Rejection of Revolution Wind 2 Project Reveals Turbulence in Offshore Wind
Costs, viability, project planning some of the hurdles industry faces
November 6, 2023
WARWICK, R.I. — As developers gave Revolution Wind the final go-ahead last week, the rejection of a proposed companion project, Revolution Wind 2, revealed just how much the offshore wind industry is hanging on a tenuous thread.
The 884-megawatt (MW) project was the only bid last year received by Rhode Island Energy in response to new procurement demands from state officials. The request for proposal (RFP) outlined by Gov. Dan McKee’s office in July 2022 called for up to 1,000 MW of commercially viable offshore wind to help Rhode Island meet its renewable energy goals.
But that’s turning out to be a taller order than state officials could have predicted; in July, Rhode Island Energy announced it was rejecting the bid from Revolution Wind 2, indicating that higher interest rates, increased costs of capital, supply chain expenses, and uncertainty over federal tax credits was unattractive to ratepayers.
The rejected bid would have been the second major offshore wind collaboration between Ørsted and Eversource. If completed, Revolution Wind 2 would have provided enough renewable energy to power more than half a million Rhode Island homes, according to the project’s website.
The developers’ first collaboration, Revolution Wind, received approval from state and federal regulators earlier this year. The company said it expects to receive approval for its final construction plans from the federal Bureau of Ocean Energy Management later this month.
Rhode Island Energy told state regulators the second project was not “commercially viable,” according to documents filed with the Public Utilities Commission late last month. Company calculations estimated the wind project would cost ratepayers more than $3 billion over the lifetime of the contract.
The utility company also expressed serious doubts about the overall viability of the project. In its filings, Rhode Island Energy officials noted the developers had provided no plans on where they were choosing to landfall the project and had taken no steps to begin the process of interconnecting the facility with the regional electric grid.
“The ambiguity in landfall location and onshore substation location and the related impacts on route selection, environmental assessments, and permitting, contribute to the project not having a credible operation date since there are numerous unknown variables that increase project risk,” James Rouland, director of regulatory policy and procurement for the PPL Corp., Rhode Island Energy’s parent corporation, wrote in testimony.
Revolution Wind 2 also did not account for the impacts to commercial and recreational fishing, and did not engage local stakeholder groups, according to Rhode Island Energy’s filings.
On Oct. 27, less than a week before a scheduled public hearing before the PUC, Revolution Wind 2 notified Rhode Island Energy it was withdrawing its bid, writing that the prices and conditions included in its proposal were only valid for six months, and expired Sept. 14.
The filings by Rhode Island Energy show that New England is not immune to the turbulence in the offshore wind industry. While Ørsted gave the final green light to Revolution Wind last week, the company said it has lost $4 billion since the start of the year. As a result, two offshore wind projects off southern New Jersey, Ocean Wind 1 and 2, were scrapped.
Ørsted isn’t the only company facing troubles. SouthCoast Wind, a joint project between the renewable energy arm of Royal Dutch Shell and Ocean Winds America, had its application before the Energy Facility Siting Board (EFSB) paused earlier this year because the company had elected to terminate its existing power purchase agreements (PPA) with three Massachusetts utility companies, prompting regulators to express doubts over the viability of the project without contracts. The developer has until October of next year to secure new contracts before the EFSB dismisses the application.
Meanwhile, state officials continue to try to court more offshore wind. Last month Rhode Island, Massachusetts, and Connecticut announced they were teaming up for a first-of–its-kind multistate contract for offshore wind. Over the next year the states will accept bids and applications for offshore wind development for up to 6,000 MW.