Last November, the Bureau of Ocean Energy Management (BOEM) announced that it had received an unsolicited application for a deepwater test project from Norwegian energy giant Statoil. The proposed project would consist of four three-megawatt floating turbines located roughly 12 nautical miles south of Boothbay Harbor in the Gulf of Maine.

Stakeholder reaction at the time of the announcement was mixed, and apparently doubters remain on the Maine Public Utilities Commission (PUC). According to the Aftenbladet report, Statoil officials recently met with the PUC and determined that support at the state level was insufficient to begin construction on the test project.

However, a Statoil executive interviewed by Aftenbladet seemed optimistic about a 2016 production goal for the test project, as well as floating technology in general in the United States.

“The US is more interested in floating windmills than fixed. Statoil will be making a decision in 2014 should the framework conditions be in place. We are now in the process of conducting environmental studies, we have been in contact with an interest association for local organizations, and we know that local industry in the U.S. has the capacity to deliver,” Ståle Tungesvik, Statoil senior vice president for reserves and business development, told Aftenbladet.

The lack of certainty over Production Tax Credits (PTC) and Investment Tax Credits (ITC) may also be delaying the project. According to the Aftenbladet report, Mr. Tungesvik has been in touch with authorities in Washington, D.C., to lobby for the financial support the project needs to progress.

NRG Energy announced this week that it is “putting active development of offshore wind projects on hold for the near term.” This is a significant shift for NRG’s subsidiary Bluewater Wind and the projects it has been developing, and may have broader implications for the US offshore wind market. NRG Energy is a Fortune 250 wholesale power generation company, owning a diverse portfolio of nearly 26 gigawatts of electric generating capacity. NRG’s assets include major holdings of generating plants fueled by natural gas, coal, oil, and nuclear power, along with some terrestrial wind. NRG also has a growing solar business, owning the 21-megawtt Blythe project (California’s largest solar photovoltaic project since 2009) and investing in other projects like the Ivanpah Solar Electric Generating System along with Google and BrightSource Energy.

Bluewater Wind, which NRG acquired in 2009, has been pursuing at least four offshore wind projects.  Of these, the Mid-Atlantic Wind Park off Delaware made the most progress.  This 450-megawatt commercial-scale project would have been located in federal waters over 13 statute miles offshore Delaware.  Bluewater also won rights to develop a New Jersey offshore wind project, and proposed additional projects off Maryland and Massachusetts.

Since its inception in 2006, Bluewater Wind’s Delaware project achieved key milestones, such as signing power purchase agreements to sell part of the project’s output to utilities. Bluewater Wind signed a 25-year contract with utility Delmarva Power for up to 200 megawatts of power from the project.  That deal was approved by the Delaware Public Service Commission in 2008, and provided a base energy price of 9.9 cents per kilowatt-hour; combined with a statutory bonus for offshore wind renewable energy credits, the effective price per kWh in 2012 might have been closer to 14 cents.  While this price is at the low end of recent offshore wind pricing, having a contract meant a greater level of certainty about project revenues after startup.

With this week’s announcement, Bluewater Wind is putting its active development of offshore wind projects on hold, and plans to terminate its power purchase agreement with Delmarva.  In announcing this reversal, NRG described a shift in the outlook for offshore wind between NRG’s 2009 acquisition of Bluewater Wind and the present.  Two years ago, NRG believed the Delaware project would receive a loan guarantee from the Department of Energy.

Now, NRG points to a different outlook.  According to NRG’s press release, the end of funding for the loan guarantee program coupled with the incipient end of the renewable energy production tax credit and investment tax credits “have rendered the Delaware project both unfinanceable and financially untenable for the present.”

NRG also pointed to its inability to secure an investment partner for the project.  NRG described how it approached more than two dozen prospective investors, but was unable to find a partner “despite the attractiveness of the PPA”.

Several other events in recent months may also have affected Bluewater’s decision.  The town of Bethany Beach, Delaware, rejected NRG Bluewater’s plan to bring undersea cables from the project ashore in town. Bluewater Wind faced repeated deadlines 2011 under the Delmarva power purchase agreement, requiring Bluewater to put up project security if it wished to continue with the project.  Those deadlines were extended for reasons including uncertainty over federal incentive programs, but likely placed the Bluewater project under increased internal scrutiny by NRG.

Other entities had expressed skepticism about the project’s viability.  For example, the Delaware Municipal Electric Corporation had agreed to buy part of the output of the Bluewater Delaware offshore wind project, but in September 2011 DEMEC entered into a contract with Duke Energy Renewables to purchase power from a Pennsylvania terrestrial wind project.  To explain this hedge, DEMEC noted “the increasingly unlikely chances the Bluewater Wind project will be built anytime soon”, and pointed to “increasing federal uncertainty about offshore wind subsidies”.  DEMEC’s choice now appears prescient.

Beyond what this week’s announcement means for Bluewater and its projects, NRG’s decision may be a sign of how uncertainty impacts the entire United States offshore wind industry.  NRG may have had other factors in mind, such as a need to focus on its growing solar play or another element of its portfolio, but uncertainty was the principal explanation offered for the decision to suspend offshore wind operations.  If so, other offshore wind projects may find themselves in a similar position to Bluewater, with the siting process well underway and power purchase agreements in place for part of the project’s output – but with financing difficult to complete given the uncertainty.

