TODAY’S STUDY: A NEW PLAN FOR U.S. OCEAN WIND
Up In The Air; What the Northeast States Should Do Together on Offshore Wind Before It’s Too Late
Clean Energy Group Lewis Milford and Val Stori & Navigant Bruce Hamilton and Jim Peterson February 2015
According to the latest news, the country’s first proposed offshore wind project, Cape Wind, might never be built. Despite the best efforts of Massachusetts state officials to support the market for years, the disappointing news highlights a stark conclusion: current offshore wind policy isn’t working.
While the Cape Wind project floundered amidst fierce local opposition, the project’s difficulties highlight a larger policy problem—it is difficult, if not impossible, for any single state to jumpstart the offshore wind industry.
With the Northeast’s keystone project in limbo, only a few small projects might be built.
Going forward, there is no solid pipeline of large projects to prove the economic and environmental benefits of this technology and bring it to scale.
The bottom line is that a new policy approach must be put in place to support a robust offshore wind industry in the United States. To be effective, that approach must rely on multi-state collaboration.
Offshore wind will only become cost competitive and reach its true potential if the states in the Northeast region act together to help create a market for the technology. The current, go-it-alone, single-state policy approach has failed.
Without effective collaboration among the states, a market for offshore wind in the Northeast will not develop and the few small projects in development might well be the last. It is that simple.
This paper takes up the challenge of multi-state policy collaboration on offshore wind. It does the following:
• It shows the strong regional economic opportunities for offshore wind in the Northeast.
• It shows the multiple regional environmental benefits of a growing offshore wind market.
• It details the many challenges and barriers to a strong regional market, and then lists actions Northeast states could take together to build this market—from setting regional procurement targets to developing joint financing and development mechanisms to concerted supply chain development.
• It details specific policy measures states could adopt together to build out this market, including creation of multi-state buyers’ networks and bargaining agents to purchase offshore wind power on behalf of multiple states.
• It then proposes a regional collaborative process for the states to use to consider these measures and to decide whether to pursue offshore wind as a regional no-carbon resource.
While hopeful, this paper does not minimize the challenges. It notes that offshore wind is currently an expensive power resource, much as solar PV technology was twenty years ago. Since that time, policy measures, business models, and incentives—all targeted directly to solar technology—have brought precipitous drops in solar prices to customers.
As a result of those concerted policies, in many regions of the country, solar has become an affordable, financeable, and commercially viable source of energy.
The same can happen with offshore wind. But its high upfront capital costs require significant policy support and greater multi-state collaboration to achieve scale.
If the states do not act together, the region might well lose the ability to capture the benefits of an expanding offshore wind market. That will leave the offshore wind technology and supply chain development to foreign countries to capture the global market for offshore wind. It will leave the region ever more reliant on imported power or on natural gas to try to meet climate goals. It will mean the region will miss out on the economic and environmental benefits of this promising, large-scale, no-carbon energy technology.
If the country wants to capture these benefits, now is the time to decide which way the region and the industry in the U.S. will go. The policy status quo will not do.
Multi-State Actions on Offshore Wind: Policies and Process to Move Forward
If it is the ultimate goal of any East Coast state to develop major offshore wind projects, it is imperative that those states work together through consistent and cooperative regional policies.
Multi-state action is needed to drive demand, organize procurement, and plan for transmission and distribution. Multi-state cost sharing will reduce impacts on rate-payers and improve the prospects for the participating states to develop a native supply chain.
This paper recommends the states consider seven multi-state policies for regional action.
• Regional Offshore Wind Target. The establishment of a practical regional target (or target range) for offshore wind capacity would create a clear demand signal to offshore wind developers that the region is open to support projects.
• Coordinated Policy Incentives. Individual state policy drivers, including any incentives for developers, should be consistent across the region to drive demand and produce cost reductions over time through scale up of the offshore wind resource.
• Financing. States should develop new, regional financing mechanisms for regional and single projects including use of bonds and various measures through green bank financing.
• Procurement. Through various policy mechanisms, states should jointly mandate the procurement of power from one or more large offshore wind projects to reduce costs and create a reliable pipeline for project developers with an aggregated demand from multiple states.
• Economic Development. Coordinated rather than purely competitive action would spur economic development activity in the region through the creation of clean energy jobs and potentially new manufacturing facilities.
• Transmission. States should develop joint public funding of regional transmission and interconnection facilities associated with regional projects.
• Permitting. It is essential to the success of the multi-state projects that the policies ultimately adopted for permitting these facilities be standardized.
The paper also recommends consideration of various implementing mechanisms for these policies to be adopted, including a multi-state buyers’ consortium, a state acting on behalf of other states as a bargaining agent, and a multi-state authority.
The paper also recommends the creation of a multi-year process for states to assess whether and how they would pursue these policies together.
Regional Opportunities for Offshore Wind…Economic, Environmental, and Energy Assurance Benefits to the Region…Policy Goals and Rationale for Multi-State Collaboration…Regional Offshore Wind Target…Coordinated Policy Incentives…Financing…Offshore Wind Energy Procurement…Economic Development and Supply Chain Strategies…Transmission…Permitting…Implementation Mechanisms for Policy Goals…Multi-State Consortium…Multi-State Bargaining Agent Arrangements…Multi-State Power Authority…Regional Process for Multi-State Collaboration…Proposed Activities for Consideration…Timeline…
After the troubling conclusion of the Cape Wind project and the uncertainty about future offshore wind projects, energy policy makers who care about the industry are at a crossroads.
The current policy direction is not working to attract developers to the U.S. There is now little to show for a decade of policy experimentation to create large-scale, offshore wind projects and markets. The industry’s fate in limbo.
At the same time, there is no clear new direction that has yet emerged to capture this attractive renewable resource. Doing more of the same—the single-state approach to create market demand—obviously will not work.
The only feasible policy goal is to achieve scale through coordinated, multi-state policies.
It is clear that such an approach would be difficult and complicated. However, the positive news is that states in the Northeast probably have the longest history of working together on complex energy and environmental issues.
It is time for the states to come together once again to explore whether they want to do what’s needed to create an offshore wind industry. A great deal of work is required to analyze whether the recommendations offered here, and others, would produce the desired results. But we will not know unless the states agree to come together and find out.
Without a commitment to explore new multi-state policies, the future of offshore wind in the region will remain up in the air.