Our estimates show that Cape Wind would receive revenue equivalent to 13.26 cents per kWh of electricity produced, gross of taxes; the present value of this revenue (in 2008, when serious construction would begin, but using 2006 prices for current comparability with other projects) is $1,527 million, which is more than adequate to cover the financial cost of building and operating the wind farm. The developer can expect to net $139 million – equivalent to a 25% return on equity – although this figure is subject to considerable uncertainty because the project faces a number of significant risks.

The project would only be privately profitable because of the subsidies it can expect to receive. It would receive a “gross subsidy” (subsidy before taxes) of $731 million (in present value terms in 2008, using the prices of 2006), consisting of (i) the Federal Production Tax Credit, which would contribute $180 million to revenue in present value terms; (ii) the sales of Massachusetts “green credits”, worth a total of $487 million in present value terms; and (iii) accelerated depreciation of investment costs, which would allow the firm to defer payment of Federal income tax, worth $65 million. The project would pay taxes, which can be offset against the gross subsidy to arrive at the “net subsidy.”

The taxes amount to $151 million in present value terms. They consist of:

(i) Massachusetts corporate income tax of $20 million;
(ii) Federal corporate income tax of $131 million (computed on the assumption of no favorable
treatment of depreciation); and
(iii) Local property tax of less than $1 million.