Bloomberg News

NRG Gets U.S. Lease for Delaware Offshore Wind Project

October 24, 2012

The U.S. Interior Department awarded a lease for more than 96,400 acres of ocean off the coast of Delaware for an offshore wind farm, while NRG Energy Inc. (NRG:US), the project’s owner, contemplates selling it.

NRG’s Bluewater Wind unit received a commercial lease for its proposed 450-megawatt wind farm about 11 nautical miles (12.7 miles) from shore, the Interior Department said yesterday in a statement, enough to power more than 100,000 homes.

This is the second offshore wind project to get a U.S. commercial lease, after Cape Wind Associates LLC’s 468-megawatt project in Nantucket Sound received approval in October 2010. The Interior Department oversees energy development in federal waters more than 3 miles from shore.

NRG suspended development of the Delaware project in December and began seeking a buyer for the Bluewater unit after failing to find investors, though it continued to pursue the U.S. lease.

Receiving the lease will make the project “appealing to strategic and financial investors” as Princeton, New Jersey- based NRG seeks partners or a buyer, David Gaier, a company spokesman, said by e-mail yesterday.

The lease gives Bluewater rights to “conduct activities in support of wind-energy development in the lease area,” including collecting wind-speed data and preparing a construction plan, according to the statement.

The project doesn’t have a customer lined up for the electricity, Amy Grace, an analyst with Bloomberg New Energy Finance, said in an e-mail. Bluewater’s power-purchase agreement with Delmarva Power & Light Co. expired at the end of 2011, and “I doubt they’ll be rushing to sign another one.”

Project Uncertainty

Wind development in the U.S. is slowing because the federal Production Tax Credit is set to expire at the end of the year, Grace said. The credit pays 2.2 cents a kilowatt-hour for electricity produced from wind and other renewable sources.

“There’s still a lot of uncertainty regarding the PTC and an offtake agreement for the project,” she said. “The bottleneck now is really on the revenue side. How do you get paid for your expensive wind energy?”

It costs about 21.8 cents to produce a kilowatt-hour of electricity at sea-based projects, compared with 8.3 cents for turbines installed on land, according to Joe Salvatore, an analyst with New Energy Finance.

“We are one step closer to making offshore wind a reality,” Senator Tom Carper, a Delaware Democrat, said in a statement. “Offshore wind is an untapped energy resource.”

To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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Companies Mentioned

  • NRG
    (NRG Energy Inc)
    • $31.35 USD
    • -0.33
    • -1.05%
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