NewEnergyNews: ORIGINAL REPORTING: THE NEW ROADMAP FOR THE REVIVAL OF OFFSHORE WIND/

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YESTERDAY

THINGS-TO-THINK-ABOUT WEDNESDAY, August 23:

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    Founding Editor Herman K. Trabish

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    Wednesday, August 12, 2015

    ORIGINAL REPORTING: THE NEW ROADMAP FOR THE REVIVAL OF OFFSHORE WIND

    The new roadmap for the revival of offshore wind; With Cape Wind stalled and Block Island funded, a new white paper lays out policy strategies

    Herman K. Trabish, March 3, 2015 (Utility Dive)

    U.S. offshore wind is staggering back into the fight after getting hit hard by Massachusetts utilities at the end of 2014. But the just-announced completion of full financing for Deepwater Wind’s five turbine, 30 MW Block Island Project only begins to assuage the industry’s disappointment.

    After overcoming obstacles for twelve years, U.S. offshore wind flagship project Cape Wind was finally blocked late last year. Because of its inability to meet contractual deadlines, National Grid and Eversource, Massachusetts’ dominant electric utilities, canceled their power purchase agreements for 77.5% of the project's output, stalling financing and development.

    “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,” concludes "Up In The Air; What the Northeast States Should Do Together on Offshore Wind Before It’s Too Late," a report from Clean Energy Group and Navigant Consulting. “The current, go-it-alone, single-state policy approach has failed.”

    The white paper is, according to Navigant Consulting Director and white paper co-author Bruce Hamilton, a roadmap to a multi-state collaboration that could make offshore wind more affordable through economies of scale. It was recently endorsed by newly-appointed Massachusetts Assistant Secretary for Energy Ron Gerwatowski, a former National Grid executive.

    “The argument against Cape Wind is that offshore wind is still too expensive,” Hamilton said. Collaboration would allow larger megawatt plants that would drive down developers’ cost per megawatt. Developers’ transmission costs could be reduced by the use of an offshore line that consolidates their projects’ generation and delivers it onshore through a single offshore substation and interconnection. A consolidated market would also allow costs and benefits, and any rate increases, to be spread across more customers.

    The paper does not target a specific project size. “A typical project in the U.S., once the industry gets going, will be in the neighborhood of 500 MW,” Hamilton said. "The average size in Europe right now is slightly smaller but they are heading in that direction.”

    There were about 7 GW of offshore wind installed globally at the end of 2014, most in Europe, where 6.6 GW were in construction and development, according to the Offshore Wind Market and Economic Analysis report from the Department of Energy and Navigant.

    Department of Energy funding for offshore wind has been substantial but hasn’t broken the logjam. None of the 14 U.S. projects in advanced stages of development, representing 4.9 GW of wind power, have started construction. With the demise of hopes for the 468 MW Cape Wind installation, Deepwater Wind’s fully permitted, approved, and now fully financed Block Island project off Rhode Island is the only project on the U.S. horizon.

    The first projects or the last?

    The 25 MW Fishermen’s Energy pilot off Atlantic City’s shore and Department of Energy-backed demonstrations, including a privately funded installation off Oregon and the Dominion Power project off Virginia, are still possibilities.

    “Block Island is going to be the first one to the finish line, by the end of 2016,” Hamilton said. “It officially qualified for the investment tax credit a year ago. It is expected to begin construction later this year and be online by the end of 2016.”

    “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,” the paper finds.

    It calls for a working group made up of representatives of the New England and Northeastern coastal states. It offers:

    examples of regional economic opportunities

    examples of regional environmental benefits

    examples of the challenges and barriers to a regional market and actions Northeastern states can take make it happen

    a list of policies needed to build a market

    the steps to a regional cooperative process and workable collaborative models

    What collaboration could fix

    The travails of the Fishermen’s Energy project shows how a regional collaboration might work, Hamilton thought. Cape Wind’s developer expended time and money to win approvals from the Massachusetts Department of Public Utilities and the state’s Supreme Court. The regulators and jurists agreed high rates for offshore wind-generated electricity would nevertheless be economic for utility customers because of its peak demand shaving potential and environmental and climate impacts.

    “It would create price suppression that would lead to $6 billion to $7 billion in net savings in the form of lower wholesale electric prices across Massachusetts,” Hamilton said.

    Meanwhile, the Fishermen’s Energy project stalled because New Jersey regulators rejected its demonstration of net positive economic, health, and environmental benefits.

    An established and agreed on regional calculation of price suppression and the other benefits validated in Massachusetts, Hamilton acknowledged, might have turned the New Jersey debate the other way.

    “The paper really targets state level policy makers,” Hamilton explained. “It gives concrete examples of ways states can work together and have worked together. It suggests a plan to start discussions and a schedule. It is a call to action and a call for states to get together to talk about how that action can happen.”

    The little return on the huge investment by the Google-backed private sector consortium in the Atlantic Wind Connection is another example. Originally planned as a backbone transmission system for the entire Northeast, the AWC has “shrunk,” Hamilton said.

    It is now being planned in phases. Only a piece connecting southern New Jersey, where electricity is cheap, and northern New Jersey, where rates are high, is advancing. A multi-state group with established policies might have supported the original vision, Hamilton agreed.

    “Transmission being shared across a larger area will require a formula to allocate the cost between the states that it serves and that formula would begin with an offshore wind development agreement,” Hamilton said. “That is the path forward.”

    Policy needs

    The paper recommends seven policy areas states should address:

    a regional target for offshore wind capacity

    standardized policies and incentives for developers

    regional financing mechanisms, including bonds and green bank financing carve-outs for offshore wind capacity as part of state renewables mandates coordinated economic development

    joint transmission and interconnection planning

    standardized regional permitting procedures

    “There are three possible mechanisms for collaboration,” Hamilton explained. “A multi-state consortium, a multi-state bargaining agent arrangement, and a multi-state power authority. The paper doesn’t recommend any one but it does recommend either of the first two over the third.”

    Any of the three could work, Hamilton said. One of the first things a working group must decide is which to use. Further concrete plans and a definitive development timeline could flow from that decision.

    The biggest surprise from the paper is that nobody in the U.S. has done anything collaboratively so far, Hamilton said. “It is really mostly common sense. States working together would be able to overcome hurdles better collectively than individually.”

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