July 3, 2011
Rhode Island

R.I. Supreme Court upholds power-purchase pact for wind farm off Block Island

By Alex Kuffner, Journal Staff Writer, The Providence Journal, www.projo.com 2 July 2011

PROVIDENCE – The Rhode Island Supreme Court has upheld a power-purchase agreement between National Grid and Deepwater Wind in a ruling that boosts the chances for development of what could be the first offshore wind farm in the United States.

In a unanimous decision released Friday, the state’s highest court found insufficient grounds to overturn the contract under which Rhode Island’s dominant utility will buy power from the five-turbine wind farm that Providence-based Deepwater proposes building in waters three miles southeast of Block Island.

Toray Plastics and Polytop Corp., both heavy users of electricity, filed an appeal with the Supreme Court after the state Public Utilities Commission approved the power-purchase agreement last August. The plastics manufacturers’ chief complaint is that the starting price of power – at more than three times the price from conventional sources – is too high.

In the 75-page decision written by Justice Gilbert V. Indeglia, the court expressed reservations about elements of the project but ruled that the commission had followed state law in considering the contract.

“Although we view with trepidation the General Assembly’s unwavering quest to sink this demonstration wind farm into the sediment of Rhode Island’s continental shelf, we nonetheless are constrained by our standard of review and the bounds of the revised [long-term contracting] statute,” the decision says.

Deepwater applauded the decision, which will allow the company to start working on permitting the 30-megawatt project.

“Today’s ruling solidifies Rhode Island’s position as a national leader in building a clean energy future for our country,” company CEO William M. Moore said in a statement.

Although the decision removes a major obstacle in the path of the wind farm – which had been delayed during the court case – it does not guarantee that the project will reach fruition. Deepwater will use the contract to help secure financing for the $205-million wind farm, but it still needs approvals from the state Coastal Resources Management Council and the U.S. Army Corps of Engineers.

In an interview, Moore said the court decision comes early enough in the summer for Deepwater to start doing geological surveys and other work so that a joint application to the two agencies can be filed within the first three months of next year.

Because Deepwater now plans to use six-megawatt turbines for the wind farm, it will reduce the number of turbines from eight to five while still maintaining the same capacity as originally planned. Moore expects a turbine vendor to be announced in the fall.

Through a spokesman, National Grid said the agreement “will help in the further development of this environmentally beneficial technology.” Attorney General Peter F. Kilmartin, who dropped an appeal against the contract filed by his predecessor Patrick C. Lynch, also welcomed the decision.

Under the 20-year power purchase agreement, National Grid will pay up to 24.4 cents per kilowatt hour for electricity from the wind farm in the first year of operation – much higher than the 6.9 cents per kilowatt hour that the utility pays for what’s known as standard offer service from such sources as natural gas-fired facilities and nuclear power plants.

The price for power from the wind farm could be lower if Deepwater saves on construction or operation costs, but the starting price will still increase by 3.5 percent annually over the life of the deal.

National Grid estimates that in total it will pay up to $415 million more for power generated by the wind farm than if it bought the equivalent amount from non-renewable sources. That “above-market” cost was at the heart of the petition filed by Toray and Polytop against the pact.

In a May 11 hearing before the court, their lawyer Michael R. McElroy argued that the potential harm to businesses from paying that much more for power would outweigh the economic benefits of the project, which a study commissioned by the state estimated at $129 million.

The court, however, found that the PUC was not required to balance the costs of the project against the benefits. Rather, the commission only had to consider the potential positive effects.

“Although this Court recognizes the parade of irrational possibilities that could incur from this legislative direction, any other interpretation by this Court would impermissibly read purposefully unwritten words into the statute’s meaning…” the decision says.

In reaction to the decision, McElroy said, “This project will create only six permanent jobs, but we believe the huge additional electric costs it will impose, especially on businesses, will significantly discourage growth in Rhode Island’s sluggish economy, which is struggling to overcome a deep recession.”

Deepwater is planning the Block Island wind farm as a demonstration project to prove the viability of offshore wind in the United States. Although offshore turbines have been installed in Europe and China, none has gone up in U.S. waters. The 130-turbine Cape Wind project in Massachusetts appears closest to construction after receiving all of its federal and state permits, but the developer is still trying to find buyers for half the power from the wind farm.

If Deepwater succeeds in building its wind farm off Block Island, it would then move forward with a 200-turbine project planned in Rhode Island Sound. The company is also planning wind farms of similar size off New Jersey and Long Island.

In the court decision, Justice Indeglia took a page from history in speaking of the potential benefits of offshore wind. He cited the 19th-century purchase of Alaska championed by the then-secretary of state, which, he wrote, was also met by skepticism by some.

“It is this Court’s fervent hope that our Legislature’s William Seward-esque policy decision championing this amended purchase-power agreement proves as lucrative and majestic as the Alaska Purchase of 1867,” the ruling says.

URL to article:  https://www.wind-watch.org/news/2011/07/03/r-i-supreme-court-upholds-power-purchase-pact-for-wind-farm-off-block-island/