Thursday, November 05, 2009

"Well, someday is here."

Aaron Nathans reports in the News Journal that Delmarva Power could have killed plans to build the first offshore wind power project in the U.S. when Bluewater Wind failed to deliver a letter of credit last July. Bluewater is looking for a new investor after its highly leveraged parent company, Babcock & Brown began to collapse under the weight of its debt. Delmarva Power declined to cancel the power purchase agreement (PPA) after Bluewater failed to deliver the letter of credit.
Earlier this week, Nathans broke the story that NRG, which competed to build a new power plant in Delaware, is planning to buy Bluewater. Nathans asks why have two opponents gotten in bed with the upstart wind power company?
It wasn't that long ago that Bluewater Wind's main opponents were Delmarva Power and NRG Energy.
But if Bluewater's offshore wind farm gets built, it may have both to thank for keeping the project afloat.
Why? NRG and Delmarva Power fought Bluewater tooth and nail. Nathans asked me:
"You know how people say soccer is the sport of the future and always will be? I think that's how people have felt about wind power," said Noyes, whose blog is called TommyWonk. Company officials thought of offshore wind as "experimental, nice to do someday. Well, someday is here."
The fundamental reason that NRG would want to buy Bluewater and Delmarva isn't fighting the deal is that wind power is makes economic sense for the investor and the customer. Nathans points out that "Bluewater's main asset is the Delmarva contract." NRG would be buying a PPA that provides 25 years of revenue, which is hard to do in any business. And Delmarva Power is buying 25 years of power at a set price, which is almost impossible to do in the energy business.

Update: I'll be discussing Bluewater with Allan Loudell on WDEL, 1150 AM, today at 5:35

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