IN WHAT COULD BE a foreshadowing of future offshore wind pricing, Rhode Island’s leading utility this week opted not to move forward with a project called Revolution Wind 2 because the cost of the electricity was deemed too high.
“Higher interest rates, increased costs of capital and supply chain expenses, as well as the uncertainty of federal tax credits, all likely contributed to higher proposed contract costs,” said the utility, Rhode Island Energy, in a press release. “Those costs were ultimately deemed too expensive for customers to bear and did not align with existing offshore wind power purchase agreements.”
Those same cost factors are wreaking havoc in Massachusetts. Two major offshore wind developers in Massachusetts are terminating their power purchase agreements with the state’s utilities because the developers say the agreements, hammered by inflation, interest rate hikes, supply chain disruptions, and the war in Ukraine, are no longer sufficient to secure financing for their projects.
The developers hope to rebid the contracts in the state’s next procurement in 2024, presumably at much higher prices. The decision by Rhode Island Energy could foreshadow the pricing Massachusetts might see next year.
PPL Corp. bought Narragansett Electric from National Grid in May 2022 and renamed it Rhode Island Energy. The utility in October issued a request for proposals for 600 to 1,000 megawatts of offshore wind. A joint venture of Orsted and Eversource was the lone bidder with its 884 megawatt Revolution Wind 2 wind farm. A deal with Revolution Wind 1 was signed in 2019 and the project is expected to become operational in 2025.
On Tuesday, after a four-month review and consultation with two state agencies, Rhode Island Energy released a press release saying it was not pursuing a power purchase agreement with Revolution Wind 2 because it would not satisfy a provision of the Affordable Clean Energy Security (ACES) law requiring the project “to reduce energy costs.”
“We recognize some will be disappointed that we didn’t choose to move forward on offshore wind in Rhode Island,” said Dave Bonenberger, president of Rhode Island Energy. “In fact, we are already in discussions with state and regional leaders about new opportunities to bring more offshore wind to the state, which we hope to progress in the coming months.”
Bonenberger said in reaching its decision the utility weighed all factors.“The economic development benefits included in the proposal were weighted and valued appropriately by our evaluation team, but ultimately it was determined those features did not outweigh the affordability concerns and other ACES standards,” Bonenberger said.
The company did not go into detail on the pricing offered for Revolution Wind 2, but said in the next 60 days it would file a document with the Rhode Island Public Utilities Commission providing more details on its decision. State agencies and Revolution Wind 2’s owners will also have a chance to comment.
The ACES law refers to “commercially reasonable” projects as ultimately defined by the Public Utilities Commission. “The commission shall determine, based on the preponderance of the evidence, that the total energy security, reliability, environmental, and economic benefits to the state of Rhode Island and its ratepayers exceed the costs of such projects,” the law states.