Wind Power:

Cape Wind's Duffy gives latest on progress of project, talks renewable energy incentives

Since 2001, Nantucket residents have engaged in a heated debate over whether or not a 130 turbine wind farm should be constructed off the shore of Nantucket Sound. After years of conversation and setbacks, the project's environmental impact was recently reviewed by the Minerals Management Service. In its draft report, MMS found that the wind farm would have a minimal impact on Nantucket Sound's environment. During today's OnPoint, Dennis Duffy, vice president of regulatory affairs at Cape Wind Associates, gives the latest on the progress of the project. He discusses MMS's draft report and addresses concerns by local commercial fishers that the wind farm could negatively affect their industry. Duffy also discusses the latest public comment period on the wind farm project and gives his take on the need for long-term renewable energy tax incentive extensions.

Transcript

Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Dennis Duffy, vice president of regulatory affairs at Cape Wind Associates. Dennis, thanks for coming on the show.

Dennis Duffy: I'm very happy to be here, Monica.

Monica Trauzzi: Dennis, the Cape Wind saga has been going on for several years now. So, let's start off by just getting everyone up to speed on where the project stands at this point.

Dennis Duffy: Well, it has indeed been a saga. We're now in our seventh year of the development of this project, which would be the first offshore American renewable energy project involving wind energy. It's been a technology that's been in place in Europe for more than 15 years. It's a proven technology, but it has yet to make it into the American markets. We've started going forward on this project in response to a number of federal and state initiatives encouraging investment in new renewable resources. And when you look at the natural resources in New England, this is really the best way for New England to meet its renewable goals. New England has limited resources when it comes to renewables. Really, the best wind for New England is offshore. That's where we have open space. It's close to the load centers where the consumers are. We just think the project makes a lot of sense. Now, it's been a long haul for seven years, but right now things look very good for Cape Wind.

Monica Trauzzi: Okay, so the Minerals Management Service released a draft report about the environmental impact.

Dennis Duffy: That's right. On January 15, after seven years of very in-depth study on this project, including a lot of fieldwork, a lot of field study, the Minerals Management Service released its draft environmental impact statement, which we were very happy to see, found little or no impact on all of the critical issues that have had people concerned over the seven year period.

Monica Trauzzi: And so, at this point, you're waiting for a final report which is expected at the end of this year?

Dennis Duffy: That's correct. The report came out in draft form on January 15. MMS then extended the normal comment period for an additional 30 days. So the comment period expires on next Monday. Then we are hopeful that MMS will process those comments, take everything into consideration, and have a final EIS and the decision out by the end of the year.

Monica Trauzzi: So, in terms of a timeline, if MMS gives its approval at the end of this year, when do you see production starting to happen? When do you see things starting to be built and when could this be fully operational?

Dennis Duffy: Well, there are several stages of getting from here to actual operation. If we could be fully permitted by the close of 2008 the financing arrangements would probably take roughly another year. So, sometime in 2009 we would have the procurement necessary to put the project in place and close the project financing. And then we'd be looking to start construction in 2010, start to come online in 2010, and be fully online in 2011.

Monica Trauzzi: What have you heard or learned from the public in this latest comment period?

Dennis Duffy: Well, that's a very good point. In a way, it was very painful and very expensive for this project to go through such a long review period, seven years of study and review. But the result is we now have an extraordinarily complete data set of the results of all the scientific study, which confirm everything that we have thought all along about the project. Probably most importantly there was independent polling done to gauge the public reaction after the release of the draft EIS, which was so favorable. It was done by the Civil Society Institute and we found absolutely, we were very pleased with the results of the study. Statewide, 86 percent of Massachusetts voters are now in favor of the project and, perhaps more importantly, 74 percent of Mass voters living on the Cape and Islands, the area most directly in proximity to the project. And we had good numbers before, but our numbers are even better now than we've had the release of the draft EIS.

Monica Trauzzi: OK, but the project is not without controversy.

Dennis Duffy: Absolutely!

Monica Trauzzi: And there are people who don't support it.

Dennis Duffy: Absolutely.

Monica Trauzzi: The fishing industry for example, they are concerned about hazards to navigation and being able to do their jobs in the waters where these windmills would be. And there are some estimates that say that there could be a $28 million loss in earnings. Are you taking the fishing industry's concerns into consideration here?

Dennis Duffy: Obviously! Obviously we are and I think people have raised legitimate points and they had fair questions and we take them very seriously. And I'm sure MMS will take them seriously too. But I think what you have to do is take a step back and read carefully the scientific reports that have been done. They've been done in a very methodical way. We've looked at actual fishing logs, actual fishing records on record with the government agencies and done a very careful methodical study of the impact on commercial fishing. And I think MMS correctly came to the conclusion that any impact on fishing is going to be relatively minor. And a number of parties have raised additional comments on the fishing issue, both pro and con. And I'm sure written comments on these issues will be coming in through the close of comments next Monday, but we're confident when MMS looks at the factual record and takes everything into account that the fishing issue, although it's very important, will be found to be relatively minor, especially when balanced against all the other good things in this project.

Monica Trauzzi: What about the impact on tourism? Do you think less people are going to go visit this area, which is a very popular summer destination?

