NRG Bluewater Wind says it will not install a planned meteorological tower for research this year, raising concerns about the future of a project that produced the nation's first offshore-windpower purchase agreement. State officials say they are disappointed in the announcement, but they remain committed to developing offshore wind power in Delaware.
Company spokeswoman Lori Neuman said that during a recent vote to continue the federal budget, Congress virtually eliminated authority for the Department of Energy's loan-guarantee program. "The abrupt reduction of DOE loan-guarantee authority has injected considerable uncertainty into the financing for and viability of all U.S. offshore wind projects," said Neuman. She said NRG Bluewater Wind wants to keep momentum moving forward on the project, but is slowing its schedule until there is more clarity surrounding federal loan guarantees and tax incentives.
The loan-guarantee program, part of the 2005 Energy Policy Act, gave government backing to loans for renewable energy development. Authorized funding for the guarantees was reduced, and a second program that allowed companies to avoid a risk-based fee will expire at the end of September. Sen. Tom Carper said the changes make it uncertain whether there will be funding available for projects planned to be built after 2012.
A University of Delaware wind-power expert says the delay is symptomatic of the state of the wind power industry at large, both onshore and offshore. Professor Jeremy Firestone said the entire wind industry has hit a bump in the road, in part because natural-gas prices are so low.
The meteorological tower is intended to study offshore wind and the migratory patterns of birds for federal permit purposes.
Firestone said money dedicated to the federal loan-guarantee program would have helped Bluewater secure a loan but was eliminated to reduce the deficit. He said tax breaks for renewable energy development are set to expire in 2012, spurring further uncertainty, although they are traditionally renewed every two years.
Bill Zak, a clean-power advocate, said the loan guarantee is an insurance policy for loans, not money the government is fronting for development.
Zak said he is fearful the change in federal policy came as a result of lobbying on behalf of fossil-fuel, oil and nuclear-energy interests who want to get rid of the fledgling wind industry.
Carper said, "Beyond the loan-guarantee program, the offshore wind industry still faces many challenges, such as securing construction contracts and the boat needed for construction."
Delaware officials disappointed
Brian Selander, spokesman for Delaware Gov. Jack Markell, said Markell views the power-purchase agreement between Bluewater Wind and Delmarva Power as a viable document. "If NRG doesn't feel like it can or is unwilling to move forward, the governor feels there should be an opportunity for others to move forward," Selander said. "There's no point in waiting years to see if federal policy will change if there are people who believe they can make the project happen," he said.
Carper said cuts to loan guarantees for renewable energy were a better alternative than what House Republicans wanted: to eliminate all guarantees. Still, he said, he was disappointed. Carper said it's unwise to cut important programs that foster economic development, but he was not prepared to let the government shut down.
He said the Delaware congressional delegation and Markell are all working closely with federal officials to see how a public-private partnership can be developed to help offshore wind projects.
Delaware Rep. John Carney said he's disappointed in NRG Energy's announcement. "Unfortunately, many in Congress have decided that, instead of investing in new sources of energy, the United States should continue to hand out unnecessary oil subsidies," he said. He said alternative sources of energy create jobs and help curb dependence on fossil fuel.
Delaware Sen. Chris Coons said, "I am disappointed by NRG's decision to suspend its efforts on its Mid-Atlantic Wind Park, but I'm still optimistic that Delaware's unique potential in offshore wind can be realized."
Coons said offshore wind will generate high-quality jobs in the First State, and he said he remains committed to offshore wind development in Delaware.
Firestone said a loan guarantee is important because although the technology has been tested, the wind industry is still young. "From Bluewater's perspective, at present there's too much uncertainty," Firestone said. "It could cost between $5 million and $10 million for the met-tower installation. I'm assuming they didn't want to make that investment now."
Zak said, "Everybody on the local political scene, including on the national level, is very much aware of this and are working very hard to make sure this is just a delay."
Neuman said NRG Energy has maintained that it needs federal assistance for the wind farm. Asked if the project is on hold indefinitely, she said, "We are waiting for more clarity on the loan-guarantee program and tax incentives."