Providence’s Deepwater Wind among nine companies set to bid on offshore wind project
Published: July 29, 2013
By ALEX KUFFNERALEX KUFFNERProvidence Journal
Journal Staff Writer
Published: July 29 2013 11:25
PROVIDENCE — An auction that starts Wednesday morning will decide who among a host of aspiring developers will win the right to build wind farms in a swath of federal waters off Rhode Island and Massachusetts.
The auction for two leases in a 257-square-mile area in Rhode Island Sound will be the first of its kind in the nation. Although the Bureau of Ocean Energy Management has held numerous auctions for leasing rights to drill for oil and gas in the nation’s coastal waters — as did its predecessor in the U.S. Department of the Interior, the Minerals Management Agency — no federal agency has ever done the same for offshore renewable energy.
The bureau has released information on the logistics of the auction, but, in the absence of any precedent, there are still unanswered questions about how the sale could play out, including how long it will last, who will participate and how much the leases will go for.
“I don’t know what to expect,” said Jeffrey Grybowski, CEO of Providence-based Deepwater Wind. “We’re all just speculating. All we can do is go into it assuming there is good competition and go into it in a position to win.”
Deepwater is one of nine companies that have met the legal, technical and financial requirements set by the bureau to be eligible to participate in the auction. Although Deepwater has confirmed that it will take part, it is unclear how many other companies will also follow through and submit bids.
In order to bid, they were required to put down deposits — $450,000 for one lease, $900,000 for both — by July 17. The bureau would not disclose which companies or even how many had made deposits. That information will be made public only after the winning bids are determined.
The eligible companies include Energy Management, the Boston-based firm behind the 130-turbine Cape Wind project that is being planned in Nantucket Sound and aims to be the first offshore wind farm in the United States. A spokesman for the company did not respond to a request for comment.
Fishermen’s Energy, which is planning wind farms off the New Jersey coast, also qualified to participate. A spokeswoman for the Cape May, N.J., company would not say whether it would make a bid.
Four companies in the running have ties to European renewable-energy developers. They are EDF Renewable Development, a subsidiary of a French company; Iberdrola Renewables, part of a Spanish company; U.S. Mainstream Renewable Power, a division of an Ireland-based company; and U.S. Wind, part of an Italian conglomerate.
The two remaining companies are domestic: Neptune Wind, which has been identified in online reports as a Massachusetts company; and Sea Breeze Energy, of Philadelphia.
Deepwater is the only developer on the list that has released plans for the waters at stake, which lie about 10 miles south of Little Compton, between Block Island and Martha’s Vineyard. The company, which is also planning a five-turbine demonstration project near Block Island, would build a wind farm in Rhode Island Sound with a capacity of up to 1,000 megawatts using more than 100 turbines.
But Deepwater must win at least one of the leases to make that plan a reality. Grybowski said he will be in New York with a group of other Deepwater employees for the auction, which will take place online.
They will be submitting the company’s bids from the offices of D.E. Shaw, the international investment firm and Deepwater’s main financial backer. Grybowski doesn’t want to take any chances with connecting to the Internet, and D.E. Shaw has a more sophisticated computer system than Deepwater’s office in Providence, he said.
A backup team led by company general counsel David Schwartz will be in Boston, at the offices of First Wind, a developer of land-based wind farms that is Deepwater’s other major investor. If there are problems in New York with, say, the network connection or some other computer glitch, the group in Boston will enter Deepwater’s bids.
While Grybowski said Deepwater has a bidding plan, he would not say if the company has a maximum bid in mind.
Although Grybowski has said in the past that Deepwater is interested in both sections of the leasing area, north and south of Cox Ledge, an important fishing ground that was removed from development, he would not say if his company has put down the full $900,000 deposit.
The auction will award the leases to the highest bidder, but the bureau has agreed to give discounts to companies that either have an agreement to sell power to a utility or a joint development agreement with a state.
No company has a power purchase agreement and Deepwater is the only one with a joint development agreement, a pact with Rhode Island that was signed in 2009.
Grybowski said that Deepwater did submit an application seeking the 20-percent credit for its joint development agreement, but the bureau had yet to respond by late last week. Approval of the credit is expected, with the Rhode Island Department of Administration also sending a letter in support of Deepwater’s application.
The auction starts at 10:30 a.m. The starting bid for the south area is $1 per acre, or $67,252, and the starting bid for the north area, which is believed to be more cost-effective for development, is $2 per acre, or $194,996.
If multiple companies meet the initial bid in the opening round, the bureau will raise the asking price in subsequent rounds, by as much as 50 percent or as little as 5 percent, until only one bidder is left for each lease area. The auction could last more than one day, the bureau said.
