Just days before an important deadline to qualify for crucial federal tax credits, Cape Wind has signed a deal with Siemens to build the project’s turbines and an electric service platform to convert its power for transmission.
The contract formalizes an announcement three years ago that Siemens would build the 3.6-megawatt turbines for the proposed Nantucket Sound wind farm but does little to mollify critics of the project, who argue it’s a desperate attempt to qualify for the tax incentives.
The German-based company has been the preferred provider of turbines for the project since 2010 but the agreement reached last week allows work to move forward, Siemens spokeswoman Claire Hassett said.
But she also said construction on components of the project hasn’t started, despite a statement to the contrary by Markus Tacke, CEO of Siemens Energy Sector’s wind power division, reported last week in Bloomberg News.
“We have been involved in various aspects of design, site assessment and engineering,” Hassett said.
Siemens signed the deal for 101 of the turbines with the option to add 29 additional turbines later, according to Hassett.
In addition to the turbines and electric service platform Siemens entered a service agreement for the wind farm for 15 years under the contract.
Siemens also continues to be willing to provide a $100 million equity investment for the project, Hassett said.
The turbine blades will be built in Aalborg, Denmark, and the nacelles in Brande, Denmark, Hassett said. The electric service platform – a 10-story structure located in the wind farm that will contain four 110-megavolt amp oil-cooled transformers – will be built by Siemens subcontractor Cianbro at its Brewer, Maine, facility.
The electric service platform was designed by Moffatt and Nichol Engineers of Norfolk, Va., according to a Cape Wind press release.
Cape Wind, which is estimated to cost more than $2.6 billion, expects to qualify for the federal investment tax credit for offshore wind projects, said Cape Wind spokesman Mark Rodgers. He declined to comment on Tacke’s statement from last week.
The tax credit is among a series of tax incentives set to expire at the end of the year. Although the tax credits have been extended retroactively in the past it is unclear whether that will occur 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.
Alternatively, under the “safe harbors 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 of Cape Wind’s planned turbines are constructed, that figure would equal roughly $130 million.
Cape Wind believes it will qualify for the tax credits under the safe harbors provision, Rodgers said.
Cape Wind has also applied for a $500 million loan guarantee from the Department of Energy but a decision on the application is still pending.
Once the turbines are built, they will be shipped to a port closer to the project before being installed, Rodgers said.
Massachusetts officials are pushing for the project’s construction to be based out of New Bedford, where a new marine terminal is under construction, but it’s unclear whether the timing of Cape Wind’s needs will align with the terminal’s completion.
“We certainly are closely monitoring the progress at the port of New Bedford and we’re optimistic that it will work out for us,” Rodgers said.
Aside from some high-level managerial positions, Siemens expects to hire locally to fill about 50 jobs that would be based out of the Falmouth Harbor operations and maintenance facility for the project, Rodgers said.
Cape Wind, which announced earlier this year that the Bank of Tokyo-Mitsubishi UFJ would take the lead on financing the project and that a Danish pension fund had promised a $200 million investment in the project, expects to secure financing by the second or third quarter of 2014, Rodgers said.
Construction would begin soon thereafter and the project would be producing power by 2016, he said.
Cape Wind’s opponents argue that the announcement Monday and the time line laid out by Rodgers are nothing new.
“They have said since 2005 that they’re going to start building the next year,” said Audra Parker, president of the project’s primary opposition group, the Alliance to Protect Nantucket Sound. “We’re now entering 2014.”
There are outstanding federal lawsuits challenging the project that involve complex legal issues and financing is not yet secure, Parker said.
“I think there’s really no new information here,” she said, calling the announcement about the deal with Siemens a desperate attempt to qualify for the tax credits.
And, despite claims by Siemens and Cape Wind that the turbines being used are the workhorse of offshore wind turbines, Parker said the proposed model is out-of-date and less efficient than newer models.
“I don’t want one turbine of any size in Nantucket Sound but from an economic standpoint they are using old technologies,” she said, adding that the ratepayer and taxpayer will pay the price.
Not true, said Rodgers, who said the model is a proven technology with a long and successful track record, which is an appropriate choice for the first offshore wind farm in the U.S.
As for the timing of the announcement, Rodgers said it was based on the complexity of the negotiations between Cape Wind and Siemens, which took time to complete.
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