WARWICK – A proposal for a large offshore wind farm that could power as much as a quarter of Rhode Island’s electric load cleared a major hurdle on Tuesday when regulators approved a contract between the developers and the state’s dominant utility.
The state Public Utilities Commission unanimously voted in favor of the 20-year agreement under which National Grid will buy power from the 400-megawatt Revolution Wind Farm that is being developed in Rhode Island Sound by Danish-owned Orsted U.S. Offshore Wind and Boston-based energy company Eversource.
National Grid will pay 9.8 cents per kilowatt-hour as part of a deal that state energy officials estimate could save Rhode Island electric consumers $90 million over the life of the contract, or about 50 cents per month for the typical customer.
The agreement won the support of the Acadia Center and other environmental groups, as well as unions, the Greater Providence Chamber of Commerce and the Energy Council of Rhode Island, which represents some of the largest electric users in the state.
Gov. Gina Raimondo described the approval as a “significant milestone” that will reduce carbon emissions and support the development of a green economy in Rhode Island.
“Two years ago, I pledged to increase our clean energy portfolio tenfold by 2020. Today’s approval by the PUC brings us within reach of that goal,” she said in a statement.
Although the three commission members all voted to approve the agreement, they each acknowledged the risks associated with the wind farm and the uncertainties surrounding the benefits to electric customers.
If the price of certificates representing the environmental benefits of renewable energy fails to increase as projected, then the contract could cost consumers in the long run, said commissioner Abigail Anthony. Additionally, much of the savings are expected to come on windy winter days when the wind farm is expected to displace more expensive oil generators or natural gas-burning plants that may charge a premium. If those savings are lower, the net benefits may be too, Anthony said.
“It’s clearly not a sure bet that the economic benefits will exceed the costs,” she said. “I think the commission and ratepayers should be clear-eyed about the economic risks.”
Commissioner Marion Gold noted that the uncertainties cut both ways, and that the project may lead to larger savings than expected. Anthony agreed.
The commission increased the chances that ratepayers will see savings by making one significant change to the contract. National Grid had requested compensation for agreeing to a deal that advances the state’s policy goal of increasing its supply of renewable energy. The company had asked to get 2.75 percent of the annual payments under the deal – about $4.5 million – to cover any risks it incurred by carrying the contract on its balance sheet.
But the state Division of Public Utilities and Carriers, the sister agency to the PUC, argued that the risk is minimal and that National Grid deserved only a fraction of its request, if anything. So too did the nonprofit energy-buying consortium PowerOptions.
The only other offshore wind contract approved by the PUC, for the Block Island Wind Farm, included a 2.75 percent remuneration rate, but the number was dictated by state law, with the rationale that National Grid was entering new and unknown territory by signing onto an agreement with the first project of its kind in the United States.
The contract for the Revolution Wind Farm is governed by a different state law that makes no provision for remuneration.
The members of the commission cited testimony from an energy consultant that Orsted will bear the development risk and that ratepayers will assume any cost risk. Chair Margaret Curran described National Grid’s testimony in support of remuneration as “not credible” and she and the other commissioners voted to keep the money with ratepayers.
“There’s no question that there’s no legal requirement for remuneration here,” Curran said. “There has not been sufficient proof that any policy considerations should require remuneration.”
The Revolution project, targeted to come online in 2023, would provide enough power for about 270,000 homes. It would lead to greenhouse gas emissions savings equivalent to taking 100,000 cars off the road. The developers have also committed to investing $250 million in the state, including $40 million on improvements for the Port of Providence and the port in the Quonset Business Park.
Outside the commission offices in Warwick after the vote, Jeffrey Grybowski, co-CEO of Orsted U.S., said he is confident that the wind farm will create net benefits for the state.
“We’re going to work really hard over the next handful of years and up to twenty-plus years from now to make sure we realize as many benefits as we can for Rhode Islanders, including creating a lot of local jobs and investing in ports,” he said.
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