Deepwater Wind to build first U.S. ocean wind farm

* Private developer signs agreement with National Grid

* First 28-MW phase of wind farm to be completed in 2013

* Plans to build larger 385-MW project as well

* Sees total cost at $1.5 bln

LOS ANGELES, Dec 10 (Reuters) - The tiniest state in the nation may build the first U.S. offshore wind farm, after privately held Deepwater Wind on Thursday landed a deal to sell power from the first phase of a Rhode Island project that eventually could supply 15 percent of the state's electricity.

Under a 20-year power purchase agreement, developer Deepwater Wind will sell electricity from up to 8 turbines producing 28 megawatts to National Grid Plc (NG.L).

Earlier this year Rhode Island set a target to obtain 20 percent of its electricity from renewable resources by 2015. [ID:nN26291981]

Many states and their utilities have looked to solar and wind power to meet clean energy goals, but Rhode Island expects offshore wind power to make up the bulk of its green energy.

Currently there are no offshore wind projects operating off the United States.

The other contender to become the first U.S. offshore wind farm is Cape Wind, a 130-turbine, $1 billion wind farm planned off the coast of neighboring Massachusetts, has been mired in protests by critics.

The first phase of Deepwater's project, called the Block Island Wind Farm, is expected to start operations in 2013. Its turbines are planned to go up 3 miles off the coast of Block Island in state-owned waters, which developers believe will ease the permitting process.

The project includes plans to build a transmission line to Block Island, which currently relies mostly on diesel fuel. Any excess electricity generated by the project that the island does not use will be fed to the state's main grid.

For the first year of the project, the electricity will cost 24.4 cents per kilowatt hour.

Deepwater also plans to build a larger utility-scale offshore wind power project in federal waters. The developer must sign a separate power purchase agreement for that farm, rated at 385 megawatts.

Together the projects would generate about 1.3 million megawatt hours of electricity annually, enough to meet 15 percent of the state's energy needs, and cost $1.5 billion.

Deepwater, whose largest investor is hedge fund DE Shaw, is funding the project through private equity and debt.

The developer plans to select a supplier for the first phase of the wind farm in the early part of the year.

Manufacturers that make offshore wind turbines include Siemens AG (SIEGn.DE) and Vestas (VWS.CO). (Reporting by Laura Isensee; Editing by Phil Berlowitz)