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Financing, tax credits will determine if Maryland's energy future is blowin' in the wind

If things go as planned, Delaware could be the first state in the U.S. to develop an offshore wind farm. NRG Bluewater Wind estimates it will take two years to obtain necessary permits ...Funding also may impact the project's timeline. Delaware's 200-megawatt offshore wind farm is estimated to cost $1.2 billion. Renewal of a federal tax credit for wind projects and approval of an application for a federal loan guarantee will be key, executives say.

To the unindoctrinated, the image seems somewhat surreal - gigantic windmill-like structures plunked down into the waters off the coast of Maryland to capture energy from near-constant blowing winds and deliver it to the state's homes and businesses.

But a recently formed partnership between Maryland and neighboring coastal states Delaware and Virginia is bringing this foreign concept one step closer to reality.

On Nov. 9 Maryland, Delaware and Virginia entered into a partnership, pledging in a Memorandum of Understanding (MOU) to jointly promote the development of offshore wind energy in the region.

"The transmission of offshore wind energy is a common issue for the region. We will use the MOU to work collaboratively," said Ross Tyler, director of clean energy for the Maryland Energy Administration (MEA).

Industry experts see the regional partnership as a critical component to introducing offshore wind as a viable renewable energy source in the region, one they say will bring with it the benefits of long-term energy rate stabilization and job creation. They're also counting on offshore wind to help Maryland meet its aggressive renewable... more [truncated due to possible copyright]  

To the unindoctrinated, the image seems somewhat surreal - gigantic windmill-like structures plunked down into the waters off the coast of Maryland to capture energy from near-constant blowing winds and deliver it to the state's homes and businesses.

But a recently formed partnership between Maryland and neighboring coastal states Delaware and Virginia is bringing this foreign concept one step closer to reality.

On Nov. 9 Maryland, Delaware and Virginia entered into a partnership, pledging in a Memorandum of Understanding (MOU) to jointly promote the development of offshore wind energy in the region.

"The transmission of offshore wind energy is a common issue for the region. We will use the MOU to work collaboratively," said Ross Tyler, director of clean energy for the Maryland Energy Administration (MEA).

Industry experts see the regional partnership as a critical component to introducing offshore wind as a viable renewable energy source in the region, one they say will bring with it the benefits of long-term energy rate stabilization and job creation. They're also counting on offshore wind to help Maryland meet its aggressive renewable portfolio standard, which requires electric suppliers to purchase 20 percent of their power from clean energy sources by 2022. Though the ink from the tri-state partnership agreement has barely dried, solid initiatives - one under way in Delaware prior to the MOU and the other just announced in Maryland - indicate a serious intent to develop offshore wind energy.

Navigating ‘regulatory regime'

In June 2008, offshore wind development company NRG Bluewater Wind - formerly Bluewater Wind, the company was bought in November 2009 by NRG Energy Inc.- entered into the nation's first contract to sell offshore wind power to a utility company. Delmarva Power has signed a 25-year contract to buy up to 200 megawatts of power from NRG Bluewater Wind, which plans to build an offshore wind farm of approximately 80 wind turbines, 11.5 miles off the coast of Delaware's Rehobeth Beach. The company estimates the wind farm will eventually supply energy to 45,000 homes in Delaware.

If things go as planned, Delaware could be the first state in the U.S. to develop an offshore wind farm. Peter Mandelstam, president and founder of NRG Bluewater Wind, estimates it will take two years to obtain necessary permits, then another year to 18 months for construction. He hopes to see the first wind turbines spinning by 2014.

Funding also may impact the project's timeline. Delaware's 200-megawatt offshore wind farm is estimated to cost $1.2 billion. Though NRG officials say they plan to pay for the project with cash, they continue to seek lenders and potential partners. The renewal of a federal tax credit for wind projects and approval of an application for a federal loan guarantee will be key, executives say.

Though the U.S. remains on the verge of implementing offshore wind turbines, offshore wind turbines have been twirling off Europe's shores for 18 years, and Mandelstam sees only one potential stumbling block here in the U.S.

"The water is as wet off the coast of Delaware as it is in Denmark," he said. "The only difference is the regulatory regime."

That Delaware has come this far, however, makes it easier for other states to follow suit, he added.

"Maryland has the benefit of Delaware's three-year, very protracted and detailed 6,000-page contract, reviewed by four state agencies and numerous consultants," Mandelstam said.

The legwork behind Delaware's offshore wind contract may have influenced Maryland's decision, announced on Dec. 8 by the MEA, to purchase up to 55 megawatts of energy from NRG Bluewater Wind as an extension of Delaware's project.

‘We can try to help each other'

Maryland may be looking to Delaware again as it enters the next phase of its offshore wind energy initiative.

That's because Delaware has already worked with the Mineral Management Services (MMS), the federal agency that ultimately decides which parts of the ocean bed can be leased out to energy developers.

"This is new territory for MMS," said Tyler of the Maryland Energy Administration. "They've done it for oil and gas, but have yet to do it for wind turbines. It's a new process for this sector. By working collaboratively, we can try to help each other."

Jerry Redden, director of economic development for Maryland's Worcester County, said working regionally to establish a presence in offshore land, which is owned by the federal government, will be critical because of the number of issues involved - U.S. Navy operations, commercial shipping issues, and other potential conflicts that have yet to bubble to the surface.

Despite challenges inherent in laying groundwork for offshore wind energy, proponents believe its long-term benefits will exceed obstacles.

Long-term price stability is one. "It's hard to find a 25-year revenue stream in the energy business. Nobody will promise to sell you natural gas for 25 years," said Tom Noyes, a Delaware-based financial consultant and wind advocate.

Unlike fossil fuels, wind is free and therefore immune to price fluctuations. Delmarva Power officials estimate that the inflation-adjusted cost of 10 cents per kilowatt hour for offshore wind energy may initially result in an increase of approximately $1.58 to customers' monthly utility bills. But over time, the stable price of offshore wind energy is expected to result in cost savings to users.

Delaware residents won't have to wait as long to reap the benefits of job creation associated with offshore wind energy. The Delaware offshore wind farm alone is slated to create 600 construction jobs. NRG Bluewater has funded a training program in Delaware - and plans to do the same at the University of Maryland - to train students to become windsmiths, professionals who oversee operation and maintenance of offshore wind turbines. Mandelstam believes manufacturing jobs for the nation's offshore wind energy industry will grow much like those seen in the onshore wind industry. Twelve years ago, there was virtually no activity in this sector; today, the wind industry employs 85,000 people in the U.S., according to the American Wind Energy Association.

Addressing concerns

While job creation will be a welcome effect of offshore wind energy development, the impact of on tourism isn't as clear. Some see the wind turbines as a potential boon for tourism.

"Any time you put a structure in the ocean, you attract fish. Offshore wind farms could actually enhance our recreational fishing tourism," said Redden.

Then there are environmental concerns, many of which have been eased by open dialogue between NRG Bluewater Wind and Delaware's Chamber of Commerce and studies showing the turbines won't impact migratory patterns of birds and fish.

How the turbines will change the view for sea gazers is a big one. Industry experts say that when situated several miles off shore - as is the plan in the mid-Atlantic - the blades of the wind turbines will appear no bigger than toothpicks on a clear day.

"You have to actually see them gracefully turning to see the beauty in them," said the Maryland Energy Administration's Tyler, who grew up in England when scores of turbines were constructed near the beaches where he played.


Source: http://baltimore.bizjournal...

DEC 18 2009
http://www.windaction.org/posts/23743-financing-tax-credits-will-determine-if-maryland-s-energy-future-is-blowin-in-the-wind
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