Deepwater Wind LLC won the first auction for offshore wind-energy development in U.S. federal waters, agreeing to pay $3.8 million to lease two blocks off Massachusetts and Rhode Island.
The closely held company, which is backed by the hedge fund D.E. Shaw & Co., plans to put 200 turbines in the water with total capacity of 1,000 megawatts, according to a statement yesterday. Construction could begin in 2017, and power production in 2018, the Providence, Rhode Island-based company said.
The U.S. Interior Department said in the next nine months, the government will offer leases for areas off Virginia, Maryland, New Jersey and Massachusetts.
“This is a major step in standing up offshore wind generation in this country,” Tommy Beaudreau, director of Bureau of Ocean Energy Management, said yesterday during a conference call with reporters.
The Wind Energy Area covers 164,750 acres about 9.2 nautical miles south of the Rhode Island coast, and could lead to the generation of enough power for 1 million homes, according to the Interior Department.
Deepwater Wind won separate auctions for two blocks, topping two other bidders. It received special consideration because it already has a joint-development agreement with the state of Rhode Island, and will also pay a $500,000 annual rent until the wind farm is operating, according to the U.S. agency.
The project may cost as much as $5 billion, including about $1 billion for transmission systems to deliver power to shore, Deepwater Chief Executive Officer Jeff Grybowski said yesterday by phone. He plans to market the project’s electricity to potential buyers in Long Island, Rhode Island, Massachusetts and Connecticut.
“We’re hoping that this year and next year we can start putting the power purchase agreements together,” Grybowski said. The project will likely be built in phases with 200 megawatts to 400 megawatts of generating capacity, he said. “It’s unlikely we would try to sell the power all at once.”
Deepwater hasn’t selected a wind turbine vendor and plans to use “at least 6-megawatt turbines, and possibly larger,” Grybowski said.
The U.S. previously awarded leases to Cape Wind Associates LLC and NRG Energy Inc. (NRG:US) for offshore projects near Massachusetts and Delaware deemed non-competitive by Interior.
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