News & Events
Iberdrola puts 300MW North Carolina wind farm on ice
Iberdrola Renewables has placed its $600m Desert Wind project on hold in North Carolina, saying it cannot proceed unless utilities enter into a long-term deal to purchase the planned 300MW of power
The move is a setback for the developer, local officials, property owners around Elizabeth City, near the Atlantic coast, and Governor Bev Perdue, who viewed the project as one of the most promising for bringing wind power to the southeast state.
Perdue, a Democrat, is seeking a second four-year term in November and has emerged as a leading supporter of renewable energy in North Carolina.
Iberdrola, the second-largest wind developer in the US after NextEra Energy Resources, has spent millions of dollars since 2009 studying environmental impacts and wind resource at the site. Deals were reached with farmers to host the 150 turbines and utility regulators had approved the project.
“As of now, we can’t find a buyer,” Paul Copleman, an Iberdrola spokesman, tells Recharge. He says company policy dictates not advancing so-called “naked” projects without multi-year offtake deals in place. Burned in the past, large wind developers and their potential lenders do not want risk and uncertainty once turbines start generating power, or reduced cash flow from lower prices in the merchant market.
While not divulging details of the failed contract negotiations, Copleman acknowledges the difficulty in locking in long-term power-supply deals in certain US locations when prices for natural gas are near a ten-year low.
The US Department of Energy forecasts that unconventional gas, freed mainly from shale by hydraulic fracturing, will supply nearly half of total American gas production by 2035.
Burgeoning supplies have prompted utilities in North Carolina and in some other states east of the Mississippi River to lessen their reliance on coal for generation and build plants that will utilise cleaner-burning gas — the federal government estimates that a gas-fed plant will produce about half the CO2 emissions per MWh of generation.
The sluggish economy has also curbed electricity-demand growth since the 2009 recession, further complicating efforts by wind developers to nail down supply deals with utilities that do not immediately need the power.
Progress Energy spokesman Scott Sutton says that in June 2011 it requested supply proposals from developers for wind power, but Iberdrola’s price was at the high end among competing bids. The two companies were unable to reach agreement and broke off talks.
“We do support wind power and renewable energy, and are actively pursuing projects that make sense for the company,” says Sutton. He notes that state law places a cap on the money a utility can spend to meet renewable-energy targets.
“We try to attain them within the fiscal boundaries set out,” he says, adding that wind must also compete with biomass, which is plentiful in North Carolina. Progress Energy does not serve Elizabeth City, and the utility there, Dominion, did not return a call from Recharge. Municipal utilities and electricity co-operatives must also add renewables to their power mix, but their requirements may not allow contracting with such a large project.
Iberdrola say it will keep the project in reserve with a close eye on the energy market, wind development in the state and whether Congress extends federal renewables tax incentives this year. “This is a great spot for a wind farm,” says Copleman.
Published: Monday, January 30 2012