Cape Wind gets $150m boost; US Energy Department to loan money for construction of offshore turbine farm
The US government is promising to back the controversial Cape Wind project with $150 million, federal officials said, signaling a vote of confidence that the offshore wind farm will get built.
The support will come in the form of a loan guarantee from the Department of Energy. With this federal commitment, which still needs to be finalized, Cape Wind would have raised $1.45 billion, or nearly 60 percent of the estimated $2.5 billion it will take to build more than 100 turbines in Nantucket Sound.
“All of it has been coming together,” said Peter W. Davidson, executive director of the Energy Department’s Loan Programs Office. “It’s a great project, and we believe it will give birth to a very important industry.”
Cape Wind’s developer, Energy Management Inc., first applied for the loan guarantee in 2009, but the project still faced several hurdles, including financing, permitting, and numerous lawsuits. Now, with a large portion of financing in place, regulatory approvals in hand, and most legal challenges resolved, the project has finally reached a threshold where it is likely to get done, US energy officials said.
Cape Wind officials are scheduled to be notified of the loan Tuesday morning. They have said the project is on track to start construction in 2015.
Cape Wind has been locking down financing and construction contractsfor the last several months. In December, it completed an agreement to purchase turbines from a subsidiary of the German conglomerate Siemens AG. In late February it secured a $600 million loan from the Danish Export Credit Agency, EKF. The next month, it signed contracts with two firms for the cables needed to transport power generated by the project, and secured $400 million in financing from several foreign financial companies.
And in May a US District Court judge dismissed a lawsuit filed by several Cape Wind opponents, which sought to invalidate a 2012 agreement brokered by the state for the Boston utility NStar to purchase power from the offshore wind project.
NStar’s power purchase agreement, as well as a similar deal made two years earlier by National Grid, was considered a critical step for developers to obtain the financing to build Cape Wind. The two utilities, the largest in the Massachusetts, agreed to purchase a total of 77.5 percent of the power generated by Cape Wind at a starting price of 18.7 cents per kilowatt hour – well above typical wholesale prices.
On Monday, Governor Deval Patrick called the promised federal funding another “significant step” for the project.
“Offshore wind will not only provide a new, clean source of energy for the United States,” he said in a statement, “it will reduce American reliance on fossil fuel, mitigate climate change, and jump-start a new US industry that will create thousands of clean energy jobs.”
US Senator Edward J. Markey, a Malden Democrat, agreed.
“This funding will help Massachusetts make energy history,” Markey said in a statement. “This kind of public-private partnership is exactly what these energy funding programs are designed to do.”
The Department of Energy’s Loan Programs Office has received intense scrutiny in recent years, following the high profile bankruptcies of several companies backed by taxpayer money, including California solar panel maker Solyndra and Waltham battery-maker A123 Systems.
But executive director Davidson said such failures only represent about 2 percent of his office’s $32 billion project portfolio. He credits that portfolio with helping to jump-start several US energy industries, including utility-scale solar developments.
“The whole industry did not exist before we made loans into that area,” he said.
He said he expects his office’s investments in offshore wind to produce the same result. He noted that European countries have already built several offshore wind projects.
“We are really behind in developing it here,” he said. “It’s a great resource that has been proven technologically to work elsewhere in the world.”
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