Cape Wind: Requiem for a dream

UNITED STATES: Cape Wind was the big, ambitious project that aimed to kickstart offshore wind development in the US, but which foundered in the face of powerful opposition groups. Where did it all go wrong and what others can learn from the developer's experience?

What could have been… Computer-generated image of the Cape Wind project

Despite more than 16 years of work and $100 million in private money, Cape Wind was a project doomed to fail.

Slated as the first offshore wind project in the Americas, it would have had a capacity of 468MW, with 130 turbines located in Horseshoe Shoal in the shallow waters off Massachusetts.

But it was in the wrong place at the wrong time — too far ahead of the US’s offshore wind learning curve.  

Late last year, developer Energy Management Inc (EMI) finally officially pulled the plug on the controversial $2.6 billion project, surrendering its federal lease of 119km2 in Nantucket Sound.

The Boston-based firm had first proposed the project in 2001 and had held a lease since 2010, but no steel was ever installed in the water.

"Although we were unable to bring Cape Wind to fruition, we are proud of the catalysing and pioneering effort we devoted to bringing offshore wind to the United States," EMI president Jim Gordon said in a statement to the Cape Cod Times in December.

Gordon, who got into renewable energy during the oil embargo in 1974, had envisioned the project sparking an offshore wind industry that would become mainstream in America.

In fact, Cape Wind had been on life support since 2015, when two utilities, National Grid and Northeast Utilities’ NStar, cancelled their power purchase agreements (PPAs) for 77.5% of its output. The developer had missed a deadline for financial close and starting construction. The project would never recover.

Now that offshore-wind development is finally taking off along the US’s east coast, it is worth recalling what went so wrong.

Death by litigation

The trailblazing project was litigated to death by a well-funded opposition, resulting in a slow pace of development that only attracted more negative attention.

It faced more than two dozen lawsuits, some backed by influential and very wealthy residents with nearby ocean-front estates.

No matter that Cape Wind’s turbines would have been no more visible than tiny sailing masts near the horizon, as Gordon told the New York Times following the project’s official demise.

And no matter that the project passed stiff environmental scrutiny from the federal government.

Cape Wind’s large size and proposed site immediately attracted opposition. Its location was less than 8km from part of the Massachusetts mainland, to which it would have supplied power, along with the tourist hotspot islands of Martha’s Vineyard and Nantucket.

By contrast, Deepwater Wind’s successful — and far smaller — 30MW five-turbine Block Island project, which came online in December 2016, is a full 26km off the mainland.

It may be only 5km from Block Island, but the island benefits dramatically from the wind project, having previously relied upon dirty and expensive diesel power. Some have even suggested that Cape Wind’s barrage of litigation may have deflected criticism from Block Island.

Powerful enemies

Cape Wind had the particular misfortune to draw the ire of oil billionaire Bill Koch, who in 2013 had spent $19.5 million buying the waterfront estate of heiress Bunny Mellon, another opponent of the wind project. Koch soon wanted to combat what he called the project’s "visual pollution".

Indeed, Koch was the main financier behind — and president of — the Alliance to Protect Nantucket Sound (APNS), a non-profit organisation specifically founded to oppose Cape Wind that raised $40 million.

In a 2013 interview with Massachusetts’ CommonWealth Magazine, Koch described his strategy on Cape Wind as: "Delay, delay, delay." The alliance was legally savvy, at one point even hiring a renowned constitutional scholar and attorney, Larry Tribe.

Also opposing the project had been the late Ted Kennedy, the Democratic Massachusetts senator and one-time presidential candidate who backed wind power elsewhere. The famous Kennedy compound is on Cape Cod, part of the nearby mainland.

In all fairness, the relentless opposition to the project included lawsuits filed by local Native American tribes, ordinary fishermen and residents, and tourism-related interests, albeit often backed by APNS.

Trust had become an issue. As Deepwater Wind vice president Clint Plummer told a Make Consulting panel earlier this year: "Cape Wind died because they were unable to build enough trust with local communities to get past years of litigation."

Promising start

Still, Cape Wind did have considerable backing, including from the Democratic Massachusetts governor at the time, Deval Patrick (2007-2015), and major national environmental groups.  

For years, the project had seemed on track. By 2014, EMI had raised about half of Cape Wind’s capital cost, including a conditional $150 million loan guarantee from the US Department of Energy.  

Mitsubishi UFJ Financial Group, Natixis and Rabobank Group were the lead arrangers in a $400 million debt package. The project also had a $600 million loan from Danish export credit agency EKF.  

Scheduled to supply its 3.6MW turbines, German technology giant Siemens was mulling a $100 million equity investment. And EMI expected Cape Wind to qualify for investment tax credits, providing 30% of its capital costs.

The company’s decision to terminate Cape Wind’s lease in December was motivated by a desire for certainty after years of limbo.

As Gordon told the New York Times: "In a[n American] football game, if you have a tie, there’s an overtime period, a sudden-death period," he said.

"We were kept in a repeated sudden-death period, and the goal posts kept moving. In my wildest imagination, I never envisioned just how exhaustive, how time consuming and how expensive this would be," he added.

Much has changed since Cape Wind was on the drawing boards. Technology is fast improving. When Gordon began working on Cape Wind, he could not locate the project further offshore because "we didn’t have the technology to go out further".

Cape Wind had a projected capacity factor of 38%, while Block Island’s, further from shore, is 48%.

Proof of concept

Block Island’s success has also given Deepwater and others in the US a "proof of concept". It has become a stepping stone to larger projects.

"People probably want to see something spinning before they go for a larger project," according to Luke Lewandowski, a research manager at Make Consulting.

Deepwater alone is now behind four larger offshore-wind projects planned off the north-eastern US and mid-Atlantic coast, including the 400MW Revolution Wind off Massachusetts. Several others projects of up to 1GW are also in the offing in the region, backed by experienced developers such as Statoil, Avangrid, Ørsted and Copenhagen Infrastructure Partners.

"Am I wistful about what could have been?" Gordon told the New York Times. "Of course I am… I guess I was ten years ahead of my time. The beautiful thing is that it’s all starting to happen."