Dennis Duffy: No. I think absolutely the opposite. All the places around the world where wind turbines have been done offshore, including in very popular tourist areas, the experience has been positive. And it's not unusual for wind turbines to be sited close to situations like Cape Cod, it's just the natural terrain of soft sand tends to get you offshore in places which are very good also for beach resorts. And the European experience consistently has been tourism has only improved.

Monica Trauzzi: The Senate, last week, voted to extend renewable energy tax credits and the measure is being taken up in the House now. What's your take on the struggle in Congress to get these renewable energy tax incentives passed and extended beyond the one-year measurement?

Dennis Duffy: Well, this is a recurring concern for everyone in the renewable energy. This is not limited to wind. This is across the board, solar, biomass. All of the renewable energy sectors are very much dependent on the production tax credit. We have made a national policy decision to identify investment in these resources, for a lot of good reasons, to be in the national interest. And for that reason we've seen it fit to incentivize additional capital investment through mechanisms like the production tax credit. And when it comes down to a vote, production tax credit usually passes by a very wide margin. The problem is that it tends to be extended for very short periods of time, only one or two years at a time. Now, at some level, I think we're all relatively confident that the PTC, production tax credit, will be extended and will be extended again if need be. But there is a great degree of uncertainty that goes into the investment community involving renewables when there is that chance that the PTC may not be again extended. So, for that reason, all sectors of the industry, we're really pushing hard for a longer period of extension, so that there will be more investor confidence that when projects that are being worked on right now do eventually come online, that the PTC will, in fact, still be there.

Monica Trauzzi: All right. And wind energy is facing opposition in many places, not just Nantucket. And Maryland Governor Martin O'Malley announced Saturday morning that he would bar commercial wind turbines from state owned land. What's your take on this latest development and why has it been such a struggle to get wind energy implemented in the United States?

Dennis Duffy: Well, wind energy has been slower to come to the United States than it has other parts of the world. We are 15 years behind the Europeans on offshore wind and I just think people are not quite comfortable with change sometimes. But gradually I think we're seeing more and more acceptance of well cited wind facilities. Now, with respect to that last reference to someone blocking wind turbines on state owned land. One of the reasons that we're looking to go offshore is that we will be seven miles away from the nearest residence. I understand when you put an energy facility close to someone's home it may have a direct and personal impact. That's one of the reasons the Europeans and now we are trying to go offshore so we are seven to eight miles away from the nearest residences.

Monica Trauzzi: Are you surprised by the handful of the Massachusetts, of the congressional delegation that hasn't given an opinion one way or another about Cape Wind, including Markey, who's heading up the House Select Committee on Global Warming?

Dennis Duffy: I can't really say I'm surprised. I wish they would come out and make a more strong and definitive statement in favor of the project, but on the other hand I understand the situation that they're in. It's a very emotionally charged issue and, in all fairness, the environmental impact statement, which is going to fully evaluate, from an objective perspective, all the concerns that have been raised, is not yet complete. So, there is some rationale to the position that says, look, I like renewable energy. This project has promise, but I reserve my judgment until such time as the environmental impact statement is complete. Because, by its very nature, it's intended to put together a reliable objective record from which policymakers can make their decision. So, again, I wish they'd come out sooner, but I understand. And, again, the concern over energy facilities is not unique to wind. Our group has developed all kinds of energy facilities and there's going to be public opposition to just about any kind of generation project that you propose. And for us to have now achieved numbers of 85 percent voter approval is just extraordinary in the energy business.

Monica Trauzzi: I want to get your take on Blue H's proposal to build a wind farm of floating wind turbines 23 miles from the shore of Martha's Vineyard. Would you consider them a competitor to your project at this point?

Dennis Duffy: Oh, no, no, no, not at all. I mean just the scale and the type of project we're talking about is completely different. We're talking about a large-scale commercial project that would supply a large block of power right into the utility grid and be integrated and be part of the operating system. What they're really talking about is a demonstration project really, an experimental project. We wish them well. There's a lot of potential for offshore wind. In the future, in order to get to more and more wind resources we're going to have to learn how to go further offshore than we can do in a commercial way today. So, I don't consider it a competitor at all. I wish them well.

Monica Trauzzi: And your company, Energy Management, got a lot of heat recently because you're trying to pursue a diesel power plant in the area. You've since stepped back from that proposal and I just wanted to get your take on what sort of energy projects you're going to continue to pursue, if it's only clean energy or is anything fair game at this point?

Dennis Duffy: Well, for starters, that project would have been an extremely clean project. It used ultra-low sulfur distillate fuel. So, I wouldn't consider that a dirty project at all and, in fact, there was a lot of study done that were demonstrated that, in fact, it would improve air quality in that region. But our position is that across-the-board, both as a system, a utility system and as a company, you have to have diversity of energy resources. We're not doing just wind projects. We've done a lot of natural gas-fired projects. We've done biomass projects and we're doing wind projects. Everything we do, whatever type of project we're working on, we really feel is state-of-the-art and as clean as that technology can be. We think there's a large role for wind, but it can't be just wind. The system has to operate efficiently and balanced every hour of every day, irrespective of weather conditions. And you really have to have a diversity of resources to do that.

Monica Trauzzi: All right. We're going to end it right there on that note. Thanks for coming on the show.

Dennis Duffy: Thank you, my pleasure.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

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