The Blog - Wind energy market analysis

Posted 08/02/2018

Richard Heap


What happened to US offshore wind project Cape Wind?

Energy Management Inc. and its founder Jim Gordon have played a key role in the growth of US offshore wind, despite the demise of the pioneering project Cape Wind [Note: This is an extended and updated version of a Wind Watch article originally published in our global edition on 8th December 2017.]

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‘Pioneers take the arrows, settlers take the land.’

This old adage is better known in the US than on my side of the Atlantic. However, it is the one that comes to mind when thinking about aborted US offshore project Cape Wind. This 468MW scheme proves that first movers don’t always get the advantage – but they can field the arrows and open the way for those who come after them.

This is why with all the current excitement about US offshore wind, I remember Cape Wind fondly. It has played an essential role in helping the sector to build its current momentum. There are now 8GW of offshore wind farms planned off the east coast of the US, of which 4GW could be built by 2030 according to the analysis of Bloomberg New Energy Finance. They will all benefit from the work done on Cape Wind.

The problem for Cape Wind is that it was first. In fact, it is a perfect example of first-mover disadvantage. Back in 2014, it was due to be North America’s first offshore wind farm – but, in December 2017, its owner Energy Management Inc. declared it dead. This represented a bitter end for the 468MW project, but not a surprising one.

Let’s cast our minds back. Cape Wind was first mooted in 2001 and spent most of the following 16 years in doubt.

First came the legal fights. Since its inception, the project planned in waters off the coast of Massachusetts attracted objections from people living in Martha’s Vineyard. Backed by the financial clout of the billionaire Koch brothers, their strategy was to delay the scheme in legal battles. Their alliance reportedly spent $40m doing so.

By July 2014, the developer had won 26 legal fights, and Cape Wind had spent ten years being scrutinised by US public bodies and regulators. They were positive.

The scheme also had funding deals in place with Bank of Tokyo Mitsubishi, Natixis, PensionDanmark and Rabobank; backing from EKF; and power purchase deals. Everything looked good.

But winning legal arguments and funding deals is not always enough. The objectors’ strategy of tying up the project in legal disputes worked. As a result, Cape Wind did not reach financial close in 2014, and enabled National Grid and NStar to walk away from power purchase agreements for 77.5% of the project’s output in January 2015.

That threw the project into a decline from which it never recovered. The termination in late 2017 may have been an acknowledgement that the location wasn’t going to work – but it is still a great shame for all of those who worked in vain on Cape Wind for over 16 years, including Energy Management Inc. president Jim Gordon.

In an interview with the New York Times in December, Gordon said he had to cancel the project so that he could move on. He had invested $100m developing the project and fighting for it but, in the end, he just needed to end the uncertainty.

“In a football game, if you have a tie, there’s an overtime period, there’s a sudden death period… We were kept in a repeated sudden death period, and the goal posts kept moving,” he said. “In my wildest imagination, I never envisioned just how exhaustive, how time consuming and how expensive this would be.”

Gordon added he was happy that his work has helped to establish precedents that are being used by the firms now following him. As he was quoted at the end of that article: “Am I wistful about what could have been? Of course I am. I guess I was ten years ahead of my time. The beautiful thing is that it’s all starting to happen.”

This is why I’m reluctant to see Cape Wind as a failure. In practical terms, it is true of course. The project isn’t going ahead despite the best efforts of Gordon and co.

But Gordon’s work is helping ensure the success of his broader mission: to open up US waters for wind farms. Cape Wind played a vital role in putting offshore wind on the agenda of US companies and policymakers. It showed there was support from politicians, financiers, regulators and utilities for doing utility-scale offshore wind.

In that respect Cape Wind should rightfully be remembered as a trailblazer.

That development helped pave the way for 13 projects we now see in waters off ten states, from Massachusetts and New York to California and Oregon. Steve Lockard, chief executive of blade specialist TPI Composites, told the WindEurope conference back in November that “the momentum and enthusiasm and curiosity from some is growing”. The early work on Cape Wind helped get that going.

It wasn’t alone of course, and we’re not trying to take anything away from the 30MW Block Island. The team at Deepwater Wind – Bryan Martin, Jeff Grybowski and all of the others – fought many similar battles to make sure their project happened. It was commissioned last year off the coast of Rhode Island, and will rightly go down in the history books at the first wind farm commissioned in US waters.

Block Island and Cape Wind have both helped to build the excitement about offshore wind in the US. The former will remain as an icon, and Cape Wind will fade from our collective memories. That’s just the way it goes. And there is little chance of anyone trying to build on the Cape Wind site now, as they could avoid the battles by building turbines further out to sea than Gordon could when Cape Wind was in planning.

We are seeing firms make progress on other projects. Deepwater Wind has talked since 2010 about the 30MW Block Island being the first phase of a 1GW plan.

Meanwhile, Statoil is planning the 1GW Empire Wind in New York waters; Avangrid and Copenhagen Infrastructure Partners are working on the 1GW Vineyard Wind off Massachusetts; and Avangrid is preparing the 1.5GW Kitty Hawk off North Carolina.

In total, projects totalling 9GW are in development off the US coast – but, for the first year in the last 16 years, Cape Wind is not among them.

It will still not be plain sailing for US offshore wind. There are threats from tax reform, fickle state politicians, the lack of a supply chain, and the restrictions in the Jones Act that need to be dealt with. But Gordon and Cape Wind helped to establish many of the legal precedents that will benefit those now looking to develop their projects.

That pioneering project may be gone – but we should not allow it to be forgotten.

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