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Senators propose tax credit extension for offshore wind

A bipartisan group of U.S. senators from around New England, including Rhode Island Sen. Sheldon Whitehouse (D), proposed a bill last week to extend the Federal Energy Investment Tax Credit for offshore wind development past its current expiration date at the end of 2012.

The tax credit is considered crucial for the financial viability of Deepwater Wind’s proposed Block Island demonstration project, a small wind farm within three miles of Block Island’s southern coast.

Deepwater used the credit when it calculated costs in the power purchase agreement between it and National Grid, which the Public Utilities Commission approved last summer. After an appeal, the Rhode Island Supreme Court upheld the agreement in a decision issued earlier this month.

The extension would give a 30-percent tax credit for the construction of offshore wind turbines that generate electricity, but instead of a time limit, it would cover the first 3,000 megawatts of power generated at any site around the country. There are no offshore wind farms in the United States at present. The Block Island project, which is one of the projects furthest along, would generate 30 MW.

Deepwater Wind CEO Bill Moore said that if the extension is granted, the tax credit could be used both for the demonstration project and a much larger 1,000 MW wind farm proposed for Rhode Island Sound.

“This legislation has a long way to go,” Moore said. “But, if [the tax credit] goes away, I wouldn’t want to speculate on what would happen to the project.”

According to Moore, a similar extension is being proposed for a federal loan guarantee for offshore wind energy development. Both programs have been cited from the beginning of the process as important for securing financing of the demonstration project.

“These programs work well in tandem,” Moore said. “They are both designed to solve the same problem, which is that it is still a challenging market to find financing.”

Both proposals could face problems during a time when government is mulling deep spending cuts. While that process unfolds, Deepwater will move forward with finalizing a turbine choice and designing the foundations for each turbine.

The turbine foundations are engineered to house each individual turbine and are then certified as “valid and financeable,” according to Moore.

“The heart of the engineering work right now is in designing the foundations and selecting the turbines,” Moore said. “Right now we are heading toward five turbines; fewer structures should equal less visual impact.”

Beyond the engineering, Deepwater has several other studies to complete before it can submit its permit application. Those studies will include sea floor surveys of the wind farm site and the cable routes, both from the wind farm to the island and from the island to the mainland.

There will also be survey work on the island studying the area where the proposed cables would make landfall, somewhere south of the town beach pavilion. All told, Moore estimates that another $3 million to $4 million in work has to be done before the company can apply for its permits.

Three to four medium-size survey vessels are expected to be working on the wind farm site and other areas around Block Island Sound this fall, Moore said. He also expects surveyors to review the connection site for the cable at the Block Island Power Company.

The company has already completed side-scan sonar sweeps of the wind farm site and taken core samples from the ocean floor, which were given to the University of Rhode Island for analysis. It is also studying wind speed and directions as well as monitoring bird and bat migration patterns.

Once all the work is done, Deepwater will submit permit applications to the Army Corps of Engineers and will require an assent from the Coastal Resources Management Council to construct the wind farm. Deepwater will also require permission from the Bureau of Ocean Energy Management, Regulation and Enforcement to install the transmission cable.

Moore says that he hopes the permitting process will go smoothly, explaining that the application for the transmission line is a familiar process, since hundreds of underwater lines have been approved. Likewise, the Army Corps has at least one experience in permitting offshore wind: the Cape Wind project, currently stalled.

As for CRMC, which has not reviewed any offshore wind proposals in the past, Moore says, “Hopefully CRMC is well positioned to accept and review our proposal because of their work” preparing a Special Area Management Plan for R.I.’s coastal waters.

The possibility for appeal and a long, drawn-out permitting phase is something Moore says he is not worrying about.

“I tend to only worry about what we can control,” Moore said. “Ultimately, I think the combination of the wind farm with a cable to the mainland remains popular on the island.”

Moore, along with several members of the development team for the wind farm, will be appearing for a question and answer period on the island this Friday, July 29, from 3 to 6:30 p.m. at St. Andrew Parish Center.