Ohio offshore wind project talks to lenders, mulls turbine size
Multiple foreign banks and at least one from the US have expressed interest in financing the six-turbine Icebreaker, the nation’s first freshwater offshore wind project which would be located in Ohio state waters in Lake Erie.
The financiers' apparent willingness to get involved with the 19.2MW facility, whose cost could be closer to $100m than an initial estimate of $150m, contrasts with the financial struggles of several other US offshore projects.
Developer Lake Erie Energy Development Corporation (LEEDCo), a nonprofit public-private partnership based in Cleveland, received letters of intent from nine banks and has held in-depth discussions with several.
“We've been working with them to make sure we satisfy what they want,” LEEDCo president Lorry Wagner tells Recharge.
The banks’ requirements include long-term purchase agreements for the facility’s power, use of a proven turbine model, regulatory approvals and permits in place, and firm numbers for capital expenditure.
LEEDCo has letters of intent from municipal utility Cleveland Public Power and two other buyers that it has not announced for the project’s electricity. It is now working to turn those into binding term sheets, says Wagner.
Lenders view the Siemens 3MW direct-drive turbine platform, which it has upgraded to 3.2MW, as a proven and bankable machine with high availability. That said, LEEDCo is looking at the German vendor’s 4MW turbine with a 130-meter rotor as a potential alternative to maximize energy production.
“That’s really what pays the bills,” says Wagner, who cautions that LEEDCo has made no determination that the 4MW may be a better machine for Icebreaker. “We don’t know that.”
What is clear is that LEEDCo is not contemplating the Siemens 6MW turbine, which is gaining popularity for ocean applications in Europe.
Wagner notes it would not be a good fit for wind resource in the Great Lakes, as the developer estimates that two 3MW turbines there would produce 15% more energy than one 6MW.
LEEDCo would need to be at financial close by year-end to meet its stated deadline of having Icebreaker in operation by 31 December 2017. “That’s looking more challenging,” says Wagner, who notes LEEDCo will take the necessary time to overcome technical and other start-up challenges that occur with a first-of-a-kind project.
“We’re going to make a decision more or less officially sometime in the next several months,” he says, regarding a target date for operation.
Icebreaker is now essentially a commercial venture after LEEDCo last May failed to win second-stage funding up to $46.7m from the US Energy Department under its Offshore Wind Advanced Technology Project demonstration program.
Instead, DOE awarded LEEDCo about $3m to complete front-end engineering design for an offshore wind turbine monopile foundation optimized for fabrication in the US.
Wagner says failure to win the larger grant forced LEEDCo to look at other ways to fulfill its mission to get the project done. The answer was to make it attractive for private investment.
LEEDCo was able to slash 20% to 25% out of capex with Icebreaker no longer a demonstration site. DOE funding would have required expenditure related to monitoring and verifying data for five years after construction. “That brought our project cost down with the PPAs we think we can achieve,” says Wagner, who believes more savings are possible.
“There is still some fluidity to it based on what the financing costs will be. Somewhere under $120m, but we’re hoping to get it closer to $100m,” he adds, noting that the engineering design will influence manufacturing costs and final project price tag.
LEEDCo is unique among US offshore projects in that its financial models do not include federal credits or subsidies. “If they do come in it will just help lower the PPA price essentially,” says Wagner.
Likewise, it is not counting on the alternative energy mandate in Ohio, which the legislature froze last year. “At this point, the state doesn’t offer any incentives for renewable energy,” he adds.
Wagner did not provide the amount of private investment LEEDCo hopes to attract to design, build and commercialize Icebreaker.