Construction has begun on the long-delayed Cape Wind project, according to a high-ranking executive with the company chosen to supply the turbines.
But exactly what that means – whether it will qualify the proposed Nantucket Sound wind farm for federal tax credits and whether the project will survive a slew of outstanding legal and financial challenges – is unclear.
Markus Tacke, CEO of Siemens Energy’s wind power division, told Bloomberg News that construction on some of the components for the project has begun. He said he expects Cape Wind to qualify for an investment tax credit that could defray 30 percent of the project’s estimated $2.6 billion cost. In addition to supplying Cape Wind’s turbines, Siemens officials have said they would be willing to invest $100 million in the project.
Cape Wind spokesman Mark Rodgers declined to comment specifically on Tacke’s assertion. “We’re confident that we’re going to secure financing and build the project,” he said.
Officials for Siemens, headquartered in Germany, did not return emails and telephone messages left by the Times seeking comment.
“They’re exploiting a loophole which would basically send hundreds of millions of U.S. tax dollars overseas,” said Audra Parker, president of the Alliance to Protect Nantucket Sound, Cape Wind’s primary opposition group.
Cape Wind cannot begin physical construction in Nantucket Sound because it hasn’t completed geotechnical and geophysical surveys of the area and still needs other incidental permits, Parker said.
In addition, the project is facing five outstanding legal challenges in federal court, four of which have been consolidated into one lawsuit.
Although the two lawsuits have been fully briefed, the oral arguments in one of the cases haven’t yet been scheduled, Parker said.
In one lawsuit, the alliance and the town of Barnstable are challenging the Federal Aviation Administration’s approval of the project. The second consolidated lawsuit includes a host of challenges to the Interior Department’s approval of Cape Wind.
Parker also questioned the nature of the work Siemens is doing and whether it truly qualifies Cape Wind for the tax credits.
“It remains to be seen,” she said.
Meanwhile the clock is ticking on the federal tax credits.
The wind energy investment tax credit and a production tax credit – based on the amount of energy produced – are scheduled to expire at the end of the year. In previous years the incentives have been approved at the last minute or approved retroactively by Congress but it’s unclear whether that will happen this year.
To qualify for the credits, Cape Wind would have to prove that construction has begun before Jan. 1, according to Internal Revenue Service guidelines. That construction could be on-site or off-site, such as the building of components specifically for the project by a manufacturer under contract with Cape Wind, according to the guidelines
The manufacturer, in this case, Siemens, would have to provide a reasonable method for proving that specific components are for specific projects.
Alternatively, under the “safe harbor provision” of the tax credit guidelines, Cape Wind could qualify if the company has spent 5 percent of the total cost of the project. If all 130 turbines of Cape Wind’s planned turbines are constructed, that figure would equal roughly $130 million.
In the past year Cape Wind president Jim Gordon has provided various figures for how much the company has spent so far, ranging from $50 million to $70 million.
The tax credits are doubly important because another Cape Wind investor, PensionDanmark, has said it will decide by the end of the year whether to invest a proposed $200 million.
In a letter sent Monday to the leaders of the U.S. Senate Committee on Finance, 23 Democrat and independent senators, including Sen. Edward Markey, D-Mass., pushed for the extension of a laundry list of tax incentives, including the wind energy credits. A long-term extension of the investment tax credit for offshore wind energy is needed to jump-start the industry, they wrote.
Cape Wind has also applied for a $500 million Department of Energy loan for the project. There is no new information on the loan, Rodgers said.
Cape Wind has secured all of the major permits it needs and has sold three-quarters of the power it expects to generate to National Grid and NStar.
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