May 24, 2018 / 5:41 AM / 7 months ago

UPDATE 1-Massachusetts, Rhode Island award major offshore wind contracts

(Adds Orsted statement, analyst)

By Nichola Groom

May 23 (Reuters) - Massachusetts on Wednesday selected a partnership between Avangrid Inc and Copenhagen Infrastructure Partners to develop what will be the largest U.S. offshore wind farm off the coast of Martha's Vineyard.

Vineyard Wind's 800 megawatt proposal was chosen by state utilities Unitil, National Grid and Eversource Energy. It is the largest ever procurement of offshore wind by a U.S. state, and represents up to 6 percent of the state's total annual electricity load.

The announcement came at the same time Massachusetts neighbor Rhode Island said it had awarded a 400 MW offshore wind procurement to Deepwater Wind, a project developer owned by D.E. Shaw Group.

Massachusetts in 2016 passed a law requiring its utilities to procure 1,600 MW of offshore wind energy over the next decade as part of an effort to reduce the state's greenhouse gas emissions.

To move forward, the parties must negotiate a contract that requires approval by the Massachusetts Department of Public Utilities.

Denmark's Orsted, the world's largest developer of offshore wind, said its Bay State Project had not been selected for contract negotiations.

"We submitted what we considered a very competitive, but value-creating bid. While we’re of course disappointed ... the U.S. remains a key market to us," said Orsted's head of wind power, Martin Neubert.

Analysts at Bernstein said they believed a lower price and potentially an earlier installation time-line of 2021 had favored Avangrid, majority-owned by Spanish utility Iberdrola , over Orsted's bid.

The cost of generating electricity from offshore wind farms has dropped dramatically in recent years but is far more costly than power from wind facilities onshore. The U.S. currently has just one small offshore wind farm off the coast of Rhode Island.

Power price details were not disclosed with the winning bids.

Separately on Wednesday, New Jersey Governor Phil Murphy signed a law that commits his state to procuring 3,500 MW of offshore wind.

The Trump administration has voiced support for development of a domestic offshore wind industry, saying it is critical to the nation's "all of the above" energy strategy. (Reporting by Nichola Groom, additional reporting by Stine Jacobsen in Copenhagen Editing by Susan Thomas)

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