NRG Bluewater Wind has won a federal lease to place turbines off the coast of Delaware, giving the power generation company what it described as a valuable asset if the wind industry can recover.
It is the first lease for an offshore wind farm issued by the Interior Department under new rules governing development of the Atlantic Outer Continental Shelf.
But any development of the Bluewater offshore wind farm remains on hold, as it has been since December, when NRG Energy terminated its offshore wind power contract with Delmarva Power.
NRG had failed to find financing for the Bluewater project, which it acquired in 2009. Observers said having a lease might have helped in the financing process.
Now NRG hopes the lease will give the project a long-run future. The lease, which is in the process of being signed, gives Bluewater the exclusive right to plan an offshore wind farm on the 96,430 acres of ocean it sought starting 11 miles off the Delaware coast.
“It definitely moves the prospect of offshore wind forward another step,” said David Gaier, a spokesman for NRG.
The company will continue to seek strategic and financial investors for the project, he said.
Gaier declined to offer insight into NRG’s prospects for actually building the wind farm. The lease is transferable in the event Bluewater sells the project to someone else, Gaier said.
“NRG wants to do what we’ve done, which is to continue to advance this asset, to give it value,” Gaier said. “And how that turns out, at this moment, we’re not sure.”
The lease gives Bluewater five years to install a device offshore to measure weather patterns, and 25 years to build and operate a wind farm.
Bluewater paid $25,000 to acquire the lease, and will pay roughly $300,000 a year for the rental until commercial operations start, according to the Bureau of Ocean Energy Management, which announced the lease on Monday.
Should turbines ever begin producing electricity, Bluewater would be required to make payments based on the value of electricity sold, the bureau reported.
By February, the company plans to file a plan describing how it will collect meteorological data, Gaier said.
Having the lease could give NRG a leg up on the competition should the industry recover, said Matt DaPrato, an analyst at IHS Global Insight.
Even with the lease, Bluewater still would need to go through three years of environmental permitting, in addition to finding a new buyer for the power, he said.
Having a lease could help in the financing process, since without one, another developer could have won the rights to build in the area Bluewater identified, he said.
“I think they view it as a solid hedge,” DaPrato said.
Although various offshore wind projects have made progress in recent years, there are currently still no turbines spinning in U.S. waters. A big limiting factor is the uncertainty surrounding federal tax credits, which are scheduled to expire at year’s end and are needed to make such projects viable.
This caused a rush of business at U.S. onshore wind manufacturers and installers as developers sought to meet the deadline, followed by furloughs and layoffs by firms unable to do so, DaPrato said.
With a longer build-out timeline, and a higher construction cost, offshore wind faces additional hurdles, he said.
The only other active federal lease for a wind farm is held by developers of the Cape Wind project off of Cape Cod. That lease was granted under procedures in place before Obama Administration changes last year.
The Bluewater project, at the time the contract was terminated, envisioned 49 large turbines and 150 smaller ones.