Vineyard Wind partner doubts construction start in 2019

The delayed environmental impact report has undermined Vineyard Wind's business plan, Copenhagen Offshore Partners acknowledges, requesting help from authorities to improve the project's economic situation.
Photo: Illustration: Vineyard Wind
Photo: Illustration: Vineyard Wind

The US' first large-scale offshore wind farm has been momentarily stymied by the fishing industry. The decision of federal authorities to postpone issuing an environmental permit until further assessments can be made has forced Vineyard Wind's owners, Copenhagen Infrastructure Partners (CIP) and Avangrid, to put construction plans on hold indefinitely – which probably means installation will not begin before New Year's.

"We have not been informed about BOEM's [Bureau of Ocean Energy Management] intended timetable. Not knowing that makes it hard for us to imagine sticking to the old plan with installation taking place as early as next year," says Klaus Skoust Møller, partner in Copenhagen Offshore Partners (COP) and project director for Vineyard Wind.

The environmental permit delay was caused by concerns from the local fishing industry about the project's consequences. This prompted the National Marine Fisheries Service (NMFS) to reject signing the permit until further evaluation – not only regarding the effect that Vineyard Wind could have for local fisheries, but also the impact of other offshore wind farms.

Ørsted projects included

Thus, assessments will need to made for the cumulative environmental effect from all offshore wind projects with attached power purchase agreements. Those also include Ørsted's projects in Rhode Island, Connecticut as well Southfork, New York. While BOEM informs that it expects to conclude the supplemental environmental impact report by early 2020 at the latest, the bureau also adds that the decision-making process has a time frame of two years.

"I can neither confirm nor deny whether they will keep to schedule," Møller says about Vineyard Wind, which submitted its construction and operation plan in December of 2017.

Several significant factors will have an impact on whether construction can begin this year. The main concern, however, is that the ITC tax credit support scheme for offshore wind is being phased out and will most likely not be accessible for projects starting later than December 31, 2019. If at all possible, the contribution would be drastically reduced.

Big step down

The ITC scheme, which based on the original plan would provide a 12 percent tax credit to the investment, was crucial for the viability of the cheap bid of USD 67.97 per MWh. As the facility will be installed following the continuous construction principle, the subsidy would be available for the first 400 MW initially set for completion in 2022 and the remaining half coming online in the following year.

"This is a large deviation from the basic condition on which we based our business plan," the project director admits but declines to answer whether the project can stand without the support scheme.

"If the ITC changes, our business plan will, of course, need to be revisited. We have pinned a lot on the time table; it was our foundation, so it's also obviously disappointing. That's why we have been very candid with politicians and told them that we want the permits on time. There are also proposals in the US to extend ITC once more, so we are crossing our fingers. We bear a burden as the first project, and predictability and legal rights are in everyone's interest. I am also confident that we and the authorities agree in that regard."

Presidential candidate support

Two bills were proposed this spring to prolong the aid scheme – even restoring the former tax credit level of 30 percent of the investment sum.

The proposal has gained further momentum since Vineyard Wind's delay. Among others, Massachusetts Senator Elizabeth Warren, currently among the most popular Democratic Party presidential candidates, shows support for the offshore wind project.

As Massachusetts' senator, Warren represents the state in which Vineyard Wind will be installed. Meanwhile, the other two bills were proposed by New England politicians – the region that will host the first wave of US offshore wind. Renewed ITC support would mean cheaper local projects due to the federal incentive.

Suppliers show support

However, subsidy policy is not the only factor affecting the delay. On the day after Vineyard Wind's announcement, CIP was, ironically, a co-curator for a gathering of suppliers concerning the major potential for US offshore wind.

Several of the participant companies, including Vestas and Bladt Industries, have already entered agreements with COP for the project. Indeed, around 90 percent of the contracts are settled, Møller said during the event. He is not concerned that the suppliers will sue for damages due to the delay.

"We have spoken with the suppliers, and they are very supportive of the new time table," he says and continues:

"They are all interested in this succeeding. So, I assume we will come up with some fitting solutions along with all our suppliers."

The project director also hopes that an accord can be reached with the local fishing industry. Even though their dissatisfaction is not new, and a the risk of the NMFS withholding the environmental permit has been clear at least since April, Møller does not think that there has been any opportunity to avoid the conflict.

"We have had detailed talks with the fishermen over a long period. The astounding thing is that local fishing is very, very limited, and it's not a particularly big thing for the fishermen, as we see it. However, as we notice in many places around the world, fishing industries are very interested in the consequences of offshore wind. So, we have prepared ourselves and come up with several alternative suggestions," Møller says.

English Edit: Daniel Frank Christensen

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