WHEN MASSACHUSETTS AND Rhode Island began exploring the construction of wind farms off the coast, there was a lot of debate about whether to start big or start small. Those who wanted to go big said a large wind farm would yield a lower price and send a signal that the region was serious about building an offshore wind industry. Those who favored starting small said going slowly would give onshore companies more time to ramp up to take advantage of the business opportunities; going too fast, they said, would give the edge to well-established European suppliers.
In the end, Massachusetts went big, negotiating a contract with Vineyard Wind for an 800 megawatt wind farm, the maximum allowed under state law. Rhode Island started small, approving a contract with Ørsted US Offshore Wind for a 400 megawatt wind farm. With the release of the Rhode Island contract on Thursday, the pricing issue is now settled: A bigger wind farm does yield a slightly better price.
National Grid, acting on behalf of Rhode Island ratepayers, agreed to pay a flat rate for electricity of 9.8 cents per kilowatt hour for 20 years. Adjusted for inflation, the so-called levelized rate is 7.4 cents per kilowatt hour.
The three Massachusetts utilities – Eversource, National Grid, and Unitil – are paying nearly a penny less — 8.4 cents a kilowatt hour over 20 years, with a levelized price of 6.5 cents.
Just as the Massachusetts price was well below what Cape Wind was going to charge years ago, the Rhode Island rate is well below the price negotiated with the five-turbine Block Island Wind Farm two years ago. The initial Block Island price was 24.4 cents but with an escalator of 3.5 percent a year the current price is 26.1 cents a kilowatt hour. The Block Island price was so high that it required special legislation before it could gain regulatory approval.
The new prices are far less because the new wind farms are much bigger and the turbine technology is better. Jeffrey Grybowski, co-CEO of Ørsted US Offshore Wind, said the industry is changing quickly.
“I didn’t expect it to be this fast,” he told the Providence Journal. “The industry has accelerated beyond my imagination.”
The Rhode Island project is called Revolution Wind, and, as part of that project, Ørsted is negotiating a separate 300 megawatt deal with Connecticut. Terms of that deal have not been announced yet.
Ørsted, based in Denmark, announced on Friday that it was selling to Eversource Energy, the New England utility, a 50 percent interest in its Revolution Wind and South Fork Wind Farm (off of Long Island) projects, as well as a 257-square-mile development tract off the coasts of Massachusetts and Rhode Island. The sale price was $225 million. Ørsted acquired the assets in November 2018 when it acquired Deepwater Wind.
Ørsted and Eversource were already 50-50 partners in Bay State Wind, which owns a 300-square mile tract off the coast of Massachusetts.