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REGIONS AMERICAS


WHENWEGET TO LARGER PROJECTSOVER 0.1GW,WEWILL SEEMUCHMORE COMMERCIAL BANK FINANCING


and Redwood Coast Energy Authority. A second area, still awaiting the go-ahead,


consists of 399 square miles off central California’s Morro Bay. Leases for this area will be auctioned on the same date as Humboldt. Together, the government estimates, they


could supply up to 4.6GW of clean energy, enough to power 1.6 million homes. Multiple leases could be granted. A joint venture between Seattle-based


Trident Winds and EnBW North America — a subsidiary of German renewable energy com- pany EnBW — to develop Castle Wind, a float- ing wind project in the Morro Bay area, intends to bid. In all, 14 wind-energy developers have sig-


nalled interest in commercial leases in California waters, a BOEM spokesman said. Success will depend on winning over environ- mentalists and commercial fishermen, who see their livings as imperilled, as well as tech- nological challenges.


Techandfinancing challenge Wind farms off the Californian shore will face different conditions from those in the east coast’s relatively shallow seas. The continental shelf off the Pacific coast plunges to depths of 600–1000m. As a result, the enormous wind turbines that will be deployed there cannot be anchored to the ocean floor in the same way, but will instead have to float on a platform, with mooring lines connected to anchors in the seabed below. The technology underlying such installa-


tions is advancing rapidly. Floating platforms have been used for decades by the oil and gas industry, which, though late to the game, is nowdeveloping and investing in offshore float- ing wind, says João Metelo, former chief execu- tive of Principle Power. Nevertheless, most major banks are not yet


prepared to finance floating offshore wind, Mr Metelo says, noting that a 1GW installation could cost about $3bn.However, he says financ- ing will not be an issue until 2024–2025, by which time banks will have had experience in Europe and Asia. “When we get to larger projects over 0.1GW, wewill seemuchmorecommercialbankfinanc-


58


ing, with typical project finance structures,” Mr Metelo says. “Morework needs to be done under- standing the turbines and floating system, but derisking will be complete in a couple of years.” Keith Martin, who specialises in tax and


project finance in the law firm Norton Rose Fulbright’s Washington DC office, says more than 40 lenders have expressed interest in lending to finance US offshore wind projects, though there is more caution about floating wind farms. Mr Martin notes that the typical “capital


stack” of a US offshore wind project consists of three elements: tax equity, debt and sponsor equity. Tax equity financing is provided largely by banks and repaid partly in tax benefits, instead of entirely in cash. “The tax benefits on an offshore wind project can amount to 44 cents per dollar of capital costs,” Mr Martin says. “The tax credits on a $3.5bn offshore wind project could amount to $900m.” At the federal level, congress approved a


30% investment tax credit for offshore wind farms. A $3bn Energy Department loan guar- antee programme is earmarked for offshore wind projects, $230m in grants was author- ised to modernise port infrastructure, and funding for research and development pro- jects was provided. California has joined the funding frenzy.


Mr Newsom has proposed a down payment of $20mfor projects to ready the state for the new industry. Several other tax credits also apply. Adam Stern, executive director of Offshore


Wind California, an industry coalition, says membership of the organisation has been growing rapidly. He is encouraging the state to set a goal of at least 10GW of offshore wind capacity by 2040. He notes, however, that the state’s trans-


mission system needs significant upgrades to make full use of wind energy. “To realise the promise of offshore wind and reach these ambitious goals it will be crucial to conduct environmental studies, upgrade port infra- structure, build an offshore wind supply chain, and streamline federal and state permitting, while protecting wildlife and cultural resources,”MrStern says. “This is a huge oppor- tunity, if done right.”■


www.fDiIntelligence.com August/September 2021


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