LEWES, Del. – NRG Bluewater Wind is delaying construction of a meteorological tower off Delaware’s coast, saying its planned offshore wind farm is endangered by cuts in federal support for renewable energy.
Some interpreted NRG’s statement as a sign the firm’s commitment to build the wind farm is wavering, although company officials said the move to delay erecting the tower to gather weather data is just a slowdown.
The planned wind farm would put 49 to 150 turbines about 13 miles off the Delaware coast to generate up to 200 megawatts of electricity. Bluewater is under contract with Delmarva Power to begin producing power by 2016.
The delay results from Congress’ decision last month to eliminate most new funding for two loan guarantee programs used to finance renewable energy projects. That move was part of a compromise that averted a government shutdown.
Congress also has left uncertain the fate of renewable energy credits important to making electricity from wind or solar projects competitive with power from fossil fuels like coal or natural gas.
Those federal actions have “injected considerable uncertainty into the financing for and viability of all U.S. offshore wind projects,” Dave Gaier, NRG spokesman, said in an email to The News Journal.
“But we remain committed to the project and are just slowing down our momentum until we have a clearer picture of the future,” Gaier wrote.
Gov. Jack Markell said it would be unwise to spend years waiting for the political climate to improve, noting the state has worked hard to smooth Bluewater’s path to construction.
“The announcement puts the project’s future into question,” Markell said. “If they think they can’t build it without the guarantee, then it makes sense to see who might.”
It’s been nearly three years since Bluewater Wind signed a 25-year contract with Delmarva Power to provide enough electricity to power about 54,000 homes. The contract was hard-fought, and was the first for offshorewind power in the United States. It positioned Delaware to be among the first states to have a wind farm off its shores.
But Bluewater’s Australian parent company suffered during the economic downturn, and NRG bought the project in late 2009.
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The acquisition brought NRG, long known for its coal-burning Indian River Power Plant, some green credibility. And officials thought it brought Bluewater the backing of a large power company with the deep pockets necessary to finance the billion-dollar wind farm.
NRG officials noted at the time of the sale that federal support would be “crucial” to finance the project, specifically through a federal program that guarantees bank loans for renewable energy projects.
When Bluewater originally sought, and won, the support of Delaware’s government, the project was not pitched as contingent on federal loan guarantees, Markell said.
Now those programs are largely gone – among the early casualties in a protracted battle to trim billions from the federal budget with a huge deficit.
In early April, the two loan guarantee programs lost the vast majority of their funding as part of the budget compromise. That, combined with looming expirations of tax and investment credits for wind power, is giving NRG pause, Gaier said.
NRG is considering other ways to work with banks to finance the project, with or without the guarantees, he said.
Markell praised NRG for its cleanup efforts at Indian River, but expressed disappointment when it came to the status of the wind farm.
“There have been a lot of people from the beginning who questioned how committed they were to this project. I think it’s going to be important we quickly figure exactly that out,” Markell said.
Gaier said Bluewater will not build the tower this year. It is needed to monitor weather and bird migration patterns, measurements that are required to prepare the detailed environmental impact statement needed to receive a federal permit. The company has been selected to negotiate a lease for the offshore tract.
Bluewater President Peter Mandelstam was not available for comment, Gaier said.
Bluewater faces an important contractual deadline June 23, when it can walk away from the project for any reason and lose just $2 million. To move forward, it would need to pay an additional $6 million to Delmarva.
Asked which way the firm planned to go a month from now, Gaier said: “We’re looking at all our options.”
Delmarva spokeswoman Bridget Shelton said NRG had not approached them about extending the deadline, or addressing the federal financial support issues.
Delmarva regional President Gary Stockbridge was unavailable, Shelton said. Stockbridge did not immediately return a call to his cell phone.
Markell said Delaware’s congressional delegation will work to get the tax credit and loan programs restored, but “waiting around for a couple of years to see what develops is probably not going to do a whole lot of good.”
Sen. Tom Carper, D-Del., said he spoke recently with NRG CEO David Crane, and asked “Are you guys still with us?”
“He said, ‘Absolutely, we are.’ And I take him at his word,” Carper said.
Rep. John Carney said he was disappointed by NRG’s announcement.
“Unfortunately, many in Congress have decided that instead of investing in new sources of energy, the U.S. should continue to hand out billions in unnecessary oil subsidies,” Carney said.
NRG’s move comes at a time it appears to be showing less of an appetite for risk. Last month, NRG pulled its financial support from a Texas nuclear reactor expansion project, after having spent $331 million on permitting and planning.
It also comes as the political winds shift away from subsidies for renewable energy.
In the wake of global warming concerns five years ago, offshore wind made a splash as a way to deliver renewable power to large population centers on the East Coast.
But with the economic downturn, consumers turned their worries toward high energy prices, and offshore windprojects, with their relatively high per-kilowatt-hour price, have struggled to find buyers for their power.
Bluewater has small power-purchase commitments from municipal governments in Delaware and Maryland in addition to Delmarva Power, but has been unable to sign up other buyers so the farm could be significantly enlarged to improve its viability.
Other utilities, such as the Southern Company in Georgia, were considering offshore wind but said the price tag was too high.
Buying offshore wind is one way for utilities to satisfy green-energy purchase mandates, like Delaware’s, which requires them to have 25 percent renewable power by 2025.
Pat Gearity, a former Delaware clean power activist who now lives in North Carolina, said NRG and its industry allies should be held responsible for the demise of the wind farm if they don’t do everything they can to pressure government to restore the gutted programs.
Jim Lanard, president of the Offshore Wind Development Coalition, said the scaling back of the loan guarantee program “creates an extra hurdle for the industry to overcome.”
But, he said, developers are bullish on the future, noting that 20 firms are expected to bid on a federal call for interest to build off New Jersey. That state created an offshore wind power purchase requirement for utilities that could make it easier for developers to finance their projects.
“The industry is alive and well and it’s growing,” Lanard said.
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