Platt’s Inside Energy Quotes Ed Zaelke on Challenges Facing Offshore Windpower Industry

Akin Gump global project finance practice co-head Ed Zaelke was quoted by Platt’s Inside Energy for its article “Analysts skeptical as US sets offshore wind auction” on the challenges facing the nascent offshore windpower industry.

Responding to those industry commentators who believe that offshore wind is not cost-competitive, Zaelke says that cost is certainly a consideration in the ultimate success of this industry, but that this argument may be premature, as wind farms haven’t begun operating offshore the United States yet.  He adds, “It will come down in price, but we have to decide whether just because it’s not cost-competitive today whether the right choice is to ignore it. If we always did that we’d still be driving horses and buggies.”

He noted that onshore wind production prices are about half of their levels five years ago, thanks to the combined effect of development investment and efficiency efforts, and that he expects a similar reduction in offshore wind, which enjoys advantages over onshore windpower.

Zaelke did say that the ongoing availability of the production tax credit (PTC) provided by Congress in early 2013 and due to expire at year’s end will be a determinative factor in the industry’s success.  He stated, “It’s unlikely that a utility will simply pay the current cost of offshore wind without some government incentive or government mandate in place to encourage that, but more important than that is a consistency in policy.”

He added that the expiration and uncertain renewal of the PTC imperils offshore projects, noting “It’s very difficult to take a project like an offshore project that takes several years to develop and keep investing in it not knowing that when you finally bring it to market whether or not the tax incentives that you relied upon five or six years ago are still going to be there. That’s a challenge for onshore wind, and that has a much shorter development span than offshore.”