Offshore wind development still faces hurdles

by Daniel Bowden
Wednesday, January 23, 2013

Wind energy fans and developers still face many hurdles before construction can begin. The Call for Information and Nominations published by the Bureau of Ocean Energy Management last month for three lease locations for commercial wind farms — one six miles from Kitty Hawk, the others seven and 13 miles from Wilmington — in the federal waters off the North Carolina coast is a big step toward renewable energy development in the state. Dave Rogers, field director for Environment North Carolina, said he believes the high upfront cost of building wind farms and the volatility of legislation surrounding current incentives are major obstacles for development. 

Congress recently spared federal renewable energy incentives, including the popular Production Tax Credit (PTC) and the Investment Tax Credit (ITC), during budget slashing related to averting the “fiscal cliff.” The subsidies expired on Dec. 31, 2012, but were reinstated for another year on Jan. 2, 2013.

The PTC provides companies with a 2.2 cent per kilowatt-hour benefit for the first 10 years of a renewable energy facility’s operation, and the ITC will provide a 30-percent tax credit for construction costs on renewable energy products.

“[The tax credits] have become kind of like a political football,” Rogers said. “We didn’t renew them this year until after Jan. 1, and we only renewed them for one year. I think that volatility tends to harm the process. If we could create a longer term incentive program … I think that would go a long way toward making offshore wind a reality.”

The tax credits were originally instated as part of the Energy Policy Act Policy of 1992. Since its creation, the tax credits have been extended five times. Development tends to increase immediately following the credits’ extensions and tapers off as they approach their expiration date.

“I think one of the big things is the political will to make this happen,” said Zak Keith, associate organizer with the Sierra Club. “I think there are a lot of industries out there that want to build them, but we really need to set the stage for renewable energy.”

Rogers and Keith both described the current political climate in North Carolina as less than ideal for wind energy development. Many elected officials are new, and several veteran politicians have been vocal in their opposition to focus state efforts on renewable energy development.

Identifying the consumer is another obstacle. Who will buy wind energy? Developers need to secure a purchase agreement before breaking ground on a project, lack of such an agreement has held up wind energy development in other states.

In a telephone conversation held earlier this month, Jason Wallace, a spokesman for Duke Energy, said, “The company has been committed to supporting research and study of wind energy generation, and we continue to believe there is good wind off the North Carolina coast, but we also recognize that any development in wind off the coast of the state has to make sense for our customers, the coastal communities and the company as a whole.”

With BOEM's public comment period closing around the same time as the Call for Information, the level of public interest has yet to be fully gauged. The Cape Wind project in Cape Cod has faced serious hold-ups as a result of opposition from several key members of the community, including the Kennedys. 

Probably the biggest obstacle facing offshore wind development anywhere in the U.S. is simply that it has never been done here before.

“This is a relatively new technology for the U.S.” said Brian O’Hara, president of the N.C. Wind Energy Coalition. “There’s over a 20-year track record in Europe but none in the U.S. yet. I think one of the biggest hurdles is just getting something up and running and letting the public and utilities see how these things operate and get comfortable with them. There’s a tremendous amount of potential, but we just have to get past the first installation.”


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