National Grid on Feb. 7 said that it is seeking regulatory approval of a 20-year contract for energy from the new Revolution Wind offshore wind farm, which was originally developed by Deepwater Wind and then acquired by Ørsted.
National Grid said that it selected Revolution Wind in coordination with the Rhode Island Office of Energy Resources (OER) and the Division of Public Utilities and Carriers through a competitive offshore wind energy procurement process in collaboration with Massachusetts.
The procurement was part of Massachusetts’ 2017 offshore wind request for proposals, which will result in a total production of 1,200 MW of carbon-free energy, the company said, adding that 800 MW will be delivered to Massachusetts, while the remaining 400 MW will be delivered to Rhode Island.
The contract price for energy and environmental attributes is a fixed, nominal price of 9.8 cents per kWh – 7.4 cents per kWh in 2017 dollars – over the entire term of the power purchase agreement, National Grid said.
As noted in National Grid’s Feb. 7 filing with the Rhode Island Public Utilities Commission, the proposed power purchase agreement with DWW Rev I, LLC provides for the purchase of energy and renewable energy certificates (RECs) from DWW’s Revolution Wind Farm offshore wind energy facility, which is to be located on the Outer Continental Shelf in Bureau of Ocean Energy Management (BOEM) lease area off the coast of Rhode Island.
DWW’s facility was selected by National Grid, in consultation with the OER and the Division, out of a total of 18 bids submitted by all three BOEM leaseholders in response to a competitive procurement for offshore wind energy generation issued by the Massachusetts electric distribution companies and the Massachusetts Department of Energy Resources in June 2017, National Grid said.
National Grid, in consultation with the OER and Division, voluntarily selected the DWW facility to pursue a long-term power purchase agreement under the Rhode Island Affordable Clean Energy Security Act (ACES) because analysis of DWW’s proposal indicated that it had favorable, competitive pricing, and significant net benefits for Rhode Island, including the potential to produce valuable economic benefits for the state due to its proximity to Rhode Island, National Grid said.
National Grid said that while it has no direct corporate affiliate relationship to DWW, National Grid’s corporate affiliate, GridAmericas Holding (National Grid Ventures), has entered into an option agreement with an affiliate of DWW under which National Grid Ventures has the right to acquire transmission assets at the time of the project’s commercial operation date, subject to certain terms and conditions, and to provide transmission service to DWW under a transmission services agreement.
The power purchase agreement costs for energy and RECs are projected to be $4.6m (net present value in 2018 dollars) below the market forecast of energy and RECs over the term of the power purchase agreement, National Grid said, adding that the power purchase agreement is forecast to provide an additional $87m of indirect energy and REC price savings expected from reductions in supply costs for Rhode Island retail customers.
Taking all costs and benefits into account, including more than $400m in economic benefits to Rhode Island and more than $500m in societal level benefits associated with the reduction in greenhouse gas emissions, the power purchase agreement is expected to result in total net benefits of more than $1bn over the life of the contract, National Grid said.
The company noted that it is requesting financial remuneration and incentives of 2.75% of the actual annual payments under the power purchase agreement, noting that its recommended remuneration rate compensates the company for strategically utilizing its strong balance sheet and credit ratings, which are derived from its investors’ capital and the company’s prudent management of that capital, to enable the cost-effective financing of the project.
National Grid said that its request for remuneration is estimated to result in remuneration of about $36.6m (net present value in 2018 dollars) over the life of the contract. Based on rates currently in effect, the net bill impact of the power purchase agreement, inclusive of remuneration, for a typical customer using 500 kWh each month is estimated to result in a decrease of 0.4%, the company said.
Ørsted divests Revolution Wind project
Ørsted, in a Feb. 8 statement, said that it has divested 50% of certain recently acquired offshore wind assets to Eversource (NYSE:ES) for a purchase price of about $225m, including the Revolution Wind project, which will deliver 400 MW to Rhode Island and 304 MW to Connecticut.
Subject to permitting, securing power purchase agreements, and final investment decisions by Ørsted and Eversource, Revolution Wind is expected to be commissioned in 2023, Ørsted said. The Revolution Wind lease area is located about 15 miles south of the Rhode Island coast.
Ørsted added that the divestment to Eversource also includes:
- The approximately 130-MW South Fork project, which is located 35 miles east of Long Island and will interconnect into eastern Long Island, where it will deliver power to households under a long-term power purchase agreement with the Long Island Power Authority. Subject to permitting, further development, and final investment decisions by Ørsted and Eversource, South Fork is expected to be commissioned by the end of 2022
- Two undeveloped New England lease areas, Massachusetts North and Massachusetts South, which can potentially be developed into significantly above 1 GW offshore wind capacity
Eversource, in a Feb. 8 statement, said, in part: “Ørsted and Eversource have the strong financial capability, deep local knowledge and the offshore wind development experience needed to invest in the life of these projects, with Ørsted’s financial footing allowing the company to self-fund all projects. Eversource expects to finance the projects in a manner that maintains strong investment-grade credit ratings.”