U.S. OFFSHORE WIND – THERE’S SOMETHING HAPPENING HERE (FINALLY)

States Have the Wind at Their Backs in the Offshore Debate
Evan Lehmann, October 8, 2009 NY Times)

SUMMARY
Offshore wind along the Northeast and Mid-Atlantic coast was the topic at a New Jersey clean energy summit and a consensus was evident. More offshore wind will come faster and at a lower cost from a joint multi-state effort.

The good news is that such an effort means a fleet of offshore wind installations on the East Coast’s outer continental shelf will face fewer regulatory hurdles and it brings one step closer the boom in manufacturing and jobs and access to enormous supplies of emissions-free affordable electricity for Eastern Seaboard population centers.

The bad news is that transmission planners may have to rethink the concept of a national high voltage New Energy superhighway in favor of a set of regional loops with national interconnects.

The cooperation emerges as states wrestle with the federal government over who will control and regulate the emerging energy industry powerhouse, a welcome change from the recent past when the federal government would not help drive the development of offshore wind.

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COMMENTARY
Offshore wind is something that makes so much sense, it’s hard to believe it isn’t already being built.

A landmark 2007 study from researchers at the University of Delaware and Stanford University concluded that the Middle-Atlantic Bight, the stretch of the Atlantic Ocean from Cape Cod, Mass., to Cape Hatteras, N.C., has enough wind potential to generate 330 gigawatts of electricity, almost twice the 185-gigawatt current energy demand for all energies (for electricity, vehicle gasoline, fuel oil and natural gas services) in the 9-state Mid-Atlantic seaboard estimated by the study's researchers. The New England states north of Cape Cod to Maine are also rich in resources, as is the Atlantic coast of both the Carolinas.

Offshore wind is an especially important asset on the East Coast for two crucial reasons. First, the outer continental shelf on the Atlantic coast is wide and shallow, making the building of offshore projects more affordable relative to the more daunting challenges of building installations into strong winds off the West Coast, where developers would have to face much deeper, more inhospitable waters.

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Second, the richness of the East Coast winds are immediately adjacent to huge population centers which already pay high electricity rates for power transmitted from coal, nuclear and gas plants in outlying areas. This means offshore wind’s higher costs would be more readily marketable. Its local abundance would make it more welcome and recognizably reliable. In contrast, West Coast winds are richest far off the more sparsely populated Northern California and Pacific Northwest coasts.

Not only would the development of Atlantic coast offshore wind mean more New Energy supply where it is needed most, but it would both (1) reduce the strain on the region's existing overburdened transmission system and (2) reduce the complexity of building a national high voltage New Energy superhighway by reducing the demand for Midwest wind and Southwest sun from New England and the Eastern seaboard.

Yet the U.S. has no offshore wind installations. It has none even approved for construction. It lags far behind Europe and, more recently, China, in the development of a technology likely to supply a huge portion of the world’s electricity by the middle of this century. (See WIND PUTS TO SEA)

Until the Obama administration took office earlier this year, the processing and regulation of offshore wind installations was left to the states. This made it possible for small, well-funded groups to block development for a variety of selfish or greedy reasons. The only project that got so far as an attempt to win approval was the Cape Wind project off Masssachusetts’ Cape Cod. It initiated the approval process in 2001. It is still not approved, blocked by a small coterie of affluent property owners with NIMBY (Not-In-My-BackYard) excuses.

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When the Obama administration took over at the Department of Interior (DOI), it faced a conflict over ocean energy installations between DOI’s Minerals Management Services (MMS) division and the Federal Energy Regulatory Commission (FERC). The Energy Policy Act of 2005 authorized MMS to regulate offshore energy projects but FERC also claimed jurisdiction. Throughout the Bush years, the MMS and FERC battle was allowed to remain unresolved over who had jurisdiction over wind, ocean wave, tidal and current projects on the outer continental shelf beyond the state-regulated 3-mile limit. Emphasis went to natural gas and liquified natural gas projects and lobbying went to extending oil and gas drilling rights.

Shortly after being approved by the Senate in April, Obama Secretary of the Interior Ken Salazar knocked heads and brokered a settlement. 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 kicked off June 29. (See U.S. GREENLIGHTS OFFSHORE WIND)

With the federal government ready to assume control of the situation, the states have collectively realized their own resources will soon be out of their hands if they don’t get out of their own collective way. Suddenly, state regulatory processes are being streamlined.

