by nb41
Thu Jun 26th, 2008 at 11:22:24 AM EST
On June 25, a potentially important announcement came concerning an offshore wind project in the U.S. see http://www.hometownannapolis.com/cgi-bin/read/2008/06_24-02/OUD or here: http://www.washingtonpost.com/wp-dyn/content/article/2008/06/23/AR2008062302217.html and the developers website, here http://www.bluewaterwind.com/delaware.htm
For this 200 MW farm (initial phase of 600 MW total), an amazingly high price for electricity of $117.10 (Euro 74/MW-hr) on the U.S mid-Atlantic coast was negotiated. This should bring in about $82 million/yr in revenue from the wind farm, which will probably cost in excess of $800 million to build. The key to it is a 25 year Power Purchase Agreement (PPA). The local utility (Delmarva Power) tried to back out of this idea when such costs/prices were encountered, but somehow they saw the light. Delaware has no natural gas or coal of its own, much of its electricity is provided by coal and natural gas and this is getting quite expensive. In the near future, these offshore power rates will be looking like quite the bargain.
So, some customers have been lined up, and now the developer has to do their part. So far, this has been a killer of all offshore projects contemplated in the U.S. - no one will pay such high prices for electricity, even if it is non-polluting (especially of CO2), and the project makes lots of construction jobs. Perhaps a sea change has happened in that regard, too - more evidence of "Peak Ngas realized", at least for North America. They will be "assisted" by a 10 year tax credit on passive income of $15 million (roughly) each year (PTC), and the ability to completely depreciate the $800+ million in the first 6 years of this project, along with the interest on the loan (70 to 80% or more of the project cost) - worth $350+ million for the first 6 years, as long as they have profits to depreciate against. A representative of the developer (Babcock & Brown) had told me that all they needed was a viable PPA, and they could build massive offshore developments. The U.S. North Coast (Great Lakes) and East Coast has a very decent wind resource and lots of shallow waters upon which to build, and near millions of customers. Sure is preferable to nukes and coal burners, IMHO, even if it does but a hurt on the "viewscape" of rich people chillin' on the waterfront properties, or from their yachts tooling around on the waters. And if they are too drunk driving their watercraft to avoid collisions between their boast and the turbine towers/bases, looks like it will be payback time for the hungry crabs on that part of the ocean floor.... C'est la vie...
Oh well, this project is almost chump change in comparison to some recent activity - especially in Germany's offshore plans. The U.S. has been spoiled rotten with really cheap electricity for some time. Cheap electricity and air conditioning has allowed the hot and humid south to be sub-urbanized, after all, and the same goes for a lot of the southwest/California (less humid, more temperature). But, this PPA, and hopefully the project that results from the PPA is a first step, albeit a high subsidized one. Oh, and it sure beats toasting dollars in IraqNam or on idiotic weapons systems.
Nb41
