The U.S. Department of Interior (DOI) granted a lease for an offshore wind farm off the coast of Delaware to a unit of U.S. power company NRG Energy, which decided in December to put the project on hold due to financial considerations.
This was only the second offshore wind farm lease approved by the U.S. government and the first under the DOI’s “Smart from the Start” approach, the Interior Department said in a release late Tuesday.
The government issued the first offshore wind lease in 2010 to privately held Cape Wind for its 420-megawatt (MW) wind farm off Cape Cod in Massachusetts. The long awaited Cape Wind project has been in development since 2001 and was expected to cost about $2.5 billion. Construction of Cape Wind was expected to start in 2013 with some of the turbines in service in 2015.
There are no offshore wind farms in the United States although a few companies think they may be first, including Cape Wind in Massachusetts and privately held Deepwater Wind in Rhode Island.
In December, NRG, of New Jersey, put its offshore wind developments on hold in part because the company could not find an investment partner for the Delaware project.
“We will continue to preserve important assets of our offshore wind development program until the market should recover,” NRG spokesman David Gaier told Reuters Wednesday. Signing the commercial lease is one of those important steps in preserving our valuable offshore wind development assets. NRG will continue to work with Delaware as we seek partners for the (project),” Gaier said.
The Bluewater lease covers 96,430 acres in federal water about 11 nautical miles (20 km) off the coast of Delaware.
NRG proposed to build a 450-MW project off Delaware, which could generate enough power to supply over 100,000 homes. That project would cost about $2.7 billion, according to industry estimates.
When NRG stopped pursuing its offshore wind projects, the company also terminated the Delaware project’s 200-MW power purchase agreement with Delaware power company Delmarva Power and Light (DP&L). DP&L is a unit of Washington, DC-based power company Pepco Holdings Group Inc.
NRG acquired Bluewater in 2009 when the Delaware wind farm was in line for a federal Department of Energy loan guarantee. But since then, NRG said Congress eliminated funding for the loan guarantee program for offshore wind and was allowing the federal investment and production tax credits for wind projects to expire at the end of this year. Those actions by Congress, NRG said, made the Delaware project un-financeable and financially untenable, especially without a partner.
Offshore wind was not the only power source U.S. generators were having problems building.
Power prices have followed the natural gas market to decade lows this year, as the market grapples with the shale gas boom and flagging demand due to the struggling economy, making it tough to finance any power plant – renewable, fossil or nuclear- without some government support or long-term power purchase agreement.
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