Del. Wind Contract Cancelled

OCEAN CITY -- While legislation opening the door for the development of offshore wind power off the coast of Ocean City will almost certainly be introduced in the upcoming General Assembly session, a major player in both the Delaware and Maryland projects announced this week it was backing off its plans for the near term.

Delmarva Power announced this week NRG Energy, the parent company of Bluewater Wind, had cancelled its long-term power purchase agreement, which the two parties signed in 2008 to ultimately provide Delaware customers with up to 200 megawatts of offshore wind energy. Earlier this month, NRG, which was well into the planning process for an offshore wind farm off the coast of Delaware and a major player in a similar effort underway off the coast of Ocean City, announced it was putting active development of offshore wind projects on hold in the near future, acknowledging the monumental challenges in developing a new domestic industry in the current economic climate.

In mid-December, Bluewater Wind said it was unable to find an investment partner in the proposed Mid-Atlantic Wind Park off the coast of Delaware and announced it intended to terminate its power purchase agreement with Delmarva Power inked three years ago. On Tuesday, Bluewater Wind officially terminated the contract.

Delmarva Power officials accepted the contract termination, which was allowed under the terms of the agreement, and vowed to continue to support Delaware’s long-term renewable energy goals.

“Delmarva Power and NRG worked hard to see this project come to fruition,” said Regional President Gary Stockbridge. “But the inability to secure a financing partner prevents us from moving forward.”

Under the power purchase agreement, Bluewater Wind posted security during the development period of the contract. With the contract being terminated prior to Jan. 1, 2012, $2 million of that security will be credited back to Delmarva Power customers.

Meanwhile, it remains uncertain what the Delaware power purchase agreement contract termination will mean for a similar effort for an offshore wind farm off the coast of Ocean City, although presumably the same financial constraints in the current economic climate will come to bear. NRG officials said this week current economic conditions make moving forward with any offshore wind development projects difficult.

“Our people have worked hard and we’ve made a considerable financial investment in the wind park, but that effort cannot overcome the difficult and unfortunate realities of the current market,” said NRG President and CEO David Crane. “We’re not giving up, but at this moment, we can’t rationally justify investment in this project without the prospect that it can move forward within a reasonable timeframe.”

Gov. Martin O’Malley last year introduced legislation in the hopes of jumpstarting Maryland’s efforts for an offshore wind farm off the coast of Ocean City, but the bill stalled over concerns about the level of ratepayer investment in the largely private enterprise. A year later, O’Malley will certainly reintroduce some form of offshore wind energy legislation, although it may be in a different form. Senator Jim Mathias (D-38) said this week the administration is considering following New Jersey’s lead in financing offshore wind with tax incentives for private investment rather than paying for it on the backs of the ratepayers.

“I think we’ll revisit the bill with the approach of tax incentives rather than surcharges,” he said. “It’s a very fluid issue and there is a lot to be seen yet. Philosophically, I agree with the concept, but I’d like to see the financial side. Our economy is dependent on clean waterways, and by getting to renewables, we can decrease our emissions and decrease our dependency.”