Deepwater to build first U.S. offshore wind farm

(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 that could partially replace embattled nuclear power plants.The privately held U.S. wind power developer plans to begin construction of the $205 million, 30-megawatt Block Island project in 2013 or 2014, ahead of a farm proposed by Cape Wind which had been expected to be the nation's first offshore facility, according to Deepwater's CEO.
"Believe it or not, the first offshore wind farm will probably happen in little Rhode Island," CEO William Moore told Reuters in an interview.
The energy generated by the 30-megawatt Block Island project will be enough to power about 10,000 homes in Rhode Island. The company is planning other projects off the Atlantic Coast as well, with three 1,000-meagawatt projects currently in the works.
The company says a 1,000-megawatt offshore wind project will produce enough electricity for 350,000 homes.
Deepwater, majority owned by New York investment firm DE Shaw and minority owned by onshore wind developer First Wind, gained ground against other developers after Rhode Island picked the company, based in the state capitol city of Providence, 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 after concluding offshore wind power should be part of its energy mix.
Moore said Deepwater, as Rhode Island's preferred developer, last year submitted an unsolicited application with the U.S. Bureau of Ocean Energy Management (BOEM) for a lease to build a separate 1,000-MW Deepwater Wind Energy Center in federal waters off Rhode Island and Massachusetts.
"The federal government has said it will give consideration to states that have conducted these kind of preferred developer competitions in terms of their decision about who can lease the federal waters," Moore said.
Moore said the second Rhode Island project would consist of about 200 turbines and could be connected via cables to the Connecticut, Rhode Island, Massachusetts and New York power grids.
"In order to get a competitive cost level, we need to get to scale, which means 750 to 1,000 MW, and at that size you are better off trying to sell into multiple markets," Moore said.
The company has already bid the Deepwater project into the Long Island Power Authority's request for proposals for new energy sources for its New York customers on Long Island.
EYES ON THE BIG APPLE
While Cape Wind still expects its 420-MW project in Massachusetts to be the nation's first utility-scale offshore wind farm, Deepwater hopes its small Block Island wind farm will be stepping stone to bigger projects.
With New York Gov. Andrew Cuomo pressing to shut the 2,065-MW Indian Point nuclear power plant in 2013 and 2015 when its two reactors' operating licenses expire, Moore is proposing a 1,000-MW offshore wind project near New York City.
Entergy, 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.
"There is a lot of excitement in New York because the possibility Indian Point may be retired in coming years," Moore said.
"That has created a bit of an opening for offshore wind to participate in whatever process New York conducts to replace the energy from the nuclear plant."
Moore said Deepwater's Hudson Canyon Wind Farm will participate in the New York Power Authority's competition to select a developer, probably in 2013.
In addition, Deepwater and its partner New Jersey energy company Public Service Enterprise Group have already filed for a federal lease to build their proposed 1,000 MW Garden State Offshore Energy project off New Jersey.
Moore expects New Jersey regulators will conduct a competition and select a preferred developer in 2012. He also said BOEM could issue a lease for New Jersey later in 2012.
OBSTACLES
While the allure of clean wind energy is great, developers have faced several obstacles, including significantly higher costs than natural gas and even onshore wind power generators.
It can cost about six times more money to build an offshore wind farm ($6,000 per kilowatt) compared to an efficient natural gas-fired power plant ($1,000 per kilowatt).
Once the gas plant is built it can be available 24 hours a day, seven days a week. The wind farm is only available when the wind is blowing.
Moore said a 1,000 MW offshore wind project could cost about $4 billion to $5 billion.
While proposed offshore projects are generally closer to the nation's biggest population centers and have access to more consistent, stronger winds, it costs about twice as much to build an offshore wind farm than an onshore wind farm.
Developers also must lock up customers before breaking ground. UK-based energy company National Grid, which owns utilities in New England, has agreed to buy all the output from Block Island under a 20-year agreement and half of the power from Cape Wind. (Reporting by Scott DiSavino in New York; Editing by David Gregorio)