By Scott DiSavino
Oct 24 (Reuters) - The U.S. Department of Interior (DOI)
granted a lease for an offshore wind farm off the coast of
Delaware to a unit of U.S. power company NRG Energy,
which decided in December to put the project on hold due to
This was only the second offshore wind farm lease approved
by the U.S. government and the first under the DOI's "Smart from
the Start" approach, the Interior Department said in a release
The government issued the first offshore wind lease in 2010
to privately held Cape Wind for its 420-megawatt (MW) wind farm
off Cape Cod in Massachusetts. The long awaited Cape Wind
project has been in development since 2001 and was expected to
cost about $2.5 billion. Construction of Cape Wind was expected
to start in 2013 with some of the turbines in service in 2015.
There are no offshore wind farms in the United States
although a few companies think they may be first, including Cape
Wind in Massachusetts and privately held Deepwater Wind in Rhode
In December, NRG, of New Jersey, put its offshore wind
developments on hold in part because the company could not find
an investment partner for the Delaware project.
"We will continue to preserve important assets of our
offshore wind development program until the market should
recover," NRG spokesman David Gaier told Reuters Wednesday.
"Signing the commercial lease is one of those important
steps in preserving our valuable offshore wind development
assets. NRG will continue to work with Delaware as we seek
partners for the (project)," Gaier said.
The Bluewater lease covers 96,430 acres in federal water
about 11 nautical miles (20 km) off the coast of Delaware.
NRG proposed to build a 450-MW project off Delaware, which
could generate enough power to supply over 100,000 homes. That
project would cost about $2.7 billion, according to industry
When NRG stopped pursuing its offshore wind projects, the
company also terminated the Delaware project's 200-MW power
purchase agreement with Delaware power company Delmarva Power
and Light (DP&L). DP&L is a unit of Washington, DC-based power
company Pepco Holdings Group Inc.
NRG acquired Bluewater in 2009 when the Delaware wind farm
was in line for a federal Department of Energy loan guarantee.
But since then, NRG said Congress eliminated funding for the
loan guarantee program for offshore wind and was allowing the
federal investment and production tax credits for wind projects
to expire at the end of this year.
Those actions by Congress, NRG said, made the Delaware
project un-financeable and financially untenable, especially
without a partner.
Offshore wind was not the only power source U.S. generators
were having problems building.
Power prices have followed the natural gas market to decade
lows this year, as the market grapples with the shale gas boom
and flagging demand due to the struggling economy, making it
tough to finance any power plant - renewable, fossil or nuclear
- without some government support or long-term power purchase
By Scott DiSavino