Gamesa, partner suspend work on Virginia offshore wind project

Gamesa and a development partner are suspending further development of an offshore wind turbine off the coast of Virginia, citing the massive amounts of capital needed to pursue a project with a cloudy future due to uncertain federal support.

Since September 2010, Gamesa has been working with Newport News Shipbuilding to design a 5-MW prototype with plans to erect a test turbine off the mid-Atlantic coast. The design phase is expected to be completed this year.

The collaborative effort has focused on turbine reliability, low maintenance and servicing requirements, civil engineering efficiencies in infrastructure development, and cost of energy. The companies said on May 7 they are approaching the end of the critical design review (CDR) for the turbine.

“An analysis of current conditions indicates that a viable commercial market in the United States is still farther out, as much as three or four years away, at the earliest,” the companies said in a statement, making further investment impractical.

Developers in New England said they don’t expect the news in Virginia to impact their own plans in Massachusetts and Rhode Island.

“Every project is different as Cape Wind continues to move forward.  We have selected our construction contractors, and with our two power purchase agreements, we have entered our project financing phase, assisted by our financial advisors at Barclays Capital,” Cape Wind Associates Spokesman Mark Rodgers told GenerationHub.

In Rhode Island, Deepwater Wind’s Chief Administrative Officer Jeffrey Grybowski told GenerationHub its Northeast projects are full speed ahead.

“The Block Island Wind Farm has a fully-approved power purchase agreement and we expect to receive final governmental approvals in early 2013.  In addition, our Deepwater Wind Energy Center represents the best utility-scale wind farm opportunity on the Atlantic coast and as the State of Rhode Island’s preferred developer of that site, we are also developing this project aggressively,” he said.

Deepwater already has a contract with Siemens for five 6-MW turbines for its Block Island Wind Farm.

Gamesa and Newport News said the regulatory climate has improved in recent years, but the lack of an offshore grid, uncertainty surrounding the production tax credit (PTC) extension, which will expire at the end of the year without congressional action, and the lack of a federal energy policy, hamper companies’ ability to secure financing for projects.

After the design is completed, plans to build the prototype near Cape Charles, Va., which the Virginia Marine Resources Commission (VMRC) approved in March, have been postponed. The joint Offshore Wind Technology Center, opened in February 2011 in Chesapeake, Va., will be closed at the end of the year.

“I want to commend Virginia Gov. Bob McDonnell and his administration, especially the VMRC, for the time and effort they put into approving the permit for this project,” said David Flitterman, Chairman, Gamesa North America. “The Governor is a leader for his vision to utilize clean, renewable energy, and his team did everything in their power to fast track this offshore wind development.”

Gamesa said it remains committed to offshore wind globally.  If favorable conditions return, “Gamesa has an advantage to act quickly on future opportunities for a 60 Hz version should the U.S. market develop,” its statement said.

Meawhile, the American Wind Energy Association lamented the continued policy quagmire and its effect on wind development, offshore and onshore.

“Businesses need certainty to invest and this is another example of how policy uncertainty is affecting business decisions.  Wind power is an American success story, supporting nearly 500 manufacturing facilities in 43 states and employing 75,000 Americans. Urgent extensions of the production tax credit for land-based wind energy and the investment tax credit for offshore wind will allow the American wind energy success story to continue.  Without such extensions, tens of thousands of jobs and tens of billions of dollars of private investment in the U.S. will be lost,” it said in a statement.