Carper foresees projects under construction in 2013 but touts need for tax credits

Source: Phil Taylor, E&E reporter • Posted: Friday, February 1, 2013

Delaware Sen. Tom Carper (D) today said that he believes the United States could see construction of its first couple of offshore wind farms in 2013 but that lawmakers must extend key tax incentives to keep the nascent industry afloat.

Carper, who co-sponsored a measure with former Sen. Olympia Snowe (R-Maine) last Congress that would extend the investment tax credit to the first 3,000 megawatts of offshore wind projects that go into service, said he’ll be pushing his plan again as lawmakers discuss comprehensive tax reform.

“We don’t create jobs, we create a nurturing environment for jobs,” Carper said during an offshore wind event this morning at the Center for American Progress.

Creating predictability and certainty — particularly in permitting and tax policy — will be his top priority this Congress for advancing domestic energy policy, Carper said.

The investment tax credit (ITC), which allows developers to claim a 30 percent tax credit on the cost of a project in lieu of the production tax credit (PTC), is considered more valuable for offshore wind farms, whose operating performance is less proven than that of onshore wind farms. Onshore projects generally claim the PTC, which offers 2.2 cents per kilowatt-hour produced.

Congress early this month extended both credits until the end of 2013 but modified language so that projects could qualify if they have begun construction by Dec. 31, rather than having to be up and running.

Jim Lanard, president of the Offshore Wind Development Coalition, said two projects in particular appear poised to claim the ITC in 2013.

They include the long-stalled 420 MW Cape Wind project in Massachusetts’ Nantucket Sound and Deepwater Wind’s 30 MW Block Island project in state waters off Rhode Island. A third project by Fishermen’s Energy in state waters off New Jersey could also qualify if it can find a revenue stream to begin construction, he said.

Lanard said he is hopeful Carper can advance his 3,000 MW ITC bill as part of a broader overhaul of the tax code.

“We like the [Carper] model in that it lets Congress appreciate that there is certainty,” Lanard said. “The cost is maintained because you can actually calculate what the 3,000 megawatts would [cost].”

Carper, whose home state would benefit from offshore wind development in federal waters off Rehoboth Beach, acknowledged that the Congressional Budget Office cost estimate for his bill was high but that it was necessary to level the playing field between offshore wind and established energy sources such as oil and gas and coal.

Carper also praised the Interior Department’s efforts to accelerate the siting and leasing of wind power in the mid-Atlantic and for taking steps to resolve potential concerns from the military and wildlife advocates.

He recalled a phone call with Interior Secretary Ken Salazar after Carper learned that the first wind projects were not projected to be approved until 2018.

Salazar, according to Carper, told the Delaware senator to send his agency a letter “to kick him in the seat of the pants” asking the agency to accelerate its permitting program. Carper said he’s pleased with the results.

Interior has carved out a handful of “wind energy areas” from Virginia to Massachusetts and plans to hold its first two competitive offshore wind lease sales this year. The agency last fall issued its first lease under its “smart from the start” regime to NRG Bluewater Wind Delaware LLC, which plans to develop a massive project off the Delaware coast.

But while offshore wind officials say the ITC will be critical to bring early projects to fruition, some observers say it is unlikely the credit will be extended before the end of the year, as the prospects for large-scale tax reform remain murky.

Proponents say Atlantic winds are steadier, more predictable and located closer to major energy consumers on the East Coast than onshore wind, which is heaviest in rural parts of the Great Plains and the West.

But although more than 50 projects and nearly 4,000 MW of offshore wind have been installed in Europe in the past decade, the industry has yet to break ground in the United States, where it faces unsettled federal energy policy, high capital costs and the threat of lawsuits.