Despite Setbacks, Five Reasons to Be Positive About Offshore Wind - Center on Global Energy Policy at Columbia University SIPA | CGEP % - Columbia | SIPA Center on Global Energy Policy
Despite Setbacks, Five Reasons to Be Positive About Offshore Wind - Center on Global Energy Policy at Columbia University SIPA | CGEP %
It’s hard to be an offshore wind optimist these days. Four large offshore wind generation projects have been canceled in the past several weeks, .
Yet there are glimmers of hope amid the (admittedly painful) lessons, which may put the next generation of offshore wind developments on a firmer footing. And there will be a next generation—New York recently announced a 4 gigawatt (GW) offshore wind procurement;
First, state regulators made a powerful pro-consumer statement when they declined to renegotiate prices at turbine-point. Allowing developers to “win” a procurement and later renegotiate prices is “fundamentally inconsistent” with ratepayer protection
Second, one silver lining of the latest delays is that they may allow states to coordinate planning the reinforcements to the electric grid necessary to accommodate the next generation of offshore wind projects.
Third, much of the work done to develop the canceled projects won’t be wasted. Experience gained in permitting and sitting efforts, geotechnical analysis, cable routes, and other engineering work will continue to inform future projects. Without underestimating the complexities of retooling projects in the complicated regulatory permitting regime that applies to offshore wind, it is fair to expect the next round of permits to be easier and quicker, given that they can build off previous approvals.
Fourth, there’s slow but steady progress in one of the most epically challenging parts of the offshore wind experiment: building a United States–based supply chain. Developers have made significant commitments to getting port facilities ready, identifying Jones Act–compliant vessels, building nacelle and blade facilities, expanding job training efforts, and more. Regulators have learned a lot about what it takes to make these efforts a reality, and these hard lessons won’t be wasted. Future efforts may involve multi-state supply chain agreements or include supply chain commitments that aren’t directly tied to the success of any particular generation project.
Fifth, regulators—and developers—have learned a lot about how to structure effective offshore wind contracts over the past three years. The first-generation wind contracts were written when the world was awash in cheap capital. Future contracts are likely to include enhanced liquidated damages clauses and inflation indexes, which automatically adjust power purchase rates—up or down—as inflation changes. These increasingly sophisticated contracts will help avoid a repeat of the problems that have plagued this round of projects.
These hard-earned lessons are likely to lead to a stronger offshore wind industry in the longer term. However, these treacherous waters have to be carefully navigated. A danger for the offshore wind industry is that it could squander the enormous trust that has been placed in it, with state regulators and politicians looking to other sources of clean energy. The goal for proponents of offshore wind is to take the bitter lessons associated with these project failures and emerge stronger.
Notes
https://www.nytimes.com/2023/11/01/business/energy-environment/offshore…; https://www.reuters.com/sustainability/why-us-offshore-wind-industry-is…
https://documents.dps.ny.gov/public/MatterManagement/CaseMaster.aspx?Ma…
https://www.utilitydive.com/news/new-york-clean-energy-contracts-change…
https://www.governor.ny.gov/news/governor-hochul-announces-nations-larg…
https://www.mass.gov/doc/ma-ri-ct-offshore-wind-procurement-collaborati…
https://njoffshorewind.com/third-solicitation/solicitation-documents/
https://dps.ny.gov/system/files/documents/2023/10/pr23105.pdf
https://www.politico.com/news/2023/10/12/new-york-rejects-offshore-wind…
https://www.energypolicy.columbia.edu/an-offshore-wind-super-grid-for-t…
Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.