Decisions on how US offshore wind farms will be financed are needed quickly to ensure smooth sailing for a growing number of offshore wind projects, according to a white report released by the Business Network for Offshore Wind (BNOW).
“We may hit some windy financing turbulence with the loss of tax equities and safe harbor provisions for US and foreign developers of offshore wind,” said Liz Burdock , President & CEO of the Network.
“Short-term, financing using safe harbor provisions may have an advantage but, with longer-term financing, a clear and well-defined structure is needed to attract the $60-70 billion investments expected over the coming decade in the U.S.”
The paper,“ How Will Offshore Wind Reshape US Project Finance?” , results from discussions with finance experts who propose in the medium term that the construction phase of an offshore wind farm may need separate mini-financing tools, dividing up a project’s risks among suppliers, states and financial partners.
Ross Tyler , Executive Vice President of the Network, said: “Developers are retaining maximum flexibility with last minute choice in turbine technology for competitive advantage and are looking beyond the OEMs to make up equity shortfalls. Banks must analyze risks and seek comfort with lending against risks through mini-financing for specific parts of multiple projects. This might be the new tool that will spread risk and ultimately ensure success.”
Multi-project developers most likely will influence the building of regional supply chains to benefit business clusters under mini-contracts, as well as the sponsoring states.
According to the paper, ”states will need to choose and then balance their priorities: price impact on ratepayers versus local job creation.” The State of New York, for example, plans to create 5,000 jobs with its investment of USD 6 billion for 9,000 megawatts of energy prior to 2035. At the same time, New York cautions against higher costs for ratepayers.
The Network released the paper at its annual International Partnership Forum in New York City, 8-10 April.
The New York State Energy Research and Development, NYSERDA, is the host of the Forum, which has attracted about 1,500 offshore wind experts, including the Governors and other elected officials from New York, New Jersey and Connecticut who are expected to speak about offshore wind in their states.