Mass. Utilities Back out of Plan to Buy Power Generated by Cape Wind

Source: By JON KAMP and  ERIN AILWORTH, Wall Street Journal • Posted: Monday, January 12, 2015

Reversal Could Deal a Serious Blow to Long-Delayed Wind Farm off the State’s Coast

Nantucket Sound as seen from Popponesset Beach in Mashpee, Mass., where the Cape Wind offshore wind turbine power generation project won approval for construction.
Nantucket Sound as seen from Popponesset Beach in Mashpee, Mass., where the Cape Wind offshore wind turbine power generation project won approval for construction. ASSOCIATED PRESS

National Grid and NStar, a subsidiary of Northeast Utilities , were slated to buy a combined 77.5% of the output from the 130 turbine, 468-megawatt wind project, which isn’t yet under construction. But they announced late Tuesday they had backed out, saying the project had missed financing and construction commitments it was supposed to hit by Dec. 31.

“National Grid is disappointed that Cape Wind has been unable to meet its commitments under the contract,” the utility said. Northeast Utilities spokeswoman Caroline Pretyman confirmed that NStar’s contract was also terminated.

The result could spell money-raising trouble for the project, which has long been on track to be the first offshore wind farm in the U.S. but has faced repeated delays over the last 14 years amid protracted legal fights with its main opponent, the Alliance to Protect Nantucket Sound. Republican donor and energy businessman William Koch is an Alliance board member.

Cape Wind spokesman Mark Rodgers said the project, which Energy Management Inc. is developing, has secured more than $1.5 billion in announced financing commitments and more that wasn’t announced. Still, the power-purchase dispute needs successful resolution “for those commitments to remains in force,” Mr. Rodgers said in an email.

“Without the contracts, the Cape Wind project is unable to go forward,” said Alex Klein, senior research director at IHS Energy. The project’s problems, he added, reflect the challenging economics of offshore wind energy in the U.S. as it tries to compete with cheaper forms of power generation. “As a consequence, there’s unlikely to be much in the way of commercial development of offshore wind, certainly in the next decade.”

When signed, the power purchase deals were hailed as critical for Cape Wind’s construction, in part because they showed there was demand for the power. Still, they also drew some criticism because the wind-generated power would be pricier than electricity from conventional land-based generators.

Cape Wind argued to National Grid and NStar that it missed key milestones because of “extended, unprecedented and relentless litigation” mounted by the Alliance group. Cape Wind doesn’t believe the contract terminations are valid, Mr. Rodgers said.

Both utilities disagreed. “The challenges alluded to by Cape Wind were ongoing and well known to the parties at the time the agreement was entered into and were not the type of events that would excuse Cape Wind from performing its obligations under the contract,” Ms. Pretyman, the Northeast Utilities spokeswoman said in an email.

Audra Parker, president of the Alliance to Protect Nantucket Sound, called the canceled utilities deals “a near-fatal blow” for Cape Wind. Her group also has pending court cases challenging the contracts and federal agencies that approved permitting, she said.

“It’s too early to offer a eulogy” for the wind project, said Jon Mitchell, the mayor of New Bedford, Mass. His city—a former whaling hub—would play a key role in shipping parts out to the wind farm site off the southern coast of Cape Cod. He cited the many roadblocks the project previously overcame.

Whether Cape Wind lives or dies, both he and soon-to-depart Massachusetts Gov. Deval Patrick, a Democrat who has long supported the wind project, noted the state’s robust offshore power potential.

“The wind’s not going anywhere,” Mr. Mitchell said.