With the credit for its agreement with Rhode Island, Deepwater will have a leg up on its competitors in the auction, and Grybowski believes the company’s chances are good.
“We go into the auction very confident,” he said. “We’re prepared to bid in order to win.”
The auction for two leases in a 257-square-mile area in Rhode Island Sound will be the first of its kind in the nation. Although the Bureau of Ocean Energy Management has held numerous auctions for leasing rights to drill for oil and gas in the nation’s coastal waters — as did its predecessor in the U.S. Department of the Interior, the Minerals Management Agency — no federal agency has ever done the same for offshore renewable energy.
The bureau has released information on the logistics of the auction, but, in the absence of any precedent, there are still unanswered questions about how the sale could play out, including how long it will last, who will participate and how much the leases will go for.
“I don’t know what to expect,” said Jeffrey Grybowski, CEO of Providence-based Deepwater Wind. “We’re all just speculating. All we can do is go into it assuming there is good competition and go into it in a position to win.”
Deepwater is one of nine companies that have met the legal, technical and financial requirements set by the bureau to be eligible to participate in the auction. Although Deepwater has confirmed that it will take part, it is unclear how many other companies will also follow through and submit bids.
In order to bid, they were required to put down deposits — $450,000 for one lease, $900,000 for both — by July 17. The bureau would not disclose which companies or even how many had made deposits. That information will be made public only after the winning bids are determined.
The eligible companies include Energy Management, the Boston-based firm behind the 130-turbine Cape Wind project that is being planned in Nantucket Sound and aims to be the first offshore wind farm in the United States. A spokesman for the company did not respond to a request for comment.
Fishermen’s Energy, which is planning wind farms off the New Jersey coast, also qualified to participate. A spokeswoman for the Cape May, N.J., company would not say whether it would make a bid.
Four companies in the running have ties to European renewable-energy developers. They are EDF Renewable Development, a subsidiary of a French company; Iberdrola Renewables, part of a Spanish company; U.S. Mainstream Renewable Power, a division of an Ireland-based company; and U.S. Wind, part of an Italian conglomerate.
The two remaining companies are domestic: Neptune Wind, which has been identified in online reports as a Massachusetts company; and Sea Breeze Energy, of Philadelphia.
Deepwater is the only developer on the list that has released plans for the waters at stake, which lie about 10 miles south of Little Compton, between Block Island and Martha’s Vineyard. The company, which is also planning a five-turbine demonstration project near Block Island, would build a wind farm in Rhode Island Sound with a capacity of up to 1,000 megawatts using more than 100 turbines.
But Deepwater must win at least one of the leases to make that plan a reality. Grybowski said he will be in New York with a group of other Deepwater employees for the auction, which will take place online.
They will be submitting the company’s bids from the offices of D.E. Shaw, the international investment firm and Deepwater’s main financial backer. Grybowski doesn’t want to take any chances with connecting to the Internet, and D.E. Shaw has a more sophisticated computer system than Deepwater’s office in Providence, he said.
A backup team led by company general counsel David Schwartz will be in Boston, at the offices of First Wind, a developer of land-based wind farms that is Deepwater’s other major investor. If there are problems in New York with, say, the network connection or some other computer glitch, the group in Boston will enter Deepwater’s bids.
While Grybowski said Deepwater has a bidding plan, he would not say if the company has a maximum bid in mind.
Although Grybowski has said in the past that Deepwater is interested in both sections of the leasing area, north and south of Cox Ledge, an important fishing ground that was removed from development, he would not say if his company has put down the full $900,000 deposit.
The auction will award the leases to the highest bidder, but the bureau has agreed to give discounts to companies that either have an agreement to sell power to a utility or a joint development agreement with a state.
No company has a power purchase agreement and Deepwater is the only one with a joint development agreement, a pact with Rhode Island that was signed in 2009.
Grybowski said that Deepwater did submit an application seeking the 20-percent credit for its joint development agreement, but the bureau had yet to respond by late last week. Approval of the credit is expected, with the Rhode Island Department of Administration also sending a letter in support of Deepwater’s application.
The auction starts at 10:30 a.m. The starting bid for the south area is $1 per acre, or $67,252, and the starting bid for the north area, which is believed to be more cost-effective for development, is $2 per acre, or $194,996.
If multiple companies meet the initial bid in the opening round, the bureau will raise the asking price in subsequent rounds, by as much as 50 percent or as little as 5 percent, until only one bidder is left for each lease area. The auction could last more than one day, the bureau said.
With the credit for its agreement with Rhode Island, Deepwater will have a leg up on its competitors in the auction, and Grybowski believes the company’s chances are good.
“We go into the auction very confident,” he said. “We’re prepared to bid in order to win.”
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