Last week a group of Republican and Democrat Senators that, if enacted, could provide the support America’s offshore wind industry needs to finally live up to its potential. The Offshore Wind Power Act, if signed into law, could provide developers Investment Tax Credits (ITC) for the first 3,000 megawatts of capacity to come online.
The legislation was introduced at a time of relative uncertainty for the U.S. offshore wind sector. Last May the Department of Energy and NRG Bluewater, developers of two of the country’s most ambitious offshore wind projects, they would not review their respective loan guarantee applications. The DOE letter was a major setback for both companies. Cape Wind was hoping for government help developing a 420 megawatt project off Cape Cod, and NRG Bluewater was also seeking assistance financing it’s 200-megawatt project off Delaware and New Jersey.
Just a few months ago both companies were riding high. In Massachusetts, after decades of arduous development work, Cape Wind was close to launching construction on its pioneering $2.6 billion project. The company had overcome local Not In My Backyard discontent, secured the necessary state and federal permits, and garnered support from Interior Secretary Ken Salazar. Cape Wind had also convinced National Grid to buy half of its expected output at a steep premium. The Boston-based developer was working with Barclays Capital to secure that crucial DOE loan guarantee and was talking to strategic investors to raise project equity.
The DOE decision to suspend review of Cape Wind and NRG Bluewater’s applications killed the momentum for both projects. “This is not a statement about the quality of your project,” The DOE was quick to highlight, “but simply about its readiness to proceed at this time.”
With the loan guarantee program ending in September, the DOE is scrambling to provide support to a limited number of projects. Cape Wind and NRG Bluewater are simply two more projects that did not make the cut. According to Andy Wickless of Navigant Consulting’s renewable energy group this type of tough political reality will constrain the growth of offshore wind in the future.
The sponsors of the Offshore Wind Power Act are hoping the bill will inject a little more certainty into the offshore wind scene. Bill co-sponsor Senator Olympia Snowe (R-Maine) said the legislation would provide developers with “(a) consistent tax credit… and develop an incentive for energy companies to invest in this breakthrough technology.”
The bill has bi-partisan support, a rare plus in Washington’s hyper-partisan atmosphere. While the bill has been pushed to the back burner by the debt ceiling fight, observers are hopeful it could see a vote soon.
In the meantime Cape Wind is seeking to find a buyer for the electricity it has not yet sold. A company spokesman tells G.E.R. that getting a second Power Purchase Agreement (PPA) is crucial if the project is to secure financing.
The reality though is that since being shut out of DOE financing, offshore wind developers are at a standstill. If things do not change it could be years before the U.S. sees real growth in it’s offshore wind sector.
Terrence Murray, Chicago