Business

Vineyard Wind has a big selling point for its power: cheaper prices

For its power, Vineyard Wind plans to charge about one-fourth what Deepwater Wind’s Block Island project (above) charges.
Deepwater Wind
For its power, Vineyard Wind plans to charge about one-fourth what Deepwater Wind’s Block Island project (above) charges.

The first major offshore wind farm to be built off New England’s coast has at least one big selling point, compared to the doomed Cape Wind project that preceded it: much cheaper electricity.

The new project, known as Vineyard Wind, is slated to begin construction next year, some 15 miles south of Martha’s Vineyard. Vineyard Wind has generated less opposition than Cape Wind, which succumbed to years of litigation because of its proposed location in Nantucket Sound, as close as six miles to shore.

Cape Wind’s high prices fueled some of the opposition, but that apparently won’t be a problem for Vineyard Wind.

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The state’s three investor-owned electric utilities recently disclosed that they will pay Vineyard Wind about $89 a megawatt hour, on average, over the course of a 20-year contract for the first phase of the project, scheduled to come online in 2021.

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A second phase would cost less, an average of $79 per megawatt hour.

“I’m somewhat speechless at that number,” said Paul Flemming, managing director at ESAI Power LLC, an energy consultancy in Wakefield. “We’ve seen numbers like that in Europe. But they’ve got the infrastructure set up [already].”

Those prices are roughly one-third the rate of what the Cape Wind project would have charged, and at least half the cost of more recent offshore wind contracts in the United States. They are also about one-fourth the rate charged by Deepwater Wind’s Block Island project, a much smaller installation with just five turbines. It’s the country’s first offshore wind farm.

It’s hard to predict precisely how the Vineyard Wind contracts will translate into electric bills for homeowners, because the wholesale power markets fluctuate over time. But the state Department of Energy Resources says it sees the potential for modest savings to ratepayers over the life of the 20-year contracts.

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So what gives? How is Vineyard Wind able to deliver such a better price, when its 800-megawatt wind farm would be located farther out to sea, in deeper waters, than Cape Wind’s? Many factors make offshore wind more financially viable now than it was a decade ago:

 Competition: Cape Wind was the only game in town when National Grid signed a contract in 2010 at prices that began at $187 per megawatt hour, and escalated from there. Eversource signed a similar deal, but both utilities backed out when Cape Wind ran into trouble lining up financing.

In contrast, there were three development teams offering to sell off-shore power to the state’s electric utilities in a bidding process set in motion by the state’s 2016 energy law. Vineyard Wind had one key advantage: It’s furthest along in the permitting process, enabling it to be the one most likely to capitalize on federal tax credits that are scheduled to expire soon.

 Experience: As the first proposed offshore wind farm in the United States, Cape Wind was a trailblazer. But company president Jim Gordon’s experience was primarily in developing gas-fired plants, not wind farms.

Bloomberg NEF analyst Tom Harries noted that Vineyard Wind is being developed by more experienced investors: utility Avangrid and investor Copenhagen Infrastructure Partners. That experience, Harris said, is vital to managing expenses. It also lowers the perception of risk, which helps reduce financing costs.

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“We had three companies that had real experience that had bid for these projects, [with] the technology and capital to build them,” said Bob Rio, an energy expert at Associated Industries of Massachusetts. “The industry matured. It caught up to what we needed.”

 Technology: Cape Wind had proposed using 3.6-megawatt turbines, at the time considered cutting edge. Now, though, offshore turbines are bigger and more powerful. General Electric, for example, recently announced plans to make a 12-megawatt turbine. Vineyard Wind will use either 8- or 10-megawatt turbines.

Plus, the more advanced technology seen already in Europe allows wind farms to be built in deeper waters, enabling them to harness stronger winds. That means Vineyard Wind’s 80 to 100 turbines will run more efficiently, more frequently approaching peak capacity.

“Our price is more of a reflection of where the global market has moved,” said Lars Thaaning Pedersen, Vineyard Wind’s chief executive.

 Financing: It’s a minor twist, but worth noting. Cape Wind could only secure 15-year contracts from utilities. These new contracts are for 20 years, which spreads costs over a longer period.

 Opposition: Because its turbines will be larger, Vineyard Wind can be built farther from shore. Vineyard Wind does have issues — fishermen are concerned about the towers’ impact, and Yarmouth residents worry about a transmission line that’s proposed to come ashore in their town.

But Cape Wind would have been in sight of a far more populous area, and was ensnared by years of costly legal appeals. It’s hard to know how much of a role, if any, that played in its price for electricity. But the opposition eventually sank that project, while Vineyard Wind has been generating much more support.

Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.