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Analysis: Offshore - Cape Wind signs off first offshore lease

North America's inaugural offshore wind energy conference was capped off by the signing of the first federal offshore lease in the US.

The developers behind the 468MW Cape Wind signed a 28-year lease for the project, which has become the poster child for the country's long struggle to install turbines offshore.

The American Wind Energy Association and the Canadian Wind Energy Association organised the event in Atlantic City, New Jersey. It drew a respectable showing of more than 1,600 people despite there not yet being a true US market for offshore wind.

Momentum has slowly been building for machines to move offshore, particularly in the Northeast. Cape Wind Associates has blazed the trail and helped to define the development and permitting process.

The lease signed on October 6 will cost Cape Wind Associates $88,278 a year until the wind farm goes into production. After that, the company will pay an operating fee of 2% for the first 15 years and 7% for subsequent years.

The lease follows the grant of the company's permit on April 28 and a power contract signed with regional utility National Grid in early May, which will absorb half of the project's output.

The company's remaining challenges include obtaining state regulatory approval for the power contract. The contract includes an option for National Grid to either buy or broker a sale of the remaining half of the project's power output.

Dennis Duffy, Cape Wind Associates vice-president, says that one of the toughest hurdles was the burden of going first and establishing a precedent at each step.

In the nine years the project has been under development, Cape Wind approached dozens of state and federal agencies, but most were not familiar with offshore wind and had no regulations or processes to deal with it.

The project has also been a political football, kicked back and forth through three successive Massachusetts governors, in part due to its proposed location in a sensitive high-value area between Cape Cod and Nantucket Island. The first governor was neutral on the proposal and the second was openly hostile, while the third was openly supportive.

Duffy says that, if other offshore hopefuls want a real market to develop in the US, a number of changes need to be made. Within the current regulations, other offshore developers are probably facing between seven and nine years to move through the permitting process, which is far too long and difficult to finance.

The executives behind Cape Wind, including president Jim Gordon, previously developed combined-cycle natural gas plants. In stark contrast to offshore wind, gas plants can close financing in 12 months from first identifying a potential project, Duffy reports.

Speaking at a developer's roundtable forum at the conference, Erich Stephens, vice-president of OffshoreMW, said: "There are not going to be any more Jim Gordons who will have the patience for ten years of development work."

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