Charlottesville, Virginia (Platts)--5Jul2011/632 pm EDT/2232 GMT

Deepwater Wind, one of three developers in the Northeast vying to build the US' first offshore wind farm, has won a key court ruling for its 28.8-MW project off the coast of Rhode Island.

The Rhode Island Supreme Court on Friday rejected arguments from two manufacturers that National Grid will pay too much for power from the Block Island project.

Toray Plastics and Polytop challenged the state Public Utilities Commission decision approving the utility's 20-year deal to buy the power at an opening price of 24.4 cents/kWh with a 3.5% annual escalation.

The favorable court decision paves the way for the $250 million Deepwater Wind project to seek state and federal permits.

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Jim Lanard, president of the Offshore Wind Development Coalition, said that the other two offshore wind projects closing in on the finish line are Cape Wind's 420-MW project off Cape Cod, Massachusetts, and the Fishermen's Energy 24-MW wind farm off of Atlantic City, New Jersey.

All three developers are trying to complete a different set of final milestones, according to Lanard.

Deepwater has a buyer for its power and financial backers, but needs to secure permits. Fishermen's Energy has permits, but needs to secure a revenue stream for its power. Cape Wind, by far the largest project, has a buyer for half its power and has its permits, but now needs financing. Cape Wind also must ward off litigation from opponents.

"The offshore wind industry has momentum," Lanard said. "We are beginning to move in the right direction with projects that are getting closer to being able to be financed and built."

Deepwater Wind said it plans to begin site preparation in 2012, and hopes to have the Block Island wind farm operating in 2013 or 2014. The project must first secure permits from the US Army Corps of Engineers and the Rhode Island Coastal Resources Management Council, according to Meaghan Wims, a Deepwater Wind spokeswoman.

In its 75-page decision, the Rhode Island Supreme Court said the PUC acted according to state law when it approved National Grid's power purchase agreement with Deepwater Wind.

"We are disappointed with this ruling which approved what we believe was an unreasonable PUC majority decision and will cost RI electric ratepayers about $400 million, said Mike McElroy, Toray Plastics and Polytop's attorney.

"This project will create only six permanent jobs, but we believe the huge additional electric costs it will impose, especially on businesses, will significantly discourage growth in RI's sluggish economy, which is struggling to overcome a deep recession," he added.

The developer, however, expects the project to inject over $100 million in economic activity into the state and create about 200 construction jobs.

--Lisa Wood, newsdesk@platts.com