Utilities National Grid and NSTAR have terminated their power purchase agreements (PPAs) with Cape Wind Associates, claiming the embattled offshore wind developer did not meet contractual terms.
Specifically, the utilities claim that Cape Wind missed financing and construction commitments that it was required to meet on Dec. 31. With Cape Wind having missed the deadline, both utilities terminated their PPAs on Jan. 6.
In a statement, National Grid says that it ‘is disappointed that Cape Wind has been unable to meet its commitments under the contract, resulting in the termination of the PPA. This ends our involvement with Cape Wind at this point.’
NSTAR did not return calls.
The utilities had agreed to purchase 77.5% of the project's output. National Grid agreed to purchase 50% of the project's output in 2010. NSTAR bought 27.5% of Cape Wind's output in November 2012. Both agreements carried 15-year terms.
The PPAs are a crucial component in the financing needed to construct and build the proposed 468 MW offshore wind project, located in Horseshoe Shoal off the coast of Massachusetts' Nantucket Island. Without the PPAs, it is unlikely that Cape Wind – envisioned by many to be the first operational U.S. offshore wind project – can move forward.
Cape Wind had secured two of the three signed PPAs secured to date by U.S. offshore wind developers. National Grid has also agreed to purchase the output from the Block Island Offshore Wind Farm being developed by Providence, R.I.-based Deepwater Wind. The Cape Wind decision does not affect its contract with Deepwater, notes a National Grid spokesperson.
Despite obtaining much of the investment needed for the $2.5 billion project, Cape Wind has been dogged by litigation from opponents, such as the Alliance To Protect Nantucket Sound, which, among several other complaints, balked at the price of the PPAs. In fact, Cape Wind asserts that the Alliance's continued lawsuits are the primary culprit for missing the deadline.
In a Dec. 31 letter to both utilities, Cape Wind President Jim Gordon explains the developer could not meet the terms of the contract due to unavoidable delays caused by the Alliance.
‘As you are aware, Cape Wind has been the subject of extended, unprecedented and relentless litigation by the Alliance To Protect Nantucket Sound that prevents Cape Wind from achieving the remaining critical milestones of the PPA as of this date.’
Gordon goes on to explain that the Alliance has filed more than 20 administrative and judicial challenges.
‘There comes a point at which the right to litigate becomes a vexatious abuse of the democratic process,’ writes Gordon.
When reached for comment, Cape Wind said it does not regard the terminations as valid, contending that the contract contains provisions for force majeure events. In PPA parlance, a force majeure event refers to unusual, unexpected or significant events that prevent a party from meeting contractual terms. Cape Wind asserts that such a provision should contractually trigger an extension.
Audra Parker, president/CEO at Alliance To Protect Nantucket Sound, says the terminations represent a ‘fatal or near-fatal blow’ to the embattled project.
‘Our job is not done, but we are in a strong position to win,’ says Parker, noting that the group will continue its lawsuit challenging the illegal issuance of Cape Wind's federal lease.
