Deepwater Wind is also free riding on Rhode Island’s ratepayers, who will end up paying vastly more than market rate for their wind power. Grybowski’s real accomplishment here is not the building of the wind farm, but rather that he got Rhode Islanders to pay so much for its output.
For centuries the fierce winds that sweep Block Island have wrecked ships and attracted pirates. Captain Kidd is said to have buried treasure there. Amelia Earhart in 1929 landed her plane on a grassy field and tested out a metal diving suit. This year, a little farther offshore, a fleet of ships, cranes and barges is making some more Block Island history–installing America’s first-ever offshore wind farm. Steel foundations for five General Electric GE +0.29% wind turbines have already been anchored to the seafloor under 90 feet of water. Once completed, the machines will rise 600 feet above the waves, twice the height of the Statue of Liberty and bigger than any onshore turbine. Impressive, and yet on an average day this $300 million, 30-megawatt installation will generate only enough clean power to supply about 10,000 homes, or 1.5% of Rhode Island’s power needs.
That’s why we need more monstrous turbines–thousands more, says Jeff Grybowski, CEO of Providence-based Deepwater Wind, which owns the project. He sees Block Island’s five windmills as buzz saws, cutting a path for vast offshore developments in the waters off Massachusetts, New York and New Jersey. It is a viable, if expensive, source of zero-emission energy: It would take 200 of GE’s monsters to replace the power output of the 600mw Vermont Yankee nuclear plant, which was mothballed at the end of 2014.
Europe installed its first offshore turbines 25 years ago. What took America so long to get into the game? Lawyers, largely. In the U.S. the dreams of developers have been blunted by attorneys for powerful people like the Kennedy clan and billionaire William Koch, who for 15 years have fought the plans of Boston-based Cape Wind to install hundreds of turbines in Nantucket Sound, within view of their Martha’s Vineyard mansions. That $2.5 billion project will likely never get built.
Still, Grybowski chafes at the idea that the Block Island farm is just a pilot. “This is not a science project, not an R&D project–it’s a commercial project,” he says. “We’re free riding on the technical innovations that the Europeans have made.”
And to be clear, Deepwater Wind is also free riding on Rhode Island’s ratepayers, who will end up paying vastly more than market rate for their wind power. Grybowski’s real accomplishment here is not the building of the wind farm, but rather that he got Rhode Islanders to pay so much for its output. Under the company’s 20-year agreement with Rhode Island’s regulated utility, National Grid , Deepwater Wind will receive 24.4 cents per kwh for all the power those turbines can generate. That’s more than twice the wholesale price that National Grid pays for electricity now. And a lot even for New Englanders used to paying 17 cents per kwh. The average American pays 10 cents.
Worse, the contract has a built-in price escalator of 3.5% per year. That means by the end of the 20 years National Grid will be paying Deepwater 50 cents for each windy kwh. While Deepwater would not comment on financial projections, FORBES calculates that if G.E. can keep those turbines in working order, the wind farm could generate $900 million for Deepwater Wind and its majority shareholder, D.E. Shaw & Co. Add in about $100 million in federal renewable energy investment tax credits and Deepwater Wind is looking at a juicy, unleveraged pretax return on the order of 7.5%. It is a legally guaranteed, risk-free money machine.
So how did they pull this off? Connections. A decade ago Grybowski was chief of staff to then Governor Don Carcieri, who pushed the Rhode Island General Assembly to back offshore wind as a way of diversifying the tiny state’s power supply. Grybowski, an attorney, left Carcieri and went into private practice in 2007. Two years later the state passed a bill to support offshore wind. The state took it upon itself to study wind speeds, talk to fishermen and boaters, and contemplate the effect that pile-driving would have on migrating whales. It was the state that chose the Block Island site and, to use Grybowski’s word, “deconflicted” the project.
[rest of article available at source]
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