Deepwater Wind is not 38 Studios.
That’s the message from executives at the Providence-based renewable-energy firm, who don’t see any logic in efforts to link the two companies made by state Rep. Bob Watson, conservative groups, Tea Party activists and letter-writers, apart from the fact that former Gov. Don Carcieri and legislative leaders backed both projects.
“I struggle with any kind of parallel,” Deepwater CEO William Moore told WPRI.com last week. “I just don’t think they’re similar at all. … There’s no subsidy whatsoever from any taxpayer or federal taxpayer until we generate electricity.”
The Carcieri administration picked Deepwater as the state’s preferred developer of an offshore wind farm after a bidding process in 2008. The company, majority owned by elite hedge fund D.E. Shaw & Co., has invested more than $20 million so far in its five-turbine Block Island demonstration project, which is expected to cost $205 million and will be commercially financed by banks.
“You can’t arrange a financing like that for a project except one that’s viable,” Moore said. “We’re not going to come back to the state to borrow money, or the federal government.” 38 Studios always struggled to attract private investors and was kept afloat by Curt Schilling and Rhode Island taxpayers, who are now on the hook for a $75 million loan guarantee.
Poll found majority support
Rhode Islanders always saw a distinction between the two projects A WPRI 12 poll in September 2010 showed 56% of likely voters were willing to pay an additional $1.35 to $3 per month for electricity from the small wind farm Deepwater plans to build off Block Island; the same poll showed 54% of them opposed the 38 Studios deal.
“If Deepwater shut its doors tomorrow, the only people who would lose their money are [private] investors,” Jeff Grybowski, Deepwater’s chief administrative officer and Carcieri’s former chief of staff, told WPRI.com. “There are no public dollars involved. If the Block Island wind farm doesn’t happen, then National Grid has no liability to pay us.”
“We have a very detailed budget on what it will take to go from day one to the day when the turbines are fired off,” he added. “Our investors know that. We’ve planned for that; they’ve planned for that.”
Grybowski said Deepwater’s finances and progress are being closely monitored, another contrast with what transpired at 38 Studios. “We’re in a highly regulated business,” he said. “Everything we do is subject to the approval of many state and federal agencies, and before we can put anything in the water we have to get approval from federal agencies, and they scrutinize everything.”
“They’re looking not only at can we technically pull it off,” he continued, “but do we have the financial capacity to do it? They scrutinize everything, from our technical plan to our competence.”
Pricey power from offshore
Deepwater has already paid money to the R.I. Economic Development Corporation, cutting the agency a $3.2 million check in 2009 to help defray the cost of the Ocean SAMP, a zoning plan for the sea floor. Deepwater is also paying $325,000 this year for a lease option on 47 acres at the Quonset Business Park to prepare for the Block Island project.
None of that is to say Deepwater won’t cost Rhode Islanders. A 20-year contract with National Grid the company got in 2010 says the utility will pay up to 24.4 cents per kilowatt-hour for electricity from the Block Island project in its first full year of operation, an amount that will rise 3.5% per year, far above the cost of traditional coal- and gas-generated power.
Business leaders have said Rhode Island can’t afford to raise its already high electricity prices by backing the Deepwater project. “This is an example of a single company (Deepwater Wind) receiving special treatment to develop a project at the expense of all ratepayers in the state,” Rhode Island Manufacturers Association Chairman Al Lubrano argued in August 2010.
Moore – whom OnEarth magazine once nicknamed “the Johnny Appleseed of wind” – argued the sticker price of power from the Block Island project is an incomplete analysis because it accounts for neither the environmental benefits of wind energy over coal and natural gas nor the costs of seeding a new industry. He also emphasized that the R.I. Public Utilities Commission’s review of the contract is a public record.
Project on track for 2014
Deepwater is also more old-school than 38 Studios, in the sense that it’s undertaking a large-scale industrial project, not a Knowledge Economy-type initiative that happens primarily on computer screens. In October the company signed a high-profile deal with the German manufacturer Siemens to use its new 6-megawatt offshore turbines off Block Island.
“Siemens was a huge validation for the company and the project,” Grybowski said.
Deepwater expects public hearings to be held this summer on its permit applications for the Block Island project. The company hopes to win approval from regulators during the first quarter of next year, with construction of the transmission line taking place between the end of 2013 and the spring of 2014, the turbines installed during the summer of 2014, and power generation beginning later that year.
The Block Island project won’t be a huge job creator. The company projects it will hire 200 temporary construction workers to install the wind farm, then employ six full-time maintenance workers to monitor it via fiber-optic cable from a control room on the mainland once it’s up and running.
RI could beat Massachusetts
National observers are watching to see whether Deepwater or Cape Wind will get commissioned first. “We’re still on track to be the first offshore wind farm,” Moore said. “We have a healthy, friendly competition with Cape Wind.” The Massachusetts project is far larger, with 130 turbines, and its construction is slated to start next year.
The Deepwater project does raise broader policy questions about the state’s role in promoting renewable energy development, questions that go beyond any single project. The General Assembly explicitly made it state policy to push clean power with the 2004 passage of a renewable energy portfolio standard, and doubled-down in 2009 and 2010 by passing a long-term contracting bill that benefited Deepwater.
“Renewable energy only happens because governments mandate long-term contracts,” Grybowski said. “People who are opposed to the notion of government telling utilities to enter into long-term contracts with renewables – they’re going to have that objection regardless of what the project is.”
Deepwater’s bigger proposed project – a multibillion-dollar, 200-turbine wind farm in Rhode Island Sound connected to the New England and Long Island power grids – is still years in the future. The company hopes to get it through the federal leasing and permitting process by 2016 and start construction in 2017, and says the price of power could be half as much as off Block Island thanks to economies of scale.
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