RI Energy seeking bids for new offshore wind project. Here's what to know.

PROVIDENCE – Rhode Island’s largest energy utility is set to once again seek proposals for more offshore wind power to help keep the state on track to meet its climate goals.

Governor Dan McKee announced on Thursday that Rhode Island Energy will issue a new procurement for offshore wind, this time for 1,200 megawatts of capacity and timed with similar requests for proposals in Massachusetts and Connecticut in an effort to lower prices through economies of scale and boost the chances of a successful bid.

“It’s more important than ever that we continue to push for new opportunities to expand offshore wind generation in Rhode Island while ensuring it is affordable for future generations,” McKee said.

More: This board advises the state on offshore wind's impacts on fisheries. They all just resigned.

Rhode Island Energy previously rejected sole bid for 884-megawatt project

The news comes two months after Rhode Island Energy rejected the only proposal it received in response to a procurement last year mandated by the McKee administration. The company said it chose not to move forward on a contract for an 884-megawatt wind farm known as Revolution 2 because of affordability concerns.

Supply chain expenses, high interest rates and inflation drove up the costs of the project proposed by Danish developer Ørsted and New England utility Eversource, according to Rhode Island Energy.

An analysis by Rhode Island Energy of seven different pricing scenarios for the proposal found that all would result in net costs to ratepayers, ranging from $1.8 billion to $2.3 billion over the life of what would have been a 20-year contract, according to filings with the state Public Utilities Commission.

The numbers stand in contrast to the findings for Revolution Wind, the 400-megawatt project that Ørsted and Eversource began preliminary work on this summer. That contract was approved in 2019 before construction and other costs started rising. It was projected to result in cost savings for consumers.

The new RFP is not required by state law. Rhode Island Energy is issuing it voluntarily under the same 2014 statute that led to the Revolution agreement.

“This new procurement can help advance the state’s clean energy goals and support achievement of Rhode Island’s emissions-reduction targets,” Rhode Island Energy president Dave Bonenberger said. “We look forward to seeing how offshore wind developers can balance those goals with affordability and wider economic benefits for the state.”

When will things move forward?

The company expects to issue the RFP in October, with proposals due in early 2024 and the potential selection of a bid in the summer.

If a bid is chosen, it would be the third offshore wind farm that would power Rhode Island. With the completion of the 30-megawatt Block Island Wind Farm in 2016, Rhode Island became home to the first offshore wind farm in the nation. The state doubled down on its commitment to the industry three years later with the contract for the Revolution project slated for the waters of Rhode Island Sound.

The decision by Rhode Island Energy in July to turn away the Revolution 2 contract came amid wider cost concerns within the offshore wind industry. Ørsted has said it may walk away from projects in the Northeast.

Massachusetts, Connecticut and Rhode Island will all have offshore wind RFPs out at the same time

And the developers of two projects that had secured contracts to sell power to Massachusetts utilities agreed this past summer to pay big penalties and cancel the agreements because they deemed the prices too low under current market conditions.

SouthCoast Wind and Commonwealth Wind said they both planned to submit new bids with more favorable prices in the procurement process announced in August in Massachusetts.

The Rhode Island RFP may offer those companies, and other offshore wind developers, another option to secure a contract, acting state energy commissioner Chris Kearns said in an interview. The Connecticut procurement, which is set to open in the coming weeks, could also help generate more interest in the region.

Kearns said he expects more news to be released soon on the states’ joint efforts.

“We've never had the three states all out with procurements at the same time,” Kearns said. “This will be an interesting time to have the market look at that situation.”

More competition is expected to yield better prices. So too is the increase in capacity to 1,200 megawatts compared to the last Rhode Island procurement for 600 to 1,000 megawatts. Kearns said developers told officials afterwards that a larger capacity is better for them to hit their sweet spot between costs and revenues.

The state is also counting on help to push projects forward from the Biden administration, which has set a goal of developing 30,000 megawatts of offshore wind by the end of the decade. In a letter sent earlier this month, McKee joined with other governors in Massachusetts, New Jersey, New York, Connecticut and Maryland to urge the president to streamline permitting, share revenue from lease areas, and clarify rules around tax credits.

Kearns said more information on the extent of an investment tax credit for offshore wind would be of particular value to developers. Specifically, developers need to know if they can apply the credit to onshore transmission work in addition to offshore construction.

As for other challenges to the industry, such as interest rates, the state will continue to monitor the situation and the RFP may be extended if necessary, said Kearns.

“We remain committed to a third offshore wind project,” he said.

This article originally appeared on The Providence Journal: A new offshore wind project could come to waters off Rhode Island