A few miles off the coast of Block Island, a new U.S. industry is emerging from the Atlantic Ocean.
That’s where Deepwater Wind LLC is installing a massive steel frame, more than 1,500 tons, that sits on the seabed and juts about 70 feet from the water south of Rhode Island. By the end of next year there will be five of these platforms, each supporting a huge turbine, the first offshore wind farm in U.S. waters.
It’s been a long time coming. Offshore turbines have been running in Europe for more than two decades, and U.S. developers have been trying to get steel in the water since 2001. Deepwater expects its project to be the first of many to tap the potential for offshore wind energy in the U.S.
“Block Island is very important to jump start the offshore wind industry in the U.S.,” said Jeff Grybowski, Deepwater’s chief executive officer.
Grybowski is leading a group of officials on Monday to tour the site, including Gina Raimondo, the state’s Democratic governor. The five foundations will eventually each support 6-MW Alstom SA turbines, with 100-meter towers (328 feet) and rotor blades spinning with a diameter comparable to the height of the Washington Monument.
The company based in Providence, the state’s capital, is developing another wind farm nearby, between Block Island and Martha’s Vineyard in Massachusetts, with more than 1 gigawatt of planned capacity. Construction isn’t expected to start until the first project is complete.
That much larger scale means “significantly lower costs,” Grybowski said. “Starting with a small project is a way to ramp up the industrialization of the sector.”
While there’s plenty of potential energy to harness, offshore wind has been mostly stymied by high costs. Onshore turbines are some of the cheapest sources of electricity, with an average cost of about $85 a megawatt-hour, according to data compiled by Bloomberg. Coal costs about $90.
Installing equipment at sea is much more difficult, driving up costs to about $175 a megawatt-hour.
There are currently about 4.9 gigawatts of offshore projects that have been proposed in the U.S., according to market research company Navigant Consulting Inc. They will dot the Atlantic seaboard from Maine to the Carolinas. There are some tests off Oregon’s Pacific coast and even a few proposals for the Great Lakes.
The U.S. Energy Department has invested more than $300 million in offshore wind research, development, and demonstration projects.
The U.S. has more than 4,000 gigawatts of potential offshore wind capacity located within 50 miles (80 kilometers) of U.S. coasts, Jose Zayas, office director for the Wind and Water Power Technologies Office at the U.S. Energy Department, said by e-mail.
“Offshore wind has the potential to become a major source of clean energy for the coastal and Great Lakes states, which account for more than 75 percent of U.S. electric demand,” Zayas said.
It’s unclear when, or if, another offshore project will begin construction, said Amy Grace, an analyst with Bloomberg New Energy Finance, because utilities are reluctant to purchase the expensive power unless there’s government help.
“Nothing is next unless there is some form of federal subsidy,” Grace said in an interview.
Cost is what scuttled Cape Wind, a proposed $2.6 billion, 468-megawatt project off the coast of Nantucket. It filed its first permit application in 2001 then faced stiff opposition from local residents, who include American Indian groups, fishermen, the Kennedy family and billionaire Bill Koch.
National Grid Plc and Northeast Utilities’ NSTAR unit had planned to take power from Cape Wind then suffered criticism about it raising the cost of power bills. In January, after the project missed a deadline to complete financing, the two utilities filed to cancel their contracts.
New Jersey rejected in November a proposed Fishermen’s Energy LLC offshore wind farm, citing high prices for power from the project.
The Block Island project is backed by $290 million in debt financing from Societe Generale SA and KeyBank NA and about $70 million from D.E. Shaw & Co. Underwater cables will deliver power to the grid under a 20-year contract with National Grid.
The developer’s next project will be more than 30 times the size of the Block Island project. Deepwater One, with a $1 billion price tag, will be built between Martha’s Vineyard and the project under construction.
The Maryland Offshore Wind Energy Act of 2013 requires utilities to get a certain percent of their power from offshore wind farms starting in 2017. It’s expected to lead to a 200- megawatt offshore wind farm in waters near the Maryland coast. The project may be complete as soon as 2018 or 2020.
“They should have a method for financing with a state subsidy,” said Grace at BNEF. “That one has a good chance.”
©2015 Bloomberg News