Cape Wind Deadline: Headwinds for Offshore Turbines

The drive for clean energy collides with concern over cost and clear views of the horizon.

By now, 130 turbines were supposed to be turning above the shallow area of Nantucket Sound known as Horseshoe Shoal. But nothing is there to capture the power of December’s winds, except perhaps for the wings of the long-tailed ducks that winter around Cape Cod.

In the dozen years since Cape Wind was first proposed, there have been reams of study over potential impact on waterfowl, marine mammals, and submerged Indian burial grounds. The developers received local, state, and federal approvals, were granted the first U.S. offshore wind energy license in 2010, and gained the support of some key environmental groups. (See related quiz: "What You Don't Know About Wind Energy.")

But the true test will be the final hurdle: money.

To qualify for a U.S. investment tax credit that would cover 30 percent of its estimated $2.6 billion in construction costs, Cape Wind developers must break ground by December 31, or prove that they’ve made a substantial start on the project. And an important backer, the Danish pension fund PensionDanmark, has pledged $200 million contingent on a year-end deadline for lining up additional investors.

Cape Wind spokesperson Mark Rodgers said the developers would have no comment on the looming deadline. But he maintained that the project is fully permitted, has approved construction and operations, and expects to soon secure more investors. “We're very confident that we're going to be America's first offshore wind farm,” he said.(See related: First U.S. Offshore Wind Power Project Approved.")

But to do so, Cape Wind will need to overcome some stiff economic headwinds that are affecting offshore wind projects around the world. In two of the countries that have been driving global growth of offshore wind in recent years, the United Kingdom and Germany, government officials have faced criticism over the policies’ contribution to high electricity costs. (See related story, “Frozen Fish Help Reel in Germany’s Wind Power.”)

And offshore wind has attracted an especially well-heeled and determined group of opponents, who argue that the high-cost power produced by offshore turbines isn't worth the price of altering timeless ocean vistas—particularly in their own backyards. In Scotland, for instance, real estate developer Donald Trump is fighting a wind farm project planned for Aberdeen Bay, where he has invested heavily in a coastal golf resort.(See related pictures: "Flying Wind Turbines Reach for High-Altitude Power.")

On this side of the Atlantic, Cape Wind’s most vocal opponents included the late Massachusetts Senator Edward M. Kennedy and his nephew, environmental lawyer Robert F. Kennedy Jr. From the opposite side of the political spectrum, billionaire businessman and Cape Cod denizen and yachtsman William Koch continues the battle, telling CommonWealth magazine earlier this year that he had put “well over” $1 million into fighting Cape Wind as one of the backers of the Alliance to Protect Nantucket Sound. His aim, he said, has been to “delay, delay, delay.”

And now, for Cape Wind, the clock is ticking.

Europe’s Offshore Boom

On paper, these look like boom times for offshore wind energy. During the past five years, global offshore wind output grew at a surging annual pace of 40 percent, thanks largely to new farms off the coasts of the United Kingdom and Germany. Improved technologies are coming online as well. Turbines are becoming bigger and more powerful. Japan debuted an experimental floating farm last month that could be a key to harvesting the bountiful wind in deepwater locations that couldn’t be reached with turbines moored to the seabed.

In Europe, 58 working offshore wind farms in ten countries have a capacity of about 6,000 megawatts of power, according to the European Wind Energy Association (EWEA). (That’s about the capacity of the largest power plant in the United States, the Grand Coulee Dam.) By 2020, EWEA estimates, offshore installations will account for nearly one-fifth of the wind power in Europe, and will meet 4.2 percent of the EU’s electricity demand.

Because offshore turbines are considerably higher in capacity than onshore installations, governments have promoted them as crucial in the EU’s drive to achieve 20 percent renewable electricity by 2020. (See related story: "Sizing Up Wind Energy: Bigger Means Greener, Study Says.") But EWEA recently warned that “warning signs were evident” that cost concerns might stall offshore wind projects in Europe without a firm commitment to that goal.(See related: "Global Renewable Energy On Track to Eclipse Natural Gas, Nuclear.")

In the United Kingdom, world leader in offshore wind with more than half of Europe’s installed capacity, the government recently decided to boost subsidies for offshore wind, but it faced critics who complained the projects needed to be subsidized at three times the market price of power.

One of the most vocal is Trump, who is currently launching legal action against Scotland's government over its approval of the planned 11-turbine European Offshore Wind Deployment Centre in Aberdeen Bay. He’s taken on the first minister of the Scottish parliament on Twitter.

Meanwhile, in Germany, newly reelected Chancellor Angela Merkel and her governing coalition partners plan to slow the pace of offshore wind development as part of a broad renewable energy package that aims to address high electricity costs. Household electricity prices average 55 cents per kilowatt-hour in Germany, and 28 cents in the United Kingdom, compared to 13 cents in the United States. The EU statistical agency, Eurostat, reports that Europe’s household electricity costs increased more than 6 percent in 2011 and nearly 7 percent in 2012.

“Depending on who you read, renewables like offshore wind are the main culprit in rising electric rates, or they have a very minimal impact,” said Matt Roney, author of a recent Earth Policy Institute study on offshore wind. “The argument that they are a big culprit is generally coming from groups opposed to renewable energy anyway. But I think that cost is becoming more of an issue now and these groups are getting louder. When people see electric bills rising they look for an explanation, and some groups are proposing that renewable energy is the reason.”

