National Wind Watch: Wind Energy News » Energy secretary: Federal loan for Cape Wind possible

U.S. Secretary of Energy Ernest Moniz has confirmed that a federal loan application for the proposed Nantucket Sound wind farm is still alive.

“It is under active development,” Moniz said Monday in a phone interview after meetings in Connecticut and Rhode Island as part of an ongoing review by the Obama administration of the nation’s energy policy. “I cannot comment as to whether or not that will be issued.”

Although the focus of the embattled federal energy loan program has shifted over time it “remains active across the board” including in the renewable energy sector, Moniz said.

In 2011, the Energy Department put a $2 billion loan for the 130-turbine Cape Wind project on hold, essentially killing the application. Subsequently Cape Wind applied for a $500 million loan guarantee through a different program overseen by the Energy Department.

The project, which is expected to cost at least $2.6 billion, has made headway recently in securing financing.

In March, Cape Wind officials announced that, with The Bank of Tokyo-Mitsubishi UFJ Ltd., they had added Natixis and Rabobank as “lead arrangers” for the project. The banks expect to provide more than $400 million in debt themselves in addition to $900 million in potential financing from other sources.

“We’re midstream in the financing process and we expect to complete financing in the second half of this year,” Cape Wind spokesman Mark Rodgers said Tuesday.

Despite its recent progress, Cape Wind still faces opposition, including a lawsuit challenging a contract between the company and NStar for the purchase of a portion of the project’s power.

Opponents argue Cape Wind’s power will cost far more than other sources, such as land-based wind energy and natural gas. They also contend that the Energy Department’s loan program has chosen losing propositions before, most notably in the case of solar energy giant Solyndra, which failed three years ago after receiving $535 million in loans from the agency.

Cape Wind’s supporters contend the project will provide a stable price in contrast to the volatile cost of natural gas, which now provides roughly half of New England’s electricity production.

The dramatic shift in the region’s reliance on natural gas has the managers of New England’s electric grid worried.

In remarks prepared for the meeting about the Obama administration’s Quadrennial Energy Review on Monday in Hartford, Conn., the head of ISO New England, which manages the region’s grid, said the reliance on natural gas jumped from 15 percent in 2000 to 46 percent in 2013.

The severe weather this past winter, in particular, highlighted the natural gas pipeline constraints that affect the region and can lead to higher prices, according to ISO president and CEO Gordon van Welie.

It’s clear from remarks by van Welie and others that the greatest need is in increasing natural gas pipeline infrastructure and electricity infrastructure, Moniz told the Times.

The first phase of the energy review addresses energy infrastructure, distribution and storage, he said.

“It’s viewed as kind of a four-year process to lead to a coherent energy policy,” Moniz said about the review.

The idea is to incorporate the perspectives of agencies across the federal government, including the departments of defense, state and commerce, to bring together different threads of energy policy that address the economy, the environment, climate change and security, Moniz said.

The first part of the review was launched in January and is scheduled to be complete by the start of 2015, he said.

“Clearly we have seen over these last years plenty of challenges for our energy infrastructure both under normal and abnormal conditions,” he said.

Abnormal conditions include storms such as Hurricane Sandy and normal conditions include the gas capacity bottleneck in New England, he said.

Moniz, who is originally from Fall River, said other capacity concerns the Energy Department must consider include the closing of plants such as Vermont Yankee Nuclear Power Station, which is owned by the same company that owns Pilgrim Nuclear Power Station in Plymouth, and the potential reduction in energy diversity for the region.