NRG Energy brought development of a key offshore wind project off the coast of Delaware to a screeching halt on Monday. Saying the development of a new domestic offshore industry was ridden with “monumental challenges,” the Princeton, N.J., company cited its inability to find an investment partner, a lack of federal loan guarantees, and the looming expiration of wind tax incentives as key reasons behind its decision.
NRG and lead developer of the Mid-Atlantic Wind Park off the coast of Delaware, Bluewater Wind, plan to terminate the project’s 200-MW power purchase agreement (PPA) with the Delmarva Power & Light Company (DP&L) at the end of the year.
According to David Crane, NRG’s president and CEO, NRG and Bluewater had made a “considerable financial investment in the Wind Park, but that effort cannot overcome the difficult and unfortunate realities of the current market,” he said. “We’re not giving up, but at this moment we can’t rationally justify further investment in this project without the prospect that it can move forward within a reasonable timeframe.”
Since NRG acquired Bluewater Wind in November of 2009, the company said it has made significant financial investments in development, including design and engineering studies, state and federal permitting and leasing fees, ecological assessments, and professional and consulting fees to move the Wind Park forward.
“At the time of the acquisition, the outlook for offshore wind was positive,” NRG said. “The Wind Park was in line for a Department of Energy loan guarantee, a necessary element for this capital-intensive project, and NRG Bluewater had received preferential development rights for a project off the coast of New Jersey and [had] submitted proposals for projects off the coasts of Maryland and Massachusetts.”
But a little more than two years later, the outlook for offshore wind and for the Delaware project “has changed dramatically,” the company said. “In particular, two aspects of the project critical for success have actually gone backwards: the decisions of Congress to eliminate funding for the Department of Energy’s loan guarantee program applicable to offshore wind, and the failure to extend the Federal Investment and Production Tax Credits for offshore wind which expire at the end of 2012 and which have rendered the Delaware project both unfinanceable and financially untenable for the present.”
Finding an investment partner has been another difficulty. “In addition, a central element of the Wind Park’s business plan, previously communicated to public authorities in Delaware, was to find an investment partner. To date the company has been unable to find a partner, despite the attractiveness of the PPA and after having approached more than two dozen prospective investors over the course of several months,” NRG said.
The company said its next steps would be to close its Bluewater Wind development office but preserve its options by maintaining its development rights and continuing to seek development partners and equity investors. “If and when market conditions improve and the company is able to find partners, NRG will look to deploy the Wind Park and explore other viable offshore wind opportunities in the Northeast.”
Sources: POWERnews, NRG, Bluewater, DOE