Cape Wind recently got final approval. Rhode Island, Maryland and New York, among others, are in negotiations with developers. Maine and North Carolina just won funding for major study projects. Delaware approved Bluewater Wind’s proposed 450-megawatt project. New Jersey is pushing ahead with plans for several 350-megawatt installations. (See FISHERMEN CAN’T BEAT OFFSHORE WIND SO THEY JOIN). And there is much discussion of joint efforts to make building the installation-to-installation subsea transmission and installation-to-onshore-substation interconnections easier.

The states could potentially lose a lot of control and revenue if such projects are approved and coordinated at the federal level. Yet nothing could demonstrate why the federal government’s intervention is necessary more than the fate of Cape Wind. A very small group of wealthy Cape Cod residents were able to indefinitely delay construction by buying popular local support and using local courts to demand low level regulatory red tape. Only the Herculean stubbornness of Jim Gordon, the project’s developer, prevented Cape Wind from being scuttled.

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The ascendance of states rights during the Bush years was a political philosophy entirely copasetic with the Bush administration’s demonstrated larger aims.

The flexing of federal muscle to push local action is, on the other hand, entirely in keeping with the Obama administration's demonstrated understanding of the necessary balances required for power.

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Without making a judgment about which approach is closer to constitutional holiness, it is clear which is finally getting the nation closer to the opportunity to take advantage of the enormous emissions-free New Energy opportunities on the outer continental shelf.

In banding together, East Coast states see a way to take back a measure of their regulatory authority and the associated revenue opportunities. Through a joint effort to streamline access to regulatory approvals and financing, the states could attract developers by cutting their time and money costs.

Another thought is to require regional utilities to all include minimum levels of offshore wind-generated electricity into their source portfolios. This would drive demand for offshore wind and that demand would drive development.

State representatives are also in discussions about joint subsidies. States could agree on a regional production tax credit stronger than the one now available at the federal level. There is also discussion of regional feed-in tariffs for offshore wind, a form of subsidy that has had demonstrable success in Europe but has not been tried in the U.S. at the federal level.

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Finally, states can do environmental impact due diligence jointly much more effectively than it can be done individually. States can use local leverage to push environmental impact studies forward through university research facilities instead of waiting for bureaucratic progress at the Environmental Protection Agency (EPA) and other federal agencies.

States still need MMS to facilitate leases and lease approvals and acknowledge pre-existing deals made with developers before the MMS-FERC settlement was in place. Here again, however, the states would have more leverage over federal authority by jointly demanding action from MMS.

Time is of the essence. State Renewable Electricity Standards (RESs) are already in place and the states’ utilities need the development of New Energy sources to meet the standards. With federal loan guarantees and grants making expansion especially attractive right now, the states don’t want obstacles to the growth of their tax bases and job opportunities that will come with project approvals.

And there is, of course, that nagging matter of climate change. It has been the case, in the past, that when local self-interests motivate bad behavior, catastrophes of the commons bring a more noble-minded joint response. Finally.

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QUOTES
- Mark Sinclair, executive director, the Clean Energy Group: "The states in the mid-Atlantic and Northeast regions want to be the captains of their own clean energy future…They don't want transmission to be built from the Great Plains that then dictate that they have to purchase wind and coal from the Midwest…They realize if they are going to avoid that kind of national transmission approach they need to tap resources in this region, and do it soon."
- Laurie Jodziewicz, offshore wind expert, American Wind Energy Association: "…It's very complex to get an offshore wind project [approved], and we don't have any here in the United States yet. So people are very nervous about making something that is that complex even more complex."

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- Greg Watson, lead New Energy consultant, Massachusetts Governor Deval Patrick (D): "If there's any way -- and I'm not suggesting that there may be -- if there's any way by collaborating and by coming into certain areas with a clear and consistent voice so that perhaps MMS wouldn't have to, on certain issues, consult with every state individually ... if we could help them up front by doing that, by coming to some agreement, then maybe that could make that time period a little bit shorter…"
- Mark Sinclair, executive director, the Clean Energy Group: "Offshore wind in some ways is the secret to energy independence in the mid-Atlantic and Northeastern states…"