Record Hill Wind Project Receives DOE Loan Guarantee, Moves Forward: A Wind Powering America Success Story
August 30, 2011
Wind Powering America supported a Maine Wind Working Group for many years to advance wind development in the state.
After nearly 5 years of planning, preliminary construction, and delays due to the current economic environment, the Record Hill Wind Project near Roxbury, Maine, received a $102 million loan guarantee from the U.S. Department of Energy's (DOE's) Loan Programs Office.
Funded through the American Recovery and Reinvestment Act of 2009, Section 1705 of the Loan Guarantee Program is designed to address current economic conditions by helping fund "shovel ready" projects that will, in turn, create jobs. The 50.6-MW Record Hill Wind project will provide approximately 200 construction jobs and eight permanent operations and maintenance positions.
The project is a joint venture, developed and managed by Independence Wind LLC and Wagner Wind Energy LLC.
According to Rob Gardiner, president of Independence Wind, the partnership between the two companies began when Independence Wind started researching its first wind project. While looking at specific sites, Independence Wind approached landowners regarding leases. Wagner Forest Management represented the landowners. Although Wagner had been approached previously by a different developer, the group was interested in a joint venture with Independence Wind.
"We ended up not only getting the Record Hill wind site, which was our first choice among all the places we looked, but we got a partner that turned out to be invaluable in the development business," Gardiner said.
With everything in place, the project began to move forward. No one involved knew that an immense economic shift was waiting on the horizon.
"When we were starting 5 years ago, or even 4 years ago, the wind business was entirely on the upswing," Gardiner said. "We were confident that we would be able to sell the electricity as soon as we had a permit. In Maine, the permitting process is quite vigorous and time consuming, so you really can't get a power purchase agreement until after you get a permit. Potential buyers aren't interested in making speculative contracts. We were working our way through the permitting process when the economic downturn occurred. Suddenly, we were left with a terrific wind project that had demonstrated that it could get all of its permits, and our economic conditions had completely collapsed."
Gardiner believes the DOE loan guarantee played an integral part in ensuring completion of the project.
"We would not be building that project today if it were not for the loan guarantee," Gardiner said. "The economic situation has not improved significantly over the past 3 years. Two years ago, we started construction because we had our permits and we wanted to get a head start, even though we hadn't finished all of our financing or received our power purchase agreement. We were in the economic downturn, but we still had optimism, thinking we could do it."
Around this time, a group opposing the installation appealed the Maine Department of Environmental Protection's permit for the project.
"The appeal of the permit made it impossible to get any kind of financing, so that's sort of when it stalled," Gardiner continued. "We spent considerable amounts of money building the access roads, getting the first few turbine pad plates in place, and developing the pads. Then our financial package that we were trying to bring together, which we thought was going to happen, didn't happen. Then it was basic economics. We actually put those same pieces back together, but without the DOE support we wouldn't have been able to pull them back together."
Jonathan Silver, executive director of DOE's Loan Programs Office, said that Record Hill, like many other projects, would have experienced financing difficulties without the loan guarantee.
"The project would not have been able to find financing on the terms that were offered," Silver said. "While financing for wind has come back to some degree, there is still insufficient financing—particularly tax equity—available to support innovative energy projects. Private investors have limited capacity and are rarely willing to underwrite innovative, first-of-a-kind energy technologies. That's where we can help. The Loan Programs Office offers long-term, low-cost financing for projects that have the potential to drive down production costs for everyone."
According to Silver, many aspects of the Record Hill Project made it a unique investment opportunity.
"The project introduces advanced monitoring software that improves wind turbine performance," Silver said. "The wind power plant will avoid the emissions of more than 55,000 tons of carbon dioxide per year, equivalent to the annual emissions from more than 10,000 passenger vehicles, and is expected to generate more than 96,000 megawatt-hours of emissions-free electricity annually, enough to power more than 8,000 homes. Investments in projects like Record Hill strengthen our economy and our competitive position in the global clean energy race."
In conjunction with funding from the Yale Endowment Fund, the DOE loan guarantee will aid the construction of 22 Siemens 2.3-MW turbines, an 8-mile transmission line, and associated interconnection equipment. The project is expected to be complete in late November.
The Record Hill Wind Project is the third wind project to receive a loan guarantee from Section 1705. The other two projects are the Kahaku Wind Power Project and Caithness Shepherds Flat Wind Project, which upon completion will be the largest wind farm in the world with a generating capacity of 845 MW. A fourth wind project, the Granite Reliable Wind Project, has secured a conditional loan guarantee.
According to the Loan Programs Office, a loan guarantee is "a contractual obligation between the government, private creditors, and a borrower—such as banks and other commercial loan institutions—that the Federal Government will cover the borrower's debt obligation in the event that the borrower defaults."
Although the 1705 program ends on September 30, Silver feels that other tools will be able to address financing concerns for renewable energy projects.
"The Loan Programs Office still actively manages both the 1703 loan guarantee program and the Advanced Vehicle Technology Manufacturing Loan Program (ATVM). Neither of the programs have expiration dates. DOE has significant authority under 1703 to provide loan guarantees on a "self-pay" credit subsidy basis (i.e., where the applicant, rather than the government, pays the credit subsidy cost associated with the loan and a modest amount of appropriated funds for credit subsidy costs). The ATVM program also has sufficient appropriated funds to close more transactions," Silver said.
The Loan Programs Office is considered one of the largest and most productive energy project finance operations in the world. It has committed more than $30 billion to support 42 clean energy projects. These projects create or save more than 66,000 jobs across 38 states.
For additional information about DOE's Loan Programs Office and the Section 1705 Program, visit www.lpo.energy.gov.