Wind-farm project off Delaware coast mothballed by finances

In the age of seemingly unending financial uncertainty, the hits just keep on coming.

NRG Energy announced this week that it is suspending active development of offshore wind projects, citing the fact that Bluewater Wind — lead developer of the Mid-Atlantic Wind Park off the coast of Delaware and an NRG subsidiary — has been unable to find an investment partner and intends to terminate the project’s 200-megawatt power purchase agreement (PPA) with Delmarva Power & Light Company (DP&L) at the end of the year.

According to David Crane, NRG’s president and CEO, “Our people have worked hard and we’ve made a considerable financial investment in the Wind Park, but that effort cannot overcome the difficult and unfortunate realities of the current market. We’re not giving up, but at this moment we can’t rationally justify further investment in this project without the prospect that it can move forward within a reasonable timeframe.”

U.S. Sen. Thomas R. Carper (D.-Del.) expressed disappointment this week in NRG’s decision.

“Unfortunately, businesses small and large are facing a very challenging economic climate, and many are being forced to make tough financial decisions, such as scaling back investments in new business opportunities. While this decision is disappointing, I will not give up on the pursuit of clean, reliable, domestic energy sources such as offshore wind energy.”

Carper said he will continue to work with U.S. Sen. Chris Coons (D.-Del.), U.S. Rep. John Carney (D., Del.), Gov. Jack Markell and the Obama administration to do what they can to move forward with alternative-energy projects – including offshore wind energy production off the coast of Delaware.

Since acquiring Bluewater Wind in November of 2009, NRG has made significant financial investments in development, including design and engineering studies, state and federal permitting and leasing fees, ecological assessments, and professional and consulting fees to move the Wind Park forward, officials said.

They emphasized that, at the time of the acquisition, the outlook for offshore wind was positive. The wind park was in line for a Department of Energy loan guarantee – a necessary element for a capital-intensive project – and NRG-Bluewater Wind had receive preferential development rights for a project off the coast of New Jersey and has submitted proposals for projects off the coasts of Maryland and Massachusetts.

A little more than two years later, the outlook for offshore wind and for the Delaware project has had significant changes. In particular, they cited the fact that two aspects of the project critical for success have actually gone backwards, with the decisions of Congress to eliminate funding for the Department of Energy’s loan guarantee program applicable to offshore wind, and the failure to extend the Federal Investment and Production Tax Credits for offshore wind, which expire at the end of 2012 and the end of which they said had rendered the Delaware project both un-financeable and financially untenable for the present.

Carper said that, despite the hurdles NRG has faced, he is convinced that the project is a viable one.

“The federal government needs to be a good partner with private industry to help get these alternative energy projects off the ground. In that respect, I have done everything possible to find avenues for the federal government to provide a nurturing environment for the fledgling offshore wind industry, including support for loan guarantees and tax incentives that will help encourage private investment. Unfortunately, not all in Congress support these efforts.

“Regardless of NRG’s decision, Delaware’s offshore wind project remains a good, viable project,” Carper continued. “Soon, the Department of Interior will issue the project a lease on the outer continental shelf, and I am hopeful that, with this lease, we can find another company that will be willing to partner with Delaware to pursue this promising source of offshore wind energy.”

Markell added that, “While we’re supportive of the project moving forward, that seems unlikely now in the absence of some other entity acquiring the rights to this project.”

Just this past July, NRG-Bluewater Wind had extended the deadline in their agreement with Delmarva Power for an additional three months. The issue of the agreement was just one of the hurdles the proposed wind-farm project off Rehoboth Beach has faced in recent months.

Questions about federal loan guarantees and tax incentives had led to uncertainty about when, or if, the project will move forward. In that climate, this past April, Maryland legislators tabled in committee a bill that would have pursued a wind-farm project off Ocean City, Md.

“We’re trying to keep momentum going, but we’re slowing down the schedule until we have more clarity on the loan guarantee and tax incentives,” Lori Neuman, director of communications for NRG Energy Inc. told the Coastal Point on May 31 of this year. Because of the uncertainty, they re-visited the timing of the project’s implementation — including installation of a meteorological study tower, which was planned to be constructed this year and was an important step in moving forward.

The project has also faced opposition to a proposed landing point for electrical power cables in Bethany Beach, where residents of the Wellington Parkway area have expressed concerns about the health and environmental impacts of having the line run so close to their homes and beach.

In addition, a central element of the wind park’s business plan was to find an investment partner. To date, the company has been unable to find a partner, despite the having the PPA and after having approached more than two dozen prospective investors over the course of several months.

“We would like to thank Gov. Markell, [DNREC] Secretary [Collin] O’Mara, and the State’s entire Congressional delegation, led by Sen. Carper, who have provided strong and unwavering support for the project,” said Crane. “We also appreciate the executives and staff at DP&L who cooperated with Bluewater in every way, and the local communities and general public of Delaware, who enthusiastically embraced the project and the idea of emission-free power.”

NRG officials said they will close the Bluewater Wind development office but plan to preserve their options by maintaining development rights and continuing to seek development partners and equity investors.