19 Dec 2011

After Bluewater offshore wind retreat by NRG Energy, what is next shoe to drop in the U.S.?

Written by Jim Pierobon

“Financially untenable” is how NRG Energy updates its outlook for what was a planned array of wind turbines offshore Delaware. And with that prognosis, the future of wind energy off the U.S. East Coast is very much in doubt.

While the project’s fate may have been cast when the U.S. Department of Energy rejected its application for a federal loan guarantee earlier this year, the failure to find a project partner in the increasingly challenging financial and policy environments for renewable energy in the U.S. apparently has sealed its defeat.

More than just a few renewable energy developers and financiers are asking: what’s the next ‘shoe’ to drop on clean energy in the U.S.? Questions abound while China forges ahead strengthening its manufacturing prowess and further driving down its wind and solar energy cost advantages

Without Bluewater Wind, this Atlantic Wind Connection power underwater transmission cable, funded in part by Google, faces increasingly tall hurdles. CREDIT: Atlantic Wind Connection

Is Google going to pull back from its vision for an underwater transmission line linking wind energy systems between coastal New Jersey and Virginia? Will the Maryland legislature continue to reject financing offshore wind to meet its renewable electricity requirements by 2022? Will Gamesa and Northrup Grumman Shipbuilding hit the pause button on its planned offshore wind technology center in Chesapeake, VA?

The Bluewater Wind project announcement is especially unsettling to clean energy advocates because of the foundation for what appeared to be a financially viable system leading the charge on the U.S. East Coast. Even so, darkening prospects for the wind production tax credit which expires at year-end 2012 further raised an increasingly high ‘bar.’

Bluewater Wind had a 25-year contract with utility Delmarva Power to supply up to 200 megawatts of power from the project.  That deal was approved by the Delaware Public Service Commission in 2008, and provided a base energy price of 9.9 cents per kilowatt-hour. When combined with a statutory bonus for offshore wind renewable energy credits, the effective price per kilowatt hour in 2012 might have been closer to 14 cents  — a very competitive value proposition, according to attorney Todd Griset, who writes the Offshore Wind Wire. Having that contract meant a greater level of certainty about project revenues after start-up, to no avail.

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