Original text of "Deepwater Wind CEO Jeffrey Grybowski says offshore wind power cheaper than solar power in R.I."

EDITOR'S NOTE: This is the original text of the fact-check titled, "Deepwater Wind CEO Jeffrey Grybowski says offshore wind power cheaper than solar power in R.I." In the revised version, the rating has been changed.

CLAIM: "Offshore wind power is 'significantly less expensive than solar energy.'"

SPEAKER: Jeffrey Grybowski, speaking Aug. 4, 2013, in a television interview

July 31 was a red letter day for Deepwater Wind, a Providence company that hopes to build the first offshore wind farm in the United States. That was the day Deepwater was announced as the winner of a federal auction to lease space for the farm in a 257-square-mile area of waters off Rhode Island and Massachusetts.

(The company plans an initial demonstration project of five turbines off Block Island. The larger project would have more than 100 turbines.)

It was in that context that Jeffrey R. Grybowski, chief executive officer of Deepwater Wind, appeared Aug. 4, 2013 on WJAR TV's public affairs show "10 News Conference."

Host Bill Rappleye asked Grybowski how much the electricity generated by the turbines would cost.
"Yes, 13- to 14-cent power [offshore wind energy per kilowatt hour] is probably what we’re talking about, significantly lower than the cost of what we’ve seen for offshore wind to date," Grybowski said. "Also, by the way, significantly less expensive than solar energy."

We wondered whether offshore wind, is in fact, cheaper than solar.

We started with the state Division of Public Utilities and Carriers and the Public Utilities Commission, which both have important roles in setting the prices for renewable energy.

Deepwater has negotiated with energy distributor National Grid, which is required to buy power from renewable sources, a wholesale price of 24.4 cents per kilowatt hour for the five-turbine demonstration project, steadily ranging up to 46.9 cents per kilowatt hour in the last year of a 20-year contract, according to division officials. The demonstration would have a generating capacity of 30 megawatts -- a measure of peak output over an hour.

(A megawatt is 1,000 kilowatts. The average U.S. home uses about 940 kilowatt hours per month, according to the U.S. Energy Information Administration.)

If the demonstration wind farm, called Phase I, works out as planned, Deepwater Wind expects to move forward on plans to build a large-scale wind farm, called Phase II, in the leased federal waters. Phase II would generate up to 1,000 megawatts -- enough, the company says, to power 350,000 homes.

In an interview with PolitiFact Rhode Island, Grybowski said his comments on "10 News Conference" were about Phase II. He predicted that in the coming years, Deepwater will be able to negotiate with National Grid a wholesale price of 13 cents to 14 cents per kilowatt hour, escalating annually over the life of a contract.

To check Grybowski’s claim, we first had to determine the price of offshore wind energy. That’s a challenge because no such project has yet been built in the United States.

As proof that his 13- to 14-cent-per-kilowatt-hour estimate is realistic, Grybowski pointed to a formal offer by Deepwater in 2012 to sell Phase II energy in New York state for as low as 10 cents per kwh.
The closest point of comparison is in nearby Massachusetts, where the Cape Wind project in Nantucket Sound is under contract with National Grid for a year-one price, adjustable with contingencies, of 18.7 cents per kwh.

How do these prices compare with the price of solar locally?

The Rhode Island Office of Energy Resources, which also has a rate-setting role in renewable energy, reported that the output of existing and planned solar projects in the state ranges in price from 18 cents per kilowatt hour to 33 cents.

By law in Rhode Island, solar projects enter into contracts with National Grid at a fixed price for 15 years and offshore wind at a price with annual escalators for 20 years.

"This stuff is extremely complicated," with variables such as government incentives that make comparisons difficult, said Christopher Kearns, chief of program development for the Office of Energy Resources. "The rule of thumb is the larger the renewable project, the lower the price will be."
"We have seen a gradual decline in the price of solar" for larger projects, Kearns said.

The solar project that is under contract with the lowest price, 18 cents, is planned by Next Sun Energy for an industrial site on Great Road, in North Smithfield.

That’s less expensive than the 24.4 cents of Deepwater Phase I. And the North Smithfield project’s price advantage grows over time because of Deepwater’s annual price escalation.

Let’s assume that Grybowski’s 13-to-14 cent estimate for Deepwater Phase II holds true. That’s cheaper initially than the North Smithfield project.

But Phase II also has an escalating price -- Grybowski said the company expects to obtain a contract of about 20 years with prices escalating about 3 percent a year.

At year 11, the Deepwater price would equal the solar project’s fixed 18-cent price. After 15 years - the time period of the Next Sun solar project -- the Deepwater price would be 20 cents to 22 cents.

By comparison, on the national level, the U.S. Energy Information Administration estimates that the most widespread kind of solar power, photovoltaic, has a "levelized cost" of 22.4 cents per kilowatt hour, compared with offshore wind at 29.5 cents.

"Levelized cost is often cited as a convenient summary measure of the overall competitiveness of different generating technologies," the administration explains on its website.

For a large-scale offshore wind project, Grybowski contends that the 29.5-cent estimate is inaccurate, based on faulty methodology.

Our ruling

Deepwater Wind’s Jeffrey Grybowski said offshore wind power is "significantly less expensive than solar energy."

But a Rhode Island solar project has entered into a contract for a fixed price that’s cheaper than Deepwater’s Phase I demonstration project. And eventually, the fixed-price solar project would be cheaper than Deepwater’s Phase II project, whose price would rise over time.

The judges rule Grybowski’s claim False.

SOURCES

PUBLISHED: Wednesday, August 28th, 2013 at 12:01 a.m.

SOURCES:

WJAR-TV's "10 News Conference," Aug. 4, 2013

The Providence Journal, "Deepwater Wind captures both offshore wind-farm leases in first U.S. auction," Aug. 1, 2013

EIA.gov, "Levelized Cost of New Generation Resources in the Annual Energy Outlook 2013," U.S. Energy Information Administration, Jan. 28, 2013, accessed Aug. 19, 2013

Interview and email, Thomas F. Kogut, chief of information, and Stephen Scialabba, chief accountant, Rhode Island Division of Public Utilities and Carriers, and Nick Ucci, principal policy analyst, Rhode Island Public Utilities Commission, Aug. 15, 2013 and Aug. 20, 2013

Interview and emails, Jeffrey R. Grybowski, CEO, and Meaghan Wims, spokeswoman, Deepwater Wind, Aug. 19-27, 2013

Interviews and emails, Marion S. Gold, commissioner, and Christopher Kearns, chief of program development, Rhode Island Office of Energy Resources, Aug. 19-22, 2013

Email, David D. Graves, spokesman, National Grid, Aug. 22, 2013