The challenges posed by the end of the Department of Energy loan guarantee program and the impending end of the renewable tax credits are not unique to Bluewater, nor to its Delaware project.  Uncertainty surrounding the future of incentives and support for offshore wind is likely to affect other projects as well. How these forces impact each project may vary, but most currently-proposed projects rely on one or more incentives facing uncertain futures.

Meanwhile, interest is rising in deepwater floating offshore wind in waters off Maine. A subsidiary of Norwegian energy company Statoil has asked the federal Bureau of Ocean Energy Management for a lease for a site over 12 miles off Maine, near the midcoast town of Boothbay Harbor and Monhegan Island. If granted the lease, Statoil intends to develop a pilot project using its Hywind floating turbine model. Statoil also hopes to benefit from a competitive process run by the Maine Public Utilities Commission to select and fund one or more deepwater floating pilot projects.

Todd J. Griset practices energy law with Preti Flaherty Beliveau & Pachios in Maine. He also writes a blog on offshore wind, renewable energy and policy issues.

In late November the Bureau of Ocean Energy Management (BOEM) announced that it had received an unsolicited application for a deepwater test project from Norwegian energy giant Statoil. The proposed project would consist of four three-megawatt floating turbines located roughly 12 nautical miles south of Boothbay Harbor in the Gulf of Maine.

While the initial reaction among stakeholders has been mixed, the Statoil proposal confirms what many in Maine have been saying for years: the Pine Tree State is poised to become the leader in deepwater offshore wind in North America.

Last year, the Maine Public Utilities Commission issued an RFP for a deepwater floating pilot project off of Monhegan Island that would consist of eight three-megawatt turbines. The PUC is actively considering proposals and hopes to decide on a developer by early 2012, with a prototype in the water by the summer of 2013.

To help provide a blueprint for the industry, Maine released a comprehensive offshore wind report that was widely lauded by analysts and developers and may have been a key component in attracting a developer of Statoil’s stature to the state.

Proponents have long touted Maine’s deepwater offshore wind potential due to the state’s superb wind energy resource. According to Habib Dagher, UMaine Professor and head of the DeepCWind Consortium, there are 149 gigawatts of wind energy within 15 miles of the Maine coast. Depending on the map, and the source, Maine may have the greatest offshore wind resource in the United States.

BOEM has indicated that they will not rule on Statoil’s recent application until 2014, by which point the Monhegan Island prototype should be in the water.

O’Malley is looking to promote offshore wind development by requiring utilities to buy the electricity. According to the report, some of the discussion yesterday focused on a former gubernatorial aide, who is now affiliated with an offshore wind development company vying for a lease in federal waters near Maryland.

“A lot of the negative press … is that there are people with insider connections in Maryland government who will stand to gain and that that would be an inherent conflict of interest, so that’s something that my constituents are paying a lot of attention to and keep asking me about,” said State Sen. Delores Kelley.

Jim Lanard, president of the Offshore Wind Developers Coalition, discussed the proposed legislation with lawmakers and said the controversy over O’Malley’s former aide is much ado about nothing.

“It is unfortunate that this company has been tainted with this brush when there is no relationship between the leasing of the land and the state of Maryland,” Lanard said.

UMaine Receives Grant For Offshore Wind Research

The University of Maine’s Advanced Engineering and Wood Composites Center received a $3 million grant this week to equip its offshore wind testing facility, the Bangor Daily News reported.

The grant from the state’s Economic Development Administration will allow the school to purchase cutting edge robotics equipment, said Habib Dagher, director of the wood composites center.

“This technology won’t exist anywhere else, as far as we know,” Dagher said.

Salazar is scheduled to meet with state officials, including Gov. Lincoln Chafee, according to the report.

UMaine Offshore Wind Lab Set For November Opening

The University of Maine’s Offshore Wind Laboratory at the Advanced Structures and Composites Center received its certificate of occupancy this spring and employees have been working at the lab during the summer, the Bangor Daily News reported on Friday.

The $17.5 million blade testing facility is scheduled to open in November. The project was funded by the National Institute of Standards and Technology and the Maine Technology Institute, according to the report.

German Report Suggests Bubble Wrap To Contain Installation Noise

The German Federal Agency for Nature Conservation has released a report suggesting surrounding offshore wind farm construction sites with “bubble curtains” to contain underwater noise, Spiegel Online reported last week.

“A bubble curtain is one way to minimize noise and potentially reduce the impact of offshore wind farm construction on sea life,” said Greenpeace oceans & biodiversity campaigner Thilo Maack.

The wind farm in Aberdeen bay would include 11 turbines and is currently being reviewed by regulators.  Trump is reportedly concerned about the impact on the view from the golf course. Trumps neighbors suggested that he is acting hypocritically in opposing the wind farm after his business development in the area.

“How can a man who has just destroyed a site of special scientific interest and is in the process of despoiling an area of outstanding natural beauty with his golf course, comment on the view? It’s laughable,” said neighbor David Milne.

