Wind Energy Dead in the Water Off Cape Cod

Cape Wind, touted as “America’s first offshore wind project,” became one of America’s most high-profile and controversial wind-energy projects. Fourteen years in the making, estimated at $2.6 billion for 130 turbines, covering 25 square miles in Nantucket Sound off the coast of Massachusetts, the Cape Wind project has yet to install one turbine—let alone produce any electricity. Now, it may be “dead in the water.”

On January 6, the two power companies, National Grid and Northeast Utilities, that had agreed to purchase most of the electricity Cape Wind was to generate, terminated their contracts with the developers due to missed milestones. Under the terms of the contracts, Cape Wind had to secure financing and give notices to proceed to its suppliers to start work by December 31, 2014. Neither happened and both companies filed to cancel power purchase agreements. “The project is in cardiac arrest,” according to Amy Grace, a wind-industry analyst with Bloomberg New Energy Finance.

Cape Wind has faced stiff opposition since it was first proposed in 2001. Senator Edward Kennedy’s efforts, and those of his wealthy friends, to fight Cape Wind have been the most publicized, but Native Americans, fishermen, and local communities have also battled the industrialization of Nantucket Sound. The town of Barnstable has been particularly active in the fight. The Cape Cod Times reports that Charles McLaughlin, Barnstable’s assistant town attorney, said: “The town’s concerns include the possibility that a collision between a boat and the large electric service platform the project requires could spill thousands of gallons of oil into the sound.”

Former Massachusetts Governor Deval Patrick (D) positioned Cape Wind as the centerpiece of his renewable energy goals and invested significant political capital backing the proposal—including tying the NStar power purchase agreement to approval of the NStar and Northeast Utilities merger (given the unfavorable terms of the agreements, the companies may have been looking for any exit ramp). Yet, Ian Bowles, Patrick’s first energy and environment chief who, according to the Boston Globe, “helped shepherd the offshore project,” acknowledges that the loss of the power purchase agreements “may have spelled the end for Cape Wind.”

The announcement came two days before Patrick left office. While he claims: “We’ve done everything as a state government to get them over the regulatory lines,” Patrick concedes it is now “up to the market.” According to the Cape Cod Times, the former governor doesn’t know “if the project could survive without the contracts in place.”

Even the Department of Energy (DOE), which seems to indiscriminately throw money at any politically favored green-energy project, was tepid in its support for Cape Wind. DOE’s loan guarantees generally average about 60 percent of the project’s costs, but the $150 million offered to Cape Wind made up a mere 6 percent—and that, only after the project received commitments for about half of its financing. In most cases, the government guarantee comes before the private financing and signals a go-ahead for investors.

Additionally, the political winds have shifted. While Governor Patrick championed Cape Wind, Massachusetts’ new governor, Charlie Baker (R) staunchly opposes to it—even calling it Patrick’s “personal pet project.” While campaigning, Baker “dropped his opposition to Cape Wind” because he believed it was a “done deal.” Now that the deal may well be undone, Baker says he “will not try to influence the outcome of the legal process surrounding the Cape Wind project.”

Wind energy’s future faces problems beyond Massachusetts.

While Massachusetts’s utility companies filed to cancel power purchase agreements, two Minnesota wind farms, operating as Minwind Companies, filed for bankruptcy because the eleven turbines needed extensive repairs and the 360 farmers and landowners who invested in the projects can’t afford the maintenance.

Minwind’s nine separate limited-liability companies allowed investors to take advantage of federal wind-energy credits, USDA grants, and the now-discontinued state assistance program for small wind projects. The Star-Tribune reports: “The owners stand to lose their investment, and the wind farms eventually may have to shut down.”

On the national level, the American Wind Energy Association (AWEA) has continued to lobby for a retroactive extension of the Production Tax Credit (PTC) for wind energy that expired at the end of 2013. Disappointing AWEA, the lame-duck Congress did approve a ninth extension—but just through the end of 2014.

Adding insult to industrial wind’s injury, wind turbine installation placed number three in a recent list of 10 dying U.S. industries—in a better spot than only computer and recordable media manufacturing.

All of this news doesn’t bode well for the wind energy business. But for ratepayers and those who believe in the free market, current wind conditions are a breath of fresh air. Governments, both state and federal, have given wind energy every advantage. Even Warren Buffet admits the tax credits are the only reason to build wind farms. And as Governor Patrick admits, “It’s now up to the market.”

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column.