Iberdrola's N.C. wind project a no-go

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Iberdrola Renewables is putting what would have been North Carolina's first large wind farm on hold after it was unable to secure a power-purchase agreement.

Iberdrola Renewables has decided not to start construction on a proposed $600 million North Carolina wind project this year. The company says it has been unable to negotiate a power-purchase agreement with a regional power company for the electricity the operation would generate.

And without an extension of an expiring federal program that would offer a grant of up to $200 million for the 300-megawatt project, it is unlikely to be built in the near term.

“The federal incentives are a critical piece of the project,” says Iberdrola spokesman Paul Copelman. “I wouldn’t want to say we definitely couldn’t find a way to build it. But if the incentives expire, it's very challenging for the industry.”

Iberdrola, which bases its U.S. operations in Portland, will continue to pursue negotiations for a power-purchase agreement with a utility. But if there are no incentives, the costs of the project — and thus the cost of the power — will go up considerably. Iberdrola could not get a utility to sign a long-term deal to buy power from the project with the pricing advantage that comes with incentive. It is difficult to see why a utility would be more interested in a contract without that price advantage.

This is the second time in recent months that Iberdrola has pulled the plug on a project due to the inability to establish a power-purchase agreement. In October, Iberdrola announced it would stop construction of a biomass plant in Lakeview because it hadn't lined up a utility to purchase power from the plant.

State and local officials in North Carolina had rallied for the project in recent weeks. Last month, Gov. Bev Perdue wrote the chief executives of Duke Energy, Progress Energy and Dominion Resources, asking them to consider partnering with Iberdrola on the wind farm slated for Perquimans and Pasquotank counties.

Sources in the two counties said Duke and Dominion were in talks with Iberdrola. But neither Iberdrola nor the utilities would confirm that. For weeks, the status of the project remained unclear.

Then Iberdrola scheduled meetings with landowners in the project area for Tuesday night and with public officials in the counties on Wednesday.

Frank Heath, acting manager of Perquimans County, had been hoping for good news. He did not get it.

“If they don’t have a power-purchase agreement in place in December, they certainly are not going to start construction this year,” he says.

Heath says he’s still holding out hope. But then he gets an almost wistful note in his voice and adds, “It would have been a good project.”

Vann Rogerson, president of the regional economic development commission North Carolina’s North Eastsays he remains optimistic.

“Yes, it’s not happening right now, We’re disappointed about that,” he says. “But Iberdrola’s done enough of their homework to know it’s a good project.”

Rogerson says the company has its permits and it has options on the land that will remain in force for some time. And he hopes that the federal government will extend some policy to encourage renewable development. “We believe the project is not dead,” he says.

Copelman says it remains possible that the current federal incentive — a tax break for 30% of the costs of the project — will be extended or that other incentives will be introduced. But the uncertainty over incentives is already chilling plans in the industry.

There was a boom in contracts for wind projects at the end of this year as customers considering such initiatives sought to get them started in time to qualify for the incentives. Contracts already have been signed for about 8 gigawatts worth of wind projects that have started construction and will come on line in 2012.

A study released this week by the American Wind Energy Association estimates that if the incentives are not extended, the new contracts for construction in 2013 will drop precipitously to a total of 2 gigawatts, SNL Energy reports.

SNL says:

"Similarly, wind-supported jobs would drop from 78,000 in 2012 to 41,000 in 2013, and total investment by the wind energy sector would drop by nearly two-thirds, from $15.6 billion in 2012 to $5.5 billion in 2013…."

"Without an immediate extension of the (production tax credit), the study finds that nearly half of the existing jobs in the wind industry in the U.S. workforce are being put at risk," AWEA Chief Executive Denise Bode said on a conference call with reporters. "You have not had the PTC expire at a time where you had such significant U.S. manufacturing jobs at stake. It's different this time."

It is not clear what impact the possible expiration of the incentives will have on Duke Energy Renewables, which is one of the top 10 operators of wind power farms in the United States.

Duke spokesman Greg Efthimiou says the company already has more than 700 megawatts worth of projects slated for construction next year — much of it part of that year-end flurry in wind power contract. But the company has no estimate on what it expects in new contracts in 2012.