Deepwater intent on fulfilling 5-year-old promise

IN DEEP: A map of the lease areas that Deepwater Wind won through a federal auction, which are colored in brown. / COURTESY BUREAU OF  OCEAN ENERGY MANAGEMENT
IN DEEP: A map of the lease areas that Deepwater Wind won through a federal auction, which are colored in brown. / COURTESY BUREAU OF OCEAN ENERGY MANAGEMENT

Providence-based Deepwater Wind and Rhode Island energy officials say the company’s win of the first two federally auctioned offshore wind-farm sites is a milestone in the state’s goal to harness wind resources, create hundreds of new jobs and attract energy industries to help pump up the Ocean State’s sluggish economy.
The company, which employs 10, remains a long way from fulfilling the now five-year-old goal of creating 800 local jobs. A host of hurdles still stand in the way, including a long list of needed state and federal permits for a small demonstration project off Block Island that’s generated stubborn local opposition and a much larger project of up to 200 turbines in federal waters off the state’s coast.
But the July auction wins were a necessary first step in the company’s bid to become a leader in the nascent wind-energy industry in this country.
“This is certainly a big step forward,” Deepwater Wind CEO Jeff Grybowski said when the company’s $3.8 million bid won both federal leasing sites, totaling 256 square miles off the coasts of Rhode Island and Massachusetts.
“Winning the two sites is consistent with what we’ve planned,” said Grybowski. “It allows us to eventually develop the entire site, which can accommodate up to 1,500 megawatts of power. The more megawatts built, the more jobs created.”
Only two other companies, Sea Breeze LLC and US Wind Inc., participated in the auction, out of the nine companies eligible to bid.
Had Deepwater won only one site, the plans would have been cut in half to about 100 turbines – not preferable, but still greater than the 40- or 50-turbine minimum needed to achieve an economy of scale, Grybowski told Providence Business News last week.
The cut wasn’t necessary, partly because Deepwater’s bid was strengthened by its Joint Development Agreement with the state, said Bureau of Ocean Energy Management spokeswoman Tracey Moriarty.
“BOEM considers holding these types of agreements to be key indicators of success for a potential project,” Moriarty said.
That Joint Development Agreement also earned Deepwater a 20 percent credit on the cost of one of the two sites located on the Outer Continental Shelf between Block Island and Martha’s Vineyard, identified by BOEM as the north and south lease areas.
Deepwater Wind’s winning bid on the higher-priced North Lease Area was $3,744,135, but with the 20 percent credit was $2,995,308, said Moriarty. Deepwater Wind’s winning bid for the South Lease Area was $94,153. So of the total $3.8 million winning bid, the cost after the discount amounted to $3,089,461 for both areas, said Moriarty.
In exchange for Rhode Island’s backing, Deepwater has promised to bring jobs to a state in desperate need – 200 jobs anticipated for work on the Block Island project and 800 promised under the Joint Development Agreement for the larger project, the Deepwater Wind Energy Center.
But those jobs are tied only to what the company builds locally, says Grybowski. And even before the company won the July auctions it was looking beyond Rhode Island, having publicly stated plans to bid on New Jersey offshore lease sites.
“I don’t think the Joint Development Agreement covers the fabrication for the New Jersey project,” Grybowski told PBN. “Every state is going to want their own jobs. To the extent the state buys energy from a project, they’re going to want the jobs locally. There will be jobs created in New Jersey from a new project there.
“There’s somewhat of an impossibility of locating jobs in Rhode Island if we’re building a project off the coast of New Jersey,” said Grybowski.
It’s unclear whether the state agrees with Grybowski on the scope of the Joint Development Agreement. R.I. Energy Commissioner Marion Gold, who took the post a year ago, said the agreement, signed in 2009, would have to be reviewed by legal counsel before she could comment.
But she and other state officials remain strong supporters of the company.
Gold said through the Joint Development Agreement Deepwater has “an ongoing lease option agreement for land at Quonset Point amounting to $750,000 per year as an annual investment beginning in 2009.”
Gold said Deepwater has also hired Rhode Island-based marine fabrication and construction firms to construct and deploy a $4 million meteorological buoy.
“We have been an active leader in advancing offshore wind energy through our partnership with Deepwater Wind, and the successful BOEM auction marks another important step forward,” Department of Administration Director Richard A. Licht said in an email. “While a great deal of work lays ahead to advance the federal offshore wind project, including environmental reviews and the cost of energy produced, we look forward to continuing this work to harness Rhode Island’s wind resources.” Despite the company’s interest in potentially building elsewhere, Grybowski insists Deepwater is in Rhode Island for the long haul.
“We’ve invested over $50 million in Rhode Island. I think that’s a pretty darn big commitment. I think it’s highly unlikely that we are going to abandon a $50 million investment,” he said.
But the estimated cost of the Deepwater Wind Energy Center, including transmission lines, is $5 billion. And it only takes a glance at the already-permitted Cape Wind project in Nantucket Sound in Massachusetts to see how generating offshore wind energy can seem like digging out of quicksand.
The 131-turbine Cape Wind project was proposed in 2001, but has been delayed by reviews and opponents who argue it will ruin Vineyard Sound and that its power is not as valuable as envisioned.
As Deepwater prepares to sign a lease on the two offshore federal sites, it still has to deal with the recent withdrawal of its application to land its Block Island Wind Farm transmission cable under Narragansett Town Beach, based on local opposition, and come up with another proposed site.
That choice for the Block Island Wind Farm transmission line is being closely watched.
“We’re going to remain very alert to Deepwater’s plans. Half of the people who come to our meetings would like to eliminate the project entirely,” said Bob Shields, a chemical engineer who is chairman of Deepwater Resistance, a Narragansett-based PAC formed July 3. “The other half would be satisfied with an alternative route. … We don’t feel there’s a need for snap judgment.”
Grybowski said he believes Deepwater is “in the final inning of the permitting [for the demonstration project]. We expect that sometime in late summer or early fall, we’ll be getting approval from all the different agencies that are involved.
“The next public milestone would be the issuance of permits to build,” he said.
Well, maybe not final permitting by late summer, said Michael Elliott, U.S. Army Corps of Engineers project manager for the Block Island Wind Farm.
“If everyone finishes their review and gives their approval, this could be approved this year. But if there are other issues, it may not be approved this year,” Elliott said.
“I don’t really see a deal-breaker on the horizon, but who knows,” Elliott said. •

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