Offshore Wind Panel Scheduled In Maine

The Maine-based Island Institute will hold a public event on August 11 to discuss offshore wind development in the Gulf of Maine, Maine’s Free Press reported yesterday.

Deepwater Wind Resumes Studies After Winning Appeal

Deepwater Wind has responded to a victory in the Rhode Island Supreme Court last month by resuming geological and oceanographic studies for its Block Island wind farm, the Providence Journal reported last week.

The company won an appeal that was lodged against the power purchase agreement for the project.

“When the appeal was lodged last August, we had to completely postpone all the field work,” said Deepwater CEO William Moore. “We lost a year to the appeal.”

Moore said the project could still be operational in 2013.

“It’s definitely manageable,” he said.

The grants will be distributed among six projects over two years, according to the announcement.

“Developing innovative drivetrain technologies will allow U.S. manufacturers to build larger, more cost-effective, and more efficient wind turbines than any in operation today,” said Energy Secretary Steven Chu. “The projects announced today will help the United States to lead the global wind energy industry in this critical technology area, diversify our domestic energy portfolio, and create new jobs for American workers.”

The projects include Boulder Wind Power’s research on a direct drive generator that could be used for offshore wind turbines with up to 10 megawatts in capacity and Clipper Windpower’s effort to replace the gearbox with a chain drive for large wind turbines.

Judge Confirms Maine’s Monhegan Island Test Site

A Maine Superior Court judge rejected an appeal of the deepwater floating turbine test site near Monhegan Island, Maine’s Herald Gazette reported today.

Activist Ron Huber filed suit in 2010 claiming that the site would be environmentally harmful. Superior Court Justice Jeffrey Hjelm ruled that the state was justified in selecting the site.

A senior energy official said that the state government is waiting for the Bureau of Ocean Energy Management, Regulation and Enforcement to seek interest from developers for federal water near Virginia. The comments were made yesterday at the Virginia Offshore Wind Conference 2011, held in Virginia Beach.

“We’re a little frustrated with Smart from the Start,” said Cathie France, deputy director of energy policy for the state’s Department of Mines, Minerals and Energy.

UMaine Offshore Wind Lab Set To Open In October

The University of Maine is scheduled to open a new offshore wind laboratory in October, Renewable Energy World reported on Tuesday.

The facility “will include a nanocomposites laboratory, a large structural testing laboratory with a test stand capable of supporting a 70-meter wind blade, and space to accommodate faculty, staff, and graduate researchers,” according to a university Web site.

Kenneth Fletcher, director of the state’s Office of Energy Independence and Security, suggested that to avoid rate increases, the state might place “tolls” on power lines that are used to export electricity from offshore wind projects to other parts of New England.

“I think the real opportunity we see, the administration sees, is through our research and development, manufacturing and assembly — we would like to have Maine become the preemptive leader, at least on the East Coast,” Fletcher said. “The administration wants to make sure it is there at the right time with the right information and the right commitment.”

New Virginia Grant Program Could Boost Offshore Wind

Virginia lawmakers are launching a revamped grant program this summer that is designed to support large scale renewable energy development, Leesburg Today reported.

The grant program is based on a developer’s capital investment and number of jobs created, according to the report. Offshore wind developers would qualify for a grant after investing $10 million in a project.

“We’ve got great resources. We’ve got the best winds and shallow water off the Atlantic Coast,” said Virginia Gov. Bob McDonnell. “I think the pot for offshore wind is superb.”

“I think there was a little bit of a misunderstanding which I may have caused,” said Ken Fletcher, head of the Maine Office of Energy Independence and Security.

Fletcher had previously said that the cost of electricity from offshore wind would be 27 cents per kilowatt/hour. LePage said last month that he would not support any renewable energy project that raises the cost of electricity for Maine residents. Fletcher said that he now understands the price of electricity from the initial test project will be higher than the cost of electricity from fully developed wind farms.

“This really is [research and development] work in the beginning to really understand what the potential is and to learn as to what things need to be put in place to bring it to a commercial operation,” Fletcher said. “So I think that we’re in alignment with that and the administration, I think, wants to understand what they can do to be a partner with them.”

New Bill Looks To Speed Federal Offshore Wind Permitting

Virginia Congressman Rob Wittman introduced a bill yesterday to speed up offshore wind development, Washington radio station WAMU reported.

Wittman, a Republican whose district includes Hampton and Newport News, says that developers have to wait too long to even get monitoring equipment approved. The Advancing Offshore Wind Production Act is scheduled for House Natural Resources Committee hearing on June 23.

“What we’re trying to do is to say, let’s make sure the process is thoughtful, but it’s also timely,’” Wittman says.

Among other things, the bill would required the Interior Department to rule on permits for monitoring equipment within 30 days of application.

“Unnecessary bureaucratic hurdles and duplicative regulatory requirements are slowing the development of offshore wind power,” according to the press release for the bill. “In order to encourage the timely, efficient development of our offshore wind energy resources, this bill sets a firm timeline for issuing permits and streamlines regulatory requirements for installing temporary infrastructure, such as towers or buoys, to test and monitor weather.”