Md. takes step closer to offshore wind turbines

An Italian developer has won leases for about 80,000 acres of ocean tracts off of Maryland, taking its first big step in trying to build an offshore wind farm.

Eight years after Bluewater Wind first rolled out its proposal in Delaware, and 13 years after Cape Wind made its proposal for Nantucket Sound, there are still no wind farms off the coast of the United States.

Observers say Maryland offers advantages in helping offshore wind developers get their projects built, but significant challenges remain.

US Wind Inc, an arm of Renexia SpA, won the auction on Monday for a 25-year lease with a bid of $8.7 million, the Bureau of Ocean Energy Management, which is within the Department of the Interior, reported. Offshore wind in Maryland is being closely watched because the state requires utilities to buy a portion of their power from offshore wind power.

But at the end of last year, a federal tax credit for wind projects expired. A few existing planned offshore wind projects in other states took steps to qualify for the credit, but unless it gets renewed by Congress, observers say any developer off of Maryland would have to pass along the higher construction costs to whomever buys the power, namely ratepayers.

Matt DaPrato, an analyst at IHS Global Insight, said Maryland policymakers and regulators would have to gauge whether there will be the appetite to pay more for the already high cost of offshore wind.

Both Cape Wind and Deepwater Wind, a developer of a small pilot project off of Block Island in Rhode Island, took steps to try to secure the tax credit before it expired, analysts said. Both DaPrato and Amy Grace, an analyst for Bloomberg New Energy Finance, said Deepwater’s project is most likely to be constructed first because its smaller size made it easier to find equity backing.

In Delaware, Bluewater Wind in 2008 signed the first power purchase agreement for offshore wind power in the country, with Delmarva Power. But following the economic downturn, the project could not find financial backing, and Bluewater’s owner, NRG Energy, terminated the contract. NRG still owns the lease on the tracts off of Delaware, but the project is dormant.

In creating the offshore wind renewable energy credit program, Maryland is following the lead of New Jersey, which Grace said developed the program but then decided was too expensive and slowed its process.

In Maryland, last year Gov. Martin O’Malley signed legislation requiring utilities to buy an undetermined amount of energy from offshore wind farms. It was intended to be enough power to support 200 megawatts of offshore wind, 40 turbines roughly 10 miles offshore.

The details, including whether more ocean tracts will be leased for other developers, have yet to be ironed out, Grace said.

Delaware is likely to get some of the electrons from any Maryland offshore wind farm, simply because of how the power grid is laid out, Grace said. The bureau stated that if fully built out, generating as much as 1,450 megawatts, offshore wind turbines on the ocean tracts off of Maryland would generate enough power for 300,000 homes.

Without building off of its own coast, Delaware is unlikely to get the associated jobs and manufacturing potential, DaPrato said. Manufacturing sites will follow where the projects are, but a single project will not dictate who gets an entire turbine facility.

Contact Aaron Nathans at 324-2786 or anathans@delawareonline.com. Information from Bloomberg News was used in this story.