The Cape Wind plan was dealt a major setback Tuesday when two power companies that had agreed to buy energy from the Nantucket Sound wind farm terminated their contracts with the developers, raising questions about the future of the $2.5 billion offshore project.
National Grid and Northeast Utilities said Cape Wind had missed the Dec. 31 deadline contained in the 2012 contracts to obtain financing and begin construction, and chosen not to put up financial collateral to extend the deadline.
NStar, a Northeast Utilities subsidiary, informed Cape Wind officials of its decision late Tuesday, officials said.
“Unfortunately, Cape Wind has missed these critical milestones,” Northeast Utilities spokeswoman Caroline Pretyman said in an e-mail. “Additionally, Cape Wind has chosen not to exercise their right to post financial security in order to extend the contract deadlines. Therefore the contract is now terminated.”
In a separate e-mail, National Grid spokesman Jake Navarro said the utility was “disappointed that Cape Wind has been unable to meet its commitments under the contract, resulting in today’s termination of the power purchase agreement.”
Under the 2012 agreement, Northeast Utilities and NStar agreed to buy 27.5 percent of Cape Wind’s production. National Grid had previously signed on to purchase 50 percent.
A Cape Wind spokesman said the developer does not “regard these terminations as valid” because of provisions that, the company argued, would extend the deadlines.
In letters dated Dec. 31 to both utilities and state regulators, Cape Wind president James Gordon asked that the power companies hold off on voiding the contracts, citing “extended, unprecedented, and relentless litigation by the Alliance to Protect Nantucket Sound,” a leading foe of the project.
Those lawsuits, Gordon said in his letter, had prevented Cape Wind from meeting the milestones laid out in the 2012 contract. He argued that the litigation triggered a clause in the contract that allows for more latitude in Cape Wind’s ability to meet the deadlines.
The long-term implications for the often-delayed project remained unclear late Tuesday. Announcement of the soured deal came on the second-to-last full day in office for Governor Deval Patrick, who has championed Cape Wind over fierce political opposition from some in his own party. The governor has often pointed to renewable energy as a vital part of the state’s economic future, and spent significant political capital in backing the proposal.
Ian Bowles, who as Patrick’s first energy and environment chief helped shepherd the offshore project, said Tuesday’s news may have spelled the end for Cape Wind.
“Presumably, this means that the project doesn’t go forward,” he said in a telephone interview.
The jeopardy in which Cape Wind finds itself reflects a changed energy market, in which developers bear more risk than the eventual ratepayers, Bowles said.
“The risk is on the developer to either build it or not. And in this case, the developer appears to have failed,” he said.
Advances in the state’s renewable energy and efficiency policies have lessened the importance of Cape Wind in its overall energy landscape, Bowles said.
In an e-mailed statement Tuesday, Patrick spokeswoman Jesse Mermell said, “The future of offshore wind in the Commonwealth remains bright, as does the path for the marine commerce terminal in New Bedford.”
The Massachusetts Clean Energy Center last month released a request for proposals to manage the terminal, which is under development in New Bedford Harbor. That facility would help facilitate offshore projects such as Cape Wind.
Governor-elect Charlie Baker is set to take office Thursday. Once a critic of Cape Wind, Baker shifted positions during last year’s campaign, calling the project “a done deal.”
On Tuesday night, a Baker spokesman issued a statement that hinted that the new governor would not interject himself into the contract dispute.
“Governor-elect Baker believes Massachusetts must continue to pursue renewable energy sources and diversify the energy portfolio to reduce our carbon footprint, and he will determine which policies will or will not keep Massachusetts a leader in environmental reform once in office,” Baker spokesman Tim Buckley said.
Audra Parker of the Alliance to Protect Nantucket Sound said preventing the construction of Cape Wind would save billions for ratepayers.
“Very bad news for Cape Wind,” she said. “Very good news for Massachusetts ratepayers.”
The offshore project, first proposed more than a decade ago, has been dogged by permitting hurdles, political obstacles, and legal protests.
Jim O’Sullivan can be reached at firstname.lastname@example.org. Follow him on Twitter at @JOSreports.