Deepwater Wind LLC has signed a new lease agreement with the Quonset Development Corporation for a turbine-manufacturing facility and office space in the Quonset Business Park in North Kingstown. The move positions the company to develop a proposed 150-turbine wind farm off the Rhode Island coast, but only after a much-smaller demonstration project the company hopes can be built in the next two years.
If all goes according to plan, the Providence-based company will see wind five wind turbines for the smaller project dot the skyline off the southeast coast of Block Island by 2014. The proposed Block Island Wind Farm could be the first offshore wind farm built in North America. Referred to as a “demonstration-scale” project by Deepwater, the farm is a 30-megawatt complex consisting of five Siemens-built direct drive – i.e., gearless – turbines, each with a capacity of 6 MW, said Meaghan Wims, a Deepwater spokeswoman.
The project is to be located within state waters and its permit applications are pending, expected to be finalized in the first quarter of 2013. Last October, Deepwater submitted its proposal to the U.S. Department of Interior Bureau of Ocean Energy Management, Regulation and Enforcement for review and approval as well.
If the company is able to build the demonstration project as planned, it could clear the way for the much larger wind farm. That project would employ 800 to 1,000 workers for its construction at the proposed turbine-manufacturing facility in Quonset, according to the company.
“Under the development agreement we have an option on 62 acres” in the Quonset park, said Jeffrey M. Grybowski, chief administrative officer for Deepwater Wind. “We control the parcels under the agreement for three years and make payments. If within the three years we are ready to proceed with signing the lease, we let them know and start making lease payments.” Deepwater will make a $325,000 option payment the first year, $425,000 the next and $525,000 for the third year.
Under a previous deal that expired last October, but was continued until the new agreement was signed, Deepwater controlled 117 acres in the park that were scattered throughout the area, workable but not ideal, said Grybowski. The new agreement signed in May provides for contiguous parcels near the waterfront. “Now we can keep our operations on our own property. That’s a big advantage for us and for Quonset,” he said.
Management at Quonset agrees. “The three-year option agreement that the Quonset Development Corp. has with Deepwater Wind makes good sense for both parties,” said Steven E. King, managing director of the Quonset Development Corporation. “It provides Deepwater an avenue for development when they are ready to use the land, and it helps the QDC prepare for future growth. The core of our success at the business park has been to make smart business arrangements on behalf of our investors, the park and the taxpayers.”
According to Wims, the demonstration project will be connected to both Block Island and the mainland by a 21-mile transmission system also being developed by Deepwater Wind. It is planned to come ashore immediately south of Narragansett Beach in Narragansett. Construction is expected in 2013 and 2014, and commercial operations planned in the latter half of 2014.
With the new agreement secure, the company’s focus has shifted to permitting. Grybowski expects the remainder of this year will be dedicated to public hearings permitting agencies will be holding. The U.S. Army Corps of Engineers will act as the federal lead agency with BOEM playing a minor role, having jurisdiction of about nine miles of transmission line between Block Island and the mainland. The Army Corps has jurisdiction on the area where the turbines are proposed.
On the state level, hearings will be held by the Coastal Resources Management Council. Grybowski expects the agencies to respond sometime in early 2013. “Delays have been part of the process but collectively everyone involved is creating this industry from scratch, so it’s been understandable,” he said. “This hasn’t been done in the United States so we understand it will take some time.”
The Block Island farm will involve some manufacturing operations in Rhode Island in early 2014, with the steel fabrication of jacket pin piles, about 40 percent of the weight of steel that supports the turbines. “That’s a service we can get from local steel fabricators,” Grybowski said.
The turbines are not manufactured in the United States. About 100 jobs are expected to be created as a result of the projects with another 150 jobs located offshore for installation. To build the farm he expects the project to cost $205 million.
A 20-year power-purchase agreement for the sale of the energy has been secured with National Grid. The plan was controversial because it proposed raising the rates for all electric customers. A legal challenge was ultimately dismissed by the state Supreme Court.
Once the demonstration project is built, the company will turn its attention to the proposed Deepwater Wind Energy Center, a 150-turbine wind farm generating 900 MW, 18 to 25 miles south of the Rhode Island mainland and southwest of Massachusetts.
Wims said the project will be in federal waters in the “area of mutual interest” identified by Rhode Island and Massachusetts, and within a BOEM Wind Energy Area and jurisdiction. As directed by U.S. Interior Secretary Kenneth L. Salazar, turbines will not, however, be located in Cox’s Ledge, a sensitive fishing area located in 20 percent of the originally proposed site, due to the input of local fishermen.
The farm is designed to provide power to Rhode Island, Massachusetts and New York. Accompanying the project will be a transmission system connecting the farm to Long Island, Massachusetts and Rhode Island.
According to Robert W. Chew, chief energy consultant for R.W.Chew Consultants of Bristol, Deepwater’s initial wind application for the demonstration project is among the nation’s most complete offshore proposals. “Their lease is for three years but I think they expect the permitting will take less than that. It’s difficult to say because there are no other offshore projects that have been approved,” he said.
“My concern is that with all this about 38 Studios’ [sudden bankruptcy], Deepwater has said that there is no tax money at risk [in its case], which is true,” he said. “A lot of people are concerned about this; when the turbines are spinning and National Grid is required to buy power at 24 cents per kilowatt hour, and a 3.5 percent per year increase in the rate, we’re concerned about the cost of electricity and the impact it will have on businesses.”
“I am a strong fan of wind but concerned about the cost of electricity the utility companies are going to have to buy,” despite promises it will eventually be competitive.
Unlike 38 Studios, however, Deepwater has investors who are committed to seeing its projects through, says Grybowski.
“Our principal investor is the D.E. Shaw Group. To date, our investors have invested in excess of $25 million in the Block Island project and millions more in our other developments,” he said.
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