Shutdown throws another speed bump in emerging industry’s path

Source: Nick Juliano, E&E reporter • Posted: Sunday, October 13, 2013

The nascent offshore wind industry in the United States has faced its share of hiccups and stumbles over the last decade but lately has shown signs of progress. Now industry officials say the ongoing government shutdown could deliver another blow to its development.

The industry relies on the federal government in several respects. Most utility-scale installations are planned for federal waters, where the Interior Department oversees lease sales and permitting. The Department of Energy has offered millions of dollars’ worth of grants to companies that are contingent on congressional appropriations over the next several years. And developers are hoping to qualify for lucrative tax credits set to expire Dec. 31 — without which facilities risk being unprofitable.

But with government agencies closed since Oct. 1 because of House Republicans’ refusal to enact spending legislation without handcuffing the health care law, there is no one to call at Interior, DOE or the Internal Revenue Service to navigate the public-private partnerships necessary to make the still-nonexistent U.S. offshore wind industry a reality.

The level of government involvement stretches into a long list of agencies charged with managing fisheries or ensuring that turbines don’t interfere with air travel or defense operations, along with the heavy hitters like Interior’s Bureau of Ocean Energy Management, which issues permits for the installations, and DOE, which provides financial support.

“In addition to BOEM and DOE, we need the Coast Guard, we need FAA, we need Army Corps, NMFS and NOAA — all those folks are involved,” said Rhonda Jackson, of offshore developer Fishermen’s Energy, referring to the Federal Aviation Administration, National Marine Fisheries Service, and National Oceanic and Atmospheric Administration.

“They all play a very instrumental role in getting this industry moving, in getting projects across the line,” Jackson added. “We’re anxious for them to get back to work to continue the good work that they’ve done so far.”

Sources in the industry said it was unclear whether specific projects would face delays because of the shutdown, although potential problems could worsen if government agencies do not reopen soon. The most immediate impact may come later this month when the American Wind Energy Association hosts its annual Offshore Windpower exposition in Providence, R.I.

The schedule for the Oct. 22-23 event is packed with government officials who would be unable to attend if the government still is shut down.

Jim Lanard, who leads the Offshore Wind Development Coalition, said a variety of renewable industry officials had been scheduled this week to meet with Energy Secretary Ernest Moniz and officials at the White House, but that those sessions were canceled because of the shutdown.

Fishermen’s Energy is planning to build up to six wind turbines in state waters off New Jersey. It was one of six offshore wind projects to qualify for a multiyear DOE grant, the future of which is contingent on continued appropriations (E&ENews PM, Dec. 12, 2012). It also hopes to qualify for an investment tax credit (ITC), which would cover up to 30 percent of the project’s costs if certain milestones can be met by the end of this year.

However, the company’s most immediate concern is not with the federal government, but with New Jersey utility regulators who have not yet signed off on an agreement that would have set the price of its facility’s electricity through the state’s offshore renewable energy credit system (Greenwire, July 22).

Lanard said the shutdown will make it difficult for many companies hoping to qualify for the ITC this year. The credit was extended alongside the related production tax credit as part of a broader fiscal law enacted in January. To qualify, developers must begin construction by Dec. 31 or invest at least 5 percent of their total costs by that time.

The IRS distributed guidance documents outlining how to qualify, but the complex process requires technical expertise and would benefit from the ability to consult with an expert at the IRS, where most employees have been furloughed during the shutdown.

“They will be lucky to meet the deadline, and with this delay, it’s just going to make it that much harder,” Lanard said of companies hoping to receive tax credits.

Interior has so far held two lease sales for parts of the outer continental shelf to construct offshore wind farms. Deepwater Wind won a July lease for an area off Rhode Island and Massachusetts, and Dominion Virginia Power won a lease for a tract off Virginia last month. A Deepwater spokeswoman declined to comment, and a request to Dominion was not immediately returned.

The longest-planned offshore wind project is the massive Cape Wind facility, which would go in Nantucket Sound, off Massachusetts. While the project has all of the permits it needs from federal authorities, it is expected to attempt to qualify for the tax credit and remains in the running for a potential DOE loan guarantee. A spokesman for the company declined to comment.

Interior’s Bureau of Ocean Energy Management had been expected to soon conduct new lease sales off New Jersey, Maryland and Massachusetts, but those likely will be delayed because of the government shutdown.