Feds’ delay puts crucial tax credit in jeopardy for Vineyard Wind
With the federal tax credit for offshore wind projects about to expire, every day counts.
So you can understand the concern around town when it became clear the country’s first major offshore wind farm would likely miss a crucial deadline for the tax credit, a key element in the project’s financing. The reason? The US Bureau of Ocean Energy Management said it needs more time to review Vineyard Wind’s 84-turbine wind farm, to properly weigh the cumulative impacts of similar offshore projects in the pipeline.
As a result, developer Vineyard Wind on Monday said it would revise its $2.8 billion project, with a delayed schedule. The vague statement from the developer, a Massachusetts venture owned by Avangrid and Copenhagen Infrastructure Partners, didn’t say much. But these revisions likely mean one thing: Construction on the 800-megawatt project planned for waters south of Martha’s Vineyard would no longer start in time to deliver electricity by the end of 2021.
What’s the big deal? Missing that deadline could cause the generous 24 percent tax credit that Vineyard Wind had expected to disappear like the wind.
That, in turn, could throw a wrench into the project’s financing, and maybe even affect the price of its electricity. Vineyard Wind used aggressive pricing to win a spirited contest last year for power contracts with Massachusetts’ three major electric utilities. To the project’s many cheerleaders, everything is up in the air now.
Vineyard Wind counted on getting its BOEM permit by Labor Day. Now, the agency is saying it may not issue the permit until early next year. Vineyard Wind also lined up contracts with suppliers, shippers and the like to build this project — all in danger of disruption.
Avangrid chief executive Jim Torgerson put on a brave face when he discussed the project on an earnings call last month, after BOEM indicated it might need more time. He expressed confidence that the wind farm would be generating power in 2021, in time to use the 24 percent credit, assuming favorable action by the federal government. So much for that hope.
Vineyard Wind would qualify for the tax credit through a provision that requires the developer to spend at least 5 percent of the total cost before a year-end deadline. But deadlines for commissioning also need to be met. Vineyard Wind once planned for 400 megawatts, or enough power for 200,000 homes, to go into service in 2021 and the other 400 megawatts to get plugged in the following year.
The developer is still hoping to meet milestones to claim portions of the tax credit, but it’s a race against the clock that also involves getting the deadlines in the utility contracts extended.
In short, a big mess.
Maybe Vineyard Wind can get relief from the US Treasury, citing unforeseen circumstances. A more unlikely alternative: the extension of the tax credits by Congress. The House might go along with that, but it would face a tougher audience in the GOP-led Senate and the White House.
No one seems to know precisely why BOEM introduced this 11th-hour delay. The agency has a new Interior secretary in charge, David Bernhardt, who wanted to give the Massachusetts wind farm a closer look. Ostensibly, the additional time will help the agency address the many concerns raised by commercial fishermen who want the towers reconfigured to pose less of a hazard to navigation.
But some see darker forces at work. At least three Democrats in Congress – Bill Keating, Joe Kennedy III, and Ed Markey — quickly accused the Trump administration of intentionally slow-walking a renewable energy pioneer. Andrew Gottlieb, executive director of the Association to Preserve Cape Cod, will gather various Cape business and environmental leaders at an event in Hyannis on Thursday to protest the delay. Gottlieb says he doesn’t believe BOEM is mainly doing this for the fishermen; he fears the fossil fuel industry is the primary intended beneficiary.
And there’s a bigger fear taking shape: that this big permitting snag could scare companies from investing in such offshore wind projects.
It’s the kind of high-profile snafu that the Baker administration wants to avoid as Massachusetts prepares for the next round in the state’s wind energy contest. Bids are due on Aug. 23. The industry must be hoping the next winning project goes more smoothly than the first one.