The U.S. Federal Energy Regulatory Commission (FERC) Thursday gave conditional approval to the Atlantic Wind Connection project – a 250-mile offshore transmission line that would connect up to 6,000 MW of offshore wind power to the US east coast.
The approval includes rate incentives and the opportunity to recover 100% of prudently incurred costs if the first-of-its-kind project is abandoned for reasons outside the company’s control.
The project is led by transmission company Trans-Elect Development Company, LLC, and Atlantic Grid Development LLC is the project developer. Google (NASDAQ: GOOG) is a major investor, as well as Japanese conglomerate Marubeni Corporation and venture capital firm Good Energies.
The project is expected to cost $5 billion. It will run along the mid-Atlantic coast, 10 to 18 miles offshore.
FERC’s approval is conditional – the project must be linked to the PJM Interconnection’s regional transmission expansion plan. Subject to that condition, FERC granted an overall return on equity (ROE) of 12.59%, which includes 250 basis points in incentive ROE adders. Atlantic Wind had requested 300 basis points.
Other approved incentives are the inclusion of 100% of construction work in progress (CWIP) in rate base, and a hypothetical capital structure based on 60% equity and 40% debt.
Construction is scheduled to begin in 2013, with completion expected in 2021.
No Loan Guarantee Coming for Cape Wind
The Department of Energy (DOE) notified Cape Wind that its Loan Guarantee application can’t be completely processed by the program’s September 30 deadline, and is consequently "on hold."
It’s not yet clear if the lack of a loan guarantee will scuttle financing for the offshore wind project, which is expected to be the first to begin construction along the Atlantic Coast.
Cape Wind said a DOE Loan Guarantee would substantially reduce costs to Massachusetts electricity consumers, some of whom – like Wal-Mart – have already raised objections based on rate concerns.
DOE said the application will remain in the works "until further resources can be made available to the [Loan Guarantee] program." Lawmakers shifted $2 billion out of the program two years ago to pay for the "Cash for Clunkers" program. And anyone who has been following the budget haggling on Capitol Hill knows their is a good chance the program could remain unfunded.
Cape Wind said it will continue to pursue the matter.
"Cape Wind intends to secure project financing expeditiously so that the United States does not fall even further behind Europe and China where governments have established offshore wind development as an important national priority worthy of support," the company said in a statement.
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