Sound Views?

For the Cape Wind project, cost issues have only recently taken center stage; opponents for years focused primarily on the potential environmental and visual impact.

(See related, “Federal Study Highlights Spike in Eagle Deaths at Wind Farms,” “Wind Farm Faces Fine Over Golden Eagle’s Death,” and “Hope for Stemming Wind Energy’s Toll on Bats.")

But most environmental groups were swayed by the project’s potential to provide 75 percent of the electricity of Cape Cod, Martha's Vineyard, and Nantucket, from a clean energy source. (See related: "Going All The Way With Renewable Energy?")

Last year, Cape Wind was among three wind developers that signed an agreement with environmentalists to mitigate subsea sound and the impact of ship traffic on migrating, feeding, and breeding right whales in the North Atlantic. Related: As U.S. Eyes Offshore Wind Development, Whales Get New Protections

Massachusetts Audubon spent more than a decade researching and reviewing research on Cape Wind’s potential impact on birds and other wildlife. The organization was active in commenting on state and federal environmental impact review, gaining additional study and avian monitoring. Finally, in August, Mass Audubon said it concluded the project would not pose an ecologically significant threat to birds and other wildlife. The organization said it originally had “deep skepticism” about the project. Ultimately, it supported Cape Wind because of the contribution it could make on climate change, which the group said it viewed as “the gravest threat to humans and to the nature of Massachusetts and the planet.”(See related: Too Much Wind Energy? Save It Underground in Volcanic Rock Reservoirs.")

But Cape Wind has not been able to turn around all opponents, especially those concerned that 440-foot (135-meter) turbines will mar Nantucket Sound’s storied vistas. “Visual pollution,” William Koch called it in his interview with CommonWealth. “In Colorado, they have a phrase called the view shed . . . it’s extremely important to the people to have a good view shed.”

While his brothers, Charles and David, who own the fossil fuel conglomerate Koch Industries, use their wealth to bankroll national conservative groups, William Koch has focused much of his political attention close to home. His longtime Oyster Harbors estate would overlook the Cape Wind project.

Koch’s estate is currently on the market for some $15 million, but he isn't pulling up stakes; he's sinking deeper roots. He recently purchased the nearby 26-acre seaside estate of heiress Rachel Lambert “Bunny” Mellon ($19.5 million) and a neighboring 12-acre DuPont family estate ($7 million) so that the two parcels can be paired into a larger family compound.

Koch told CommonWealth he is not giving up the fight against Cape Wind, and intends to keep supporting the work of the nonprofit that has been leading the battle, the Alliance to Protect Nantucket Sound.

Recent developments on Cape Wind’s costs and financing have given the Alliance new ammunition. Earlier this year,  Massachusetts utilities contracted to purchase onshore wind power from New England neighbors New Hampshire and Maine for eight cents per kilowatt-hour. Those same utilities signed contracts with Cape Wind three years ago that committed them to buying the offshore power for 19 cents per kilowatt-hour, with a 3.5 percent increase each year. (That’s in line with the U.S. Energy Information Administration estimates that on a per-megawatt-hour basis, new offshore wind energy costs 2.6 times more than onshore wind power and 3.3 times more than advanced natural gas plants.)

“In 2010, Cape Wind signed exorbitant price contracts with the Massachusetts utilities and it became very clear that this power wasn't cheap at all,” said Alliance President and chief executive Audra Parker. “At that point, opposition started to increase across Massachusetts among people and business concerned with the possibility of rising electric bills.”

Parker insists that the Alliance is not just an organization of wealthy landowners, but a consortium of business owners, fishermen, and Native American tribes, all joined in recent years by people across the state less concerned with Nantucket Sound than with electric rates.

The pressure is worsened with the looming tax and finance deadlines Cape Wind faces; if it fails to qualify for the federal investment tax credit, its deal with the utilities would allow it to charge a higher price for power to make up the gap.

“We believe that there are many obstacles that will prevent [Cape Wind] from ever being built; financial obstacles, legal challenges, and growing objections to that specific project in that specific location at that specific cost,” Parker said.

Cape Wind spokesperson Rodgers admits that the capital costs for an offshore project are higher than for land-based wind in the short term. “But what people will get out of it is a clean source of energy, in close proximity to the energy-hungry coastline, that's never going to run out,” he said. “It's a safer and more hopeful energy future than we have now.”

As for the views of the wind farm, which the developers maintain will be low-profile from shore, Rodgers says that Cape Wind is partnering with a local ferry and cruise company to offer wind farm ecotours once the project is up and running. “I think that will be the coolest field trip destination for 250 miles,” he said. “Young people are really excited by this technology.”

Those who complain about the sight of turbines off their coast have unwittingly highlighted one of the project's great advantages. The remote Texas plains have hearty wind resources, but these coastal winds are close to millions of people who need the energy. (See related: Banking on Connections to Spur Offshore Wind.") “The Atlantic coastline from Maine to North Carolina has the best offshore wind resource in the entire world and it's not being used,” Rodgers said. “We and many others are working hard to change that.” (See related: "Helix Collapse Fails to Crush Hope for Vertical Wind Turbines.")

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

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