Spurred by the impending expiration of a federal tax credit that could be worth $780 million,Cape Wind, the long-sought giant wind farm off the Massachusetts coast, is apparently now under construction. It’s the first major offshore wind farm to begin construction in the United States, but its long-term fate hardly seems a done deal.
No announcement was made by developer Cape Wind Associates, but Siemens told Bloomberg that “there are some foundations being built and developments being done” – enough, Siemens said, to qualify the $2.6 billion project for the investment tax credit for renewable energy. Cape Wind Associates more or less confirmed that, telling Bloomberg, “We are pursuing the ITC and are hopeful we will qualify.”
Under current law, the ITC expires at the end of this year, and to qualify a project must be under construction before the clock strikes twelve. The ITC is worth up to 30 percent of a project’s cost, and developers can opt for it in lieu of the production tax credit, which currently pays 2.3 cents per kilowatt-hour for energy generated (and will also expire at the end of the year, under the same terms).
Cape Wind, which seemed to pass all its regulatory hurdles more than a year ago, has had to struggle on multiple fronts to turn the vision of a 130-turbine, 420-megawatt project into reality, waging public relations and legal battles against opponents who have cited environmental, air traffic, cultural and economic concerns.
The developers are still facing lawsuits – one foe told Bloomberg, “We haven’t even started to see what’s going to happen with the federal legal challenges” – but the bigger issue in the past year has been financing. The Danish pension fund PensionDanmark has committed $200 million toward the project, but it’s conditional on Cape Wind bringing in more money, which it needs to do by the end of this year.
The U.S. Department of Energy could come to the rescue in a big way, however – it’s been sitting for months on a proposal to give the project a loan guarantee. The company is reportedly seeking a guarantee worth $350 million.