Cape Wind is nearing construction to become America’s first offshore wind farm. Cape Wind will consist of 130 Siemens 3.6-megawatt offshore wind turbines with a capacity of 468 megawatts. The project will be located in Federal waters off the coast of Cape Cod, Massachusetts, on Horseshoe Shoal in Nantucket Sound off the coast of the U.S. state of Massachusetts approximately 30 miles long and 25 miles wide.
Each turbine would be about 285 feet and would produce up to 468 megawatts of energy and could provide about three quarters of the Cape Island’s electricity needs. The proposed location is attractive because of the available wind, ability to mount the windmills in relatively shallow water, high electricity demand, and the project’s location in federal waters (which affords some freedom from some state regulations). The wind project would eliminate the risk of potential oil spills, create an energy independence from foreign oil imports, and offset over 1 million tons per year of carbon dioxide (as well as 1.8 tons of nitrous oxide and 4,000 tons of sulfur dioxide [by avoiding the use of fossil fuels]).
The project has garnered support and resistance. Support has come from several regional towns; Greenpeace USA; the National Resources Defense Council; Bill McKibben, an environmental author; and the Boston College Environment Action Coalition. Opposition has come from Senator Edward M. Kennedy (and several other politicians), several regional towns, tourism agencies, International Wildlife Coalition, and a group of citizens called the Board of Alliance to Protect Nantucket Sound.
Opponents emphasize the environmental challenges, public safety concerns for recreational and commercial boats and aircraft, the negative impacts on fish populations, and the wind farm’s adverse visual impact (which may impact tourism and the local economy). Also, some have commented that the project could have enormous costs. The Cape Wind organization has spent over $30 million on scientific research, geotechnical exploration, Doppler oceanographic studies, avian research, socioeconomic studies, community outreach, and litigation. (The only other serious US offshore wind project was planned for Long Island, and it was cancelled.) Many of the project’s investors have grown concerned: the project will potentially exceed $2 billion in costs, it originally started over 14 years ago, and many have also questioned its efficacy. And while they remained convinced that the technical issues were viable, the political problems have seemed insurmountable.
Thus, the project’s investors and managers began to realize the benefits of extensive analysis related to all stakeholders impacted by the project. In fact, one of the major challenges was to satisfy these stakeholders and understand their impacts on the organization. This industry analysis (i.e., looking at the external conditions within which the company operates and the impact of all external stakeholders) was critical to Cape Wind’s understanding of its own strategy.
What Can Cape Wind Learn About Competencies?
The Cape Wind project shows that more than technical capability is needed for a successful project; the Cape Wind Organization discovered their missing capabilities (and a source of competitiveness) were in the area of stakeholder management. This case illustrates how analysis of competition and customers does not always provide all of the key information for firms and illustrates how important it is to marry key success factors with firm competencies via an internal analysis.
Thus, projects such as Cape Wind clearly have stakeholder management as a major key success factor. Yet, the Cape Wind organization seemed to be wanting in this area. Also, when establishing a completely new type of industry (e.g., renewable energy), gaining legitimacy is critical.
- Completed Federal and State Permitting; Cape Wind is fully permitted;
- Cape Wind issued first U.S. Commercial Offshore Wind Lease;
- Approved Construction and Operations Plan by the U.S. Department of the Interior;
- Turbine Supply Agreement with Siemens;
- Cape Wind has won 17 legal decisions in challenges brought by opponents;
- Two 15-year Power Purchase Agreements for 77½% of project output to National Grid and NSTAR, both approved by the Massachusetts Department of Public Utilities;
- Barclays Bank is Cape Wind’s Financial Advisor;
- Bank of Tokyo-Mitsubishi UFJ, Natixis and Rabobank are the Lead Arrangers of Commercial Debt and will provide over $400 million in commercial debt;
- PensionDanmark will provide $200 million in Mezzanine Debt;
- EKF (Export Bank of Denmark) has made a $600 million funding commitment.
This project is worth watching as it will set the tone for more similar efforts to bring renewable energy to the USA.