U.S. GREEN LIGHTS OFFSHORE WIND

U.S. awards exploratory leases for offshore wind
Jon Hurdle (w/Nichola Groom and Marguerita Choy), June 23, 2009 (Reuters)
and
Feds Issue First-Ever Offshore Wind Leases
Ucilla Wang, June 23, 2009 (Greentech Media)
and
First Offshore Wind Leases Issued
Jad Mouawad, June 23, 2009 (NY Times)

SUMMARY
The Obama Department of the Interior (DOI) has issued the first-ever U.S. permits for offshore wind energy projects.

Exploratory leases were granted to Bluewater Wind New Jersey Energy, Fishermen’s Energy of New Jersey, Deepwater Wind, and Bluewater Wind Delaware (2 leases).

The leases permit the companies to build meteorological towers and accumulate data on wind speeds and weather data in 5 areas 6-to-18 miles off the coasts of New Jersey and Delaware and identify feasible sites for offshore wind installations in federal waters on the U.S. outer continental shelf.

Leases (1) (click to enlarge)

Outer continental shelf federal jurisdiction is from 3-to-200 miles offshore. Within 3 miles is considered state waters. Beyond the federal jurisdiction is international territory.

Oil companies use exploratory leases, which cost them tens of millions of dollars, to do seismic mapping of the sub-sea geology before drilling. The wind companies will pay ~$17,000 each per year and use their meteorological towers to evaluate wind speed, intensity and direction.

The leases require the companies to make the data they collect available to the Minerals Management Service (MMS) of DOI, which will make it available to the public for the planning of future offshore energy projects.

Leases (1) (click to enlarge)

The companies anticipate eventually building 100-turbine, 350-megawatt, $1.5 billion installations in the leased areas. If the exploratory process goes as planned, project construction would start in 2012 and the power would be generated beginning in 2013.

Other production companies may step into the project development business after the exploratory leases expire. Participation in the data collection process is not a prerequisite for eventually obtaining a production lease.

click to enlarge

COMMENTARY
The backstory to this major step forward in the annals of U.S. New Energy is the reconciliation facilitated by Secretary of the Interior Ken Salazar between the Federal Energy Regulatory Commission (FERC) and MMS, a sub-agency to DOI. The 2 agencies had been in a dispute over offshore wind and ocean hydrokinetic (wave, tide and current) energy leasing regulation. By settling the jurisdictional obstruction shortly after he was appointed by President Obama, Secretary Salazar cleared the way for the development of both kinds of New Energies.

Having gone unsettled during the entire span of the previous administration while preparations were made for the development of offshore liquid natural gas ports, the dispute allowed the U.S. to fall far behind Europe in the development of offshore wind. Estimates put at over 30 the number of European offshore wind projects presently in service.

The Energy Policy Act of 2005 authorized MMS to regulate offshore energy projects. FERC also claimed jurisdiction. The differences were settled in April. MMS will regulate the production and transmission of non-hydrokinetic projects (mainly wind and solar energies) and manage leases for hydrokinetic projects (mainly wave, tidal and current energies). FERC will regulate hydrokinetic projects. Rules have been finalized and the lease program kicks off June 29.

Offshore in the UK's North Sea waters. (click to enlarge)

The potential of offshore wind energy is enormous. The U.S. Department of Energy (DOE) feasibility study on wind energy said the nation can get 20% of its power from wind by 2030 and can get 20% of that power from offshore wind.

A University of Delaware and Stanford University joint study in 2007 estimated the offshore wind energy potential for the Mid Atlantic Bight at 330 gigawatts, substantially more than the power consumption of the 9-state region from Massachusetts to North Carolina and the District of Columbia.

The race is on to be the first developer in U.S. history to build an offshore installation. As a result of its participation in the exploratory lease program, Bluewater Wind could be the first. It is in a strong position because Delmarva Power in Delaware guaranteed significant returns on the effort by signing a power purchase agreement to buy 200 megawatts of electricity as soon as Bluewater can make it available.

Offshore in Europe. It's time to reap this harvest in U.S. offshore waters. (click to enlarge)

The New Jersey companies are in strong positions because the state awarded them $4 million grants to hasten the development process after Governor Corzine committed the state to building 3,000 megawatts of offshore wind capacity by 2020. (See FISHERMEN CAN’T BEAT OFFSHORE WIND…)

Cape Wind, the controversial Massachusetts project stymied by the regulatory process since 2001, already has an application for a production lease pending and could beat the other companies to the construction stage if, at last, their permit is granted.

And insiders are whispering that a Rhode Island offshore project could get built ahead of all the bigger, more well-known projects for one simple reason. The Rhode Island project will be located inside the 3-mile state waters boundary, freeing its developer from clearing federal regulatory hurdles.

One of the richest energy resources in the world. (click to enlarge)

QUOTES
- Ken Salazar, Secretary of the Interior: "Wind energy off the Atlantic coast is a very significant resource… Other nations have been using offshore wind energy for more than a decade…The technology is proven, effective and available, and can create new jobs for Americans while reducing our expensive and dangerous dependence on foreign oil… The experience in Europe gives us a lot of confidence that this is a technology that will produce energy in a carbon-free way..."
- Frank Quimby, spokesman, DOI: "The companies have their ducks lined up, and they are confident that they will get the production leases once they have the scientific data they need…"