Cape Wind Project Jumps Another Hurdle, Now About Those Stimulus Funds
Cape Wind, the controversial offshore wind farm that will see as many as 130 Siemens turbines installed in Nantucket Sound, can now sell electricity to utility National Grid. The initial power purchase agreement, which was approved by Massachusetts utility regulators and posted on their website Monday, removes a major barrier to the project.
There's no doubt the long-term contract -- the first approved for a U.S. offshore wind project -- is a win for Cape Wind, National Grid, which must meet the state's renewable energy standard, and Siemens. The contract approval may also give developers offshore wind projects psychological boost, if nothing else. And at least one analyst believes it build momentum for the 6,300 megawatts of offshore wind projects that are in various stages of development, Bloomberg News reported.
Financing Cape Wind can now begin to look for financing for its project, which has been projected to cost $1 billion. Cape Wind CEO Jim Gordon has said he's confident that the project will get the financing it needs, according to Reuters.
But one big financial boost -- a 30 percent federal cash grant -- is probably not going to happen. In order to qualify for the lucrative cash grant, Cape Wind would have to start construction before the end of the year, when the stimulus initiative is set to expire.
Cape Wind had hoped for approval of its power purchase agreement from the Department of Public Utilities by Nov. 15. That didn't happen until Monday. And it's still waiting for a few minor permits from the EPA and the U.S. Army Corps of Engineers. As the Boston Herald noted last week, without those in hand, construction can't begin and Cape Wind loses out on federal cash grant. DPU, which didn't specifically name the federal cash grant, said if Cape Wind is unable to tap certain federal subsidies, that price of electricity would go up. Under other circumstances the prices could go down, it said.
The most important financing tool would be a federal loan guarantee which would reduce debt financing costs and 75 percent of the savings would be passed along to consumers in lower rates, the DPU said.
The deal
- Under the agreement, National Grid will buy half of Cape Wind's output for 18.7 cents per kilowatt-hour for 15 years, escalating annually at 3.5 percent. That's about three times more than the average wholesale power price in the area.
- The contract is to buy 50 percent of the power generate from Cape Wind. The Department of Public Utilities denied a second power purchase agreement for the second half of Cape Wind's output, saying it would have to be approved separately.
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