Deepwater to build first U.S. offshore wind farm

Wed Oct 3, 2012 12:30pm EDT

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(Reuters) - Deepwater Wind is racing to build the first U.S. offshore wind farm off Rhode Island and hopes to parlay that into a string of East Coast farms, the company's chief executive told Reuters.

The privately held U.S. wind power developer plans to begin construction of the $250 million, 30-megawatt (MW) Block Island project by early 2014, ahead of a farm proposed by Cape Wind long expected to be the nation's first offshore facility.

"The Block Island project is on target to become the nation's first offshore wind project," Deepwater CEO William Moore said.

Deepwater submitted the final state and federal permit applications for Block Island on Tuesday.

The project, powered by five Siemens 6-MW turbines, will generate enough electricity for about 10,000 homes in Rhode Island. A U.S. unit of UK power company National Grid PLC will buy power from the Block Island wind farm for its Rhode Island customers.

The company is also planning other projects off the Atlantic Coast, with three 1,000-MW projects currently in the works, each capable of powering about 350,000 homes.

Deepwater, majority-owned by New York investment firm DE Shaw and minority-owned by Boston-based wind developer First Wind, gained the advantage over other offshore wind developers after Rhode Island picked the in-state Providence-based company as its preferred developer.

Rhode Island was not the first state to consider the clean energy prospects offered by offshore wind farms, but it moved decisively over the past few years after concluding offshore wind should be part of its energy mix.

While privately held New England power company Energy Management Inc still hopes its long embattled 420-MW Cape Wind project in Massachusetts will be the nation's first utility-scale offshore wind farm, Deepwater expects its small wind farm, about three miles southeast of Block Island, will be a stepping stone to bigger projects.

"With Block Island we are gaining real-time information on what it will cost to build the bigger project. That is a huge competitive advantage as we look to transition to the 1,000-MW (Deepwater Wind Energy Center) we are hoping to build in federal waters," Moore said.

The company hopes to get the federal lease for the project by the first quarter of 2013. The Center will be built in Rhode Island Sound south of Rhode Island and Massachusetts.

"There are other companies interested in that federal lease, but we have an advantage because of our prior selection by Rhode Island as their preferred developer," he said.

The larger Deepwater project is anticipated to cost over $4 billion and will consist of 150 to 200 turbines connected via cables to both New England and New York.

"By being tied into two grids, we avoid the business risk of a single-point interconnection, and we get to move energy other than our wind power over the lines," Moore said.

The company bid the Deepwater project into the Long Island Power Authority's (LIPA) request for proposals for new energy sources for its customers on Long Island, New York.

Moore said the Rhode Island Sound project would be competitive with a new natural gas plant built on Long Island and could be in service by 2018 when LIPA wants the new supply. LIPA was expected to decide on its request later in the autumn.

EYES ON THE BIG APPLE

With New York Governor Andrew Cuomo pressing to shut the 2,065-MW Indian Point nuclear power plant north of New York City in 2013 and 2015 when its two reactors' operating licenses expire, Deepwater has also proposed to build a 1,000-MW wind project, dubbed Hudson Canyon, in waters south of the city.

Entergy Corp, the nuclear plant's owner, wants Indian Point to run for another 20 years and is seeking new licenses for the reactors from federal nuclear regulators.

Cuomo set up the New York Energy Highway task force to upgrade and modernize the state's electric system, spur economic growth and create jobs. Eighty-five companies responded with 130 proposals totaling more than 25,000 MW. The task force expects to announce a plan in the autumn.

"Most everyone in New York assumes that replacing Indian Point was one of the main reasons for the Energy Highway initiative," Moore said.

Deepwater proposed two wind farms for the Energy Highway - Hudson Canyon, which would be connected to both New Jersey and New York City, and the Rhode Island Sound project.

Hudson Canyon would also cost about $4 billion and provide New York City with competitively priced wind power and electricity from the PJM grid, Moore said.

PJM, formerly known as the Pennsylvania-New Jersey-Maryland grid, is the nation's biggest power grid, serving more than 60 million people in 13 Mid-Atlantic and Midwest states from New Jersey to Illinois and the District of Columbia.

"Even if Indian Point remains in service," Moore said, "the New York region is growing and will need new sources of energy, and it can't all be natural gas.

"It is great to have cheap natural gas. However, even if investing in new renewables seems expensive compared to today's gas prices, you need to take a longer view," he said.

Natural gas prices have averaged nearly $6 per million British thermal units over the last decade, but a boom in shale gas production helped drive prices to 10-year lows below $2 in April. Prices currently are in the $3.50 area.

(Additional reporting by Joe Silha in New York; editing by Prudence Crowther)

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