Nstar’s agreement to purchase power from Cape Wind Associates LLC may lead to financing of the first U.S. offshore wind project.
Nstar agreed to purchase 129 megawatts of capacity from the planned 468-megawatt project as part the Boston-based utility holding company’s $4.8 billion acquisition by Northeast Utilities, in a deal approved yesterday by Massachusetts regulators.
That means the developer has lined up buyers for 77.5 percent of the wind farm’s total output and will be enough to seek financing, said Mark Rodgers, a Cape Wind spokesman. State regulators must approve the Nstar contract, as they did with National Grid Plc’s 2010 agreement to buy 234 megawatts of capacity from the project off the coast of Nantucket.
“We believe these two contracts will be enough for us to get financing,” Rodgers said in a phone interview. “We’ll continue to look for buyers for the remainder as that process moves forward.”
The Cape Wind project has been in development for more than a decade.
Opposition to the project, which would place 130 Siemens AG turbines in Nantucket Sound, say that offshore wind is too expensive compared to onshore wind and solar energy. Offshore wind costs almost three times as much as onshore, and four times that of an efficient natural-gas plant, according to Bloomberg New Energy Finance data.
“Ratepayers are not going to stand still for the kind of bills that the governor, Nstar, National Grid and Cape Wind want to impose on them,” Audra Parker, president of Alliance to Protect Nantucket Sound, said in a statement. “Other green energy is available at a fraction of the price.”
Tax Credit Expiring
The contract with Nstar, similar to National Grid, will probably include provisions for the potential loss of a federal tax credit that provides wind-power producers 2.2 cents a kilowatt-hour, Rodgers said.
National Grid agreed to pay Cape Wind 18.7 cents a kilowatt-hour for half the output that the project produces. The price will increase 3.5 percent annually for the 15-year life of the contract.
The production tax credit for wind will expire at the end of this year unless Congress passes an extension.
Even a two-year extension may not help Cape wind and other offshore developers qualify for the credit, because large offshore projects take longer than that to complete, said Amy Grace, a wind energy analyst at New Energy Finance in New York.
“There’s still a lot of uncertainty,” Grace said.