N.C. ocean waters chosen for offshore wind farm

The News & Observer (Raleigh, N.C.)December 13, 2012 

Federal authorities on Wednesday announced that about 1,900 square miles of Atlantic Ocean waters are open for building offshore wind farms, making North Carolina the nation’s new energy hotspot for planting forests of whirling turbines in the high seas.

The U.S. Department of Interior identified a combined sector that’s larger than any such previously designated for hosting the 400-foot turbines. Two of the maritime blocks are between Myrtle Beach and Wilmington, while one lies beyond the Outer Banks, across from Kitty Hawk, Nags Head and Manteo.

A host of developers are expected to express interest, setting the stage for a federal lease auction as early as next year to allow projects to move forward. North Carolina’s ocean waters are considered to have some of the best wind resources along the East Coast. What’s more, the offshore areas picked by the feds have the advantage of being near populated regions with existing transmission capacity and other infrastructure needed to move gigawatts of electricity onto the power grid.

But offshore wind energy remains among the most expensive forms of electricity today, and building a wind farm in the sea has proven an elusive goal in this country. The industry is still distrusted by some as a subsidy-dependent boondoggle, even though advocates depict wind energy as a clean and safe alternative to mining, fracking, energy imports and nuclear waste.

An offshore wind farm long planned in Nantucket Sound off Cape Cod in Massachusetts is tied up in legal challenges, while plans to build one in Delaware waters fell through in recent weeks because of the likely expiration of federal tax incentives for these multibillion dollar projects.

“The biggest challenge is: Who’s going to buy the power?” said Brian O’Hara, president of the N.C. Offshore Wind Coalition. “If you can figure that out, then you’ve got a project.”

One company that expects to file a notice of interest in bidding for leases is Arcadia Offshore, the New Jersey company whose Delaware deal collapsed for lack of subsidies. Arcadia president Peter Mandelstam said the process will be complex and time-consuming, requiring extensive environmental analyses and public hearings; even if everything goes smoothly, construction could take five years to get under way and two years to complete.

“Absolutely,” Mandelstam said of his goals off North Carolina. “We’re gonna do it.”

But he acknowledged that with historically low natural gas prices, no utility is likely to buy offshore wind power unless it’s required to do so by state regulators or lawmakers. The argument for investing in wind power is that it’s an emissions-free source of electricity with a fixed price, as opposed to wagering on natural gas, which could spike in price and strand consumers with soaring bills, he said.

“One of the many advantages of wind is that it’s guaranteed stable-price power for the next 20, 25 years,” he said.

The areas identified as suitable by a federal panel represent less than 20 percent of the Atlantic Ocean originally under consideration off the shore of North Carolina. The Wilmington block begins seven miles offshore, while the Kitty Hawk block starts six miles from shore.

Much of the sea waters have been deemed off-limits because an offshore wind project would conflict with military operations, fish habitats, bird migratory patterns, shipping routes and other concerns.

The soaring turbines have to be anchored to the sea floor and designed to withstand hurricane-force winds.

Offshore wind farms now face the looming prospect of losing an important federal subsidy that is set to expire Dec. 31. The tax credit covers 30 percent of the cost of building the project.

Mandelstam said the tax credit substantially reduces the cost of an offshore wind farm and makes it more palatable to utilities, public officials and customers. Getting one built is a giant undertaking that hinges on an electric utility committing to buy the wind farm’s power output through a long-term power purchase agreement.

“Historically it has been done because of a push from the legislature or from a public service commission,” he said. “It’s going to be hard for developers to spend capital in North Carolina when there’s no visibility of a purchase power agreement.”

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