Cape Wind in Jeopardy as Utilities Cancel Power Purchase Contracts

The controversial Cape Wind power project planned for development off Nantucket Island in Massachusetts has suffered what may be a fatal blow, The Boston Globe reported today. According to the newspaper and several other independent reports, the two local utilities that had contracts to buy power from the offshore wind farm terminated their contracts as the Cape Wind developers missed an end-of-year deadline to obtain financing and start construction.

A Northeast Utilities spokeswoman told the Boston newspaper in an email, “Unfortunately, Cape Wind has missed these crucial milestones. Additionally, Cape Wind has chosen not to exercise their right to post financial security in order to extend the contract deadlines. Therefore, the contract is now terminated.” The utility’s NStar subsidiary was to be the buyer of much of the wind project’s power.

A spokesman for the other utility customer for the power from the $2.5 billion project, National Grid, said the company is “disappointed that Cape Wind has been unable to meet its commitments under the contract, resulting in today’s termination of the power purchase agreement.”

Under the contract, NStar was committed to buy 27.5% of the project’s output and National Grid was to purchase 50% of the power from the 130 planned windmills.

Cape Wind argued that delays erected by opponents of the project through a series of administrative actions and lawsuits account for the inability of the project to meet its contract milestones. According to Capecod.com, a Cape Wind spokesman said, “We do not regard these terminations as valid due to the Force Majeure provision of the contracts that extends the milestone dates.”

Cape Wind President James Gordon wrote to NStar and National Grid on Dec. 31, “Cape Wind has been the subject of extended, unprecedented and relentless litigation by the Alliance to Protect Nantucket Sound, Inc. that prevents Cape Wind from achieving the remaining Critical Milestones under the [power purchase agreement] as of this date.”

The Cape Wind project in Nantucket Sound has been under development for 15 years and faced a blizzard of opposition and litigation over that period, including challenges from the Kennedy family, which owns substantial Cape Cod property on Nantucket Sound. As designed, the project would have 454 MW of peak generating capacity and become the first offshore wind project in the U.S.

Audra Parker, president of the Alliance to Protect Nantucket Sound, an opponent of the project, said cancellation of the power purchase agreements could spell the end Cape Wind. “Losing the contract means continued difficulty for financing and without financing in place it is very difficult to build the project,” said Parker. “I think this is a huge problem for Cape Wind.”

Save Our Sound, another local opposition group, said, “The decision by NStar and National Grid to end their contracts with Cape Wind is a fatal or near-fatal blow to this expensive and outdated project. It’s very bad news for Cape Wind, but very good news for Massachusetts ratepayers, who will save billions of dollars in electric bills.”

Kennedy Maize is a POWER contributing editor (@kennedymaize, @POWERmagazine)