TODAY’S STUDY: The Future Of Offshore Wind Foreseen

The National Offshore Wind Strategy

September 2016 (U.S. Departments of Energy and the Interior)

Executive Summary

Offshore wind energy holds the promise of significant environmental and economic benefits for the United States. It is an abundant, low-carbon, domestic energy resource. It is located close to major coastal load centers, providing an alternative to long-distance transmission or development of electricity generation in these land-constrained regions. Once built, offshore wind farms could produce energy at low, long-term fixed costs, which can reduce electricity prices and improve energy security by providing a hedge against fossil fuel price volatility.

Realizing these benefits will require overcoming critical challenges in three strategic themes: 1) reducing the costs and technical risks associated with domestic offshore wind development, 2) supporting stewardship of U.S. waters by providing regulatory certainty and understanding and mitigating environmental risks of offshore wind development, and 3) increasing understanding of the benefits and costs of offshore wind energy.

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The U.S. Department of Energy (DOE), through its Wind Energy Technologies Office, and U.S. Department of the Interior (DOI), through its Bureau of Ocean Energy Management (BOEM), have jointly produced this updated national strategy to facilitate the responsible development of offshore wind energy in the United States. In doing so, the agencies accounted for progress made since the last national offshore wind strategy released in 2011, and utilized significant input from the offshore wind community. This strategy highlights the gaps that need to be addressed by the offshore wind community as a whole, and provides a suite of actions that DOE and DOI are positioned to undertake to address these gaps and help the nation realize the benefits of offshore wind development.

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The United States Needs a National Approach to Offshore Wind Development

The national energy landscape has changed significantly since the first national strategy for offshore wind was released in 2011. The first domestic offshore wind farm is scheduled for commercial operation in 2016, and there are now 11 active commercial leases along the Atlantic Coast. The United States took steps toward a low-carbon future through its commitments at the Paris Climate Conference, the promulgation of the Clean Power Plan,1 and legislative action, such as the extension of the renewable energy production tax credit and investment tax credit. Coastal states have increased their demand for renewable energy deployment through renewable portfolio standards and other mandates. Many legacy fossil fuel, nuclear, and renewable generators are set to retire because of age, cost, or as part of the move toward lower-carbon sources of electricity. Land-based wind energy generation in the United States has increased nearly 60% and utility-scale solar generation increased more than 1,300% [1] relative to 2011.

Most of this renewable generation is located far from coastal load centers, and long-distance transmission infrastructure has not kept pace with this rapid deployment. At the same time, the offshore wind market has matured rapidly in Europe, and costs are now falling. These trends suggest that offshore wind has the opportunity to play a substantial role as a source of domestic, large-scale, affordable electricity for the nation.

DOE and DOI developed this strategy as a joint document and have a single overarching goal in its implementation, which is to facilitate the development of a robust and sustainable offshore wind industry in the United States. The agencies will coordinate on the implementation of many of the specific actions they intend to undertake to support achievement of this goal. In recognition of their unique and complementary roles, and consistent with their missions and authorities, DOE and DOI each identified the actions they plan to address, and set individual objectives against which they will measure progress. These objectives are as follows:

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• DOE aims to reduce the levelized cost of energy through technological advancement to compete with local electricity costs, and create the conditions necessary to support DOE’s Wind Vision2 study scenario levels [2] of deployment by supporting the coexistence of offshore wind with the environment, coastal communities, and other users of ocean space.

• DOI aims to enhance its regulatory program to ensure that oversight processes are well-informed and adaptable, avoid unnecessary burdens, and provide transparency and certainty for the regulated community and stakeholders.

DOE and DOI solicited significant stakeholder and public input to inform this document through a DOE Request for Information and a DOI Request for Feedback, as well as a jointly hosted public workshop. Feedback received through these efforts was critical to DOI and DOE in defining the challenges facing offshore wind presented in this document, as well as suggesting potential federal actions to address them.

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Offshore Wind Represents a Significant Opportunity to the Nation

A number of factors demonstrate the realistic and substantial opportunity that offshore wind presents to the United States:

• U.S. offshore wind resources are abundant. Today, a technical potential of 2,058 gigawatts (GW) of offshore wind resource capacity are accessible in U.S. waters using existing technology. This is equivalent to an energy output of 7,200 terawatt-hours per year— enough to provide nearly double the total electric generation of the United States in 2015.

• Significant siting and development opportunities are available today in U.S. waters. By the end of 2015, DOI had awarded 11 commercial leases for offshore wind development that could support a total of 14.6 GW of capacity in areas already vetted for preliminary siting conflicts through extensive intergovernmental and stakeholder coordination. BOEM has a number of potential wind areas that are currently in the planning stages.

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• Electricity demand growth and scheduled power plant retirements in coastal states provide significant opportunity for offshore wind development. If the 86 GW of offshore wind studied in the Wind Vision study scenario3 were developed by 2050, offshore wind would make up 14% of the projected demand for new electricity generation in the coastal and Great Lakes states.

• In some locations, offshore wind could be competitive with incumbent forms of generation in the next decade. A new cost analysis by the National Renewable Energy Laboratory shows credible scenarios for cost reductions below $100/megawatt-hour by 2025 in some areas of the United States, and more widely around the country by 2030.

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Assuming near-term deployment of offshore wind at a scale sufficient to support market competition and the growth of a supply chain, development of offshore wind energy in markets with relatively high electricity costs, such as the Northeast, could be cost-competitive within a decade.

• Deploying offshore wind could lead to significant electrical system benefits for system operators, utilities, and ratepayers. Because of its low marginal costs of production and the fact that offshore winds in many regions tend to be strong at times of peak demand, offshore wind energy can lower wholesale electricity prices in many markets. Offshore wind can also decrease transmission congestion and reduce the need for new long-distance transmission.

• A robust offshore wind industry would lead to significant positive environmental and economic external benefits. Assuming the Wind Vision study scenario deployment level of 86 GW offshore wind by 2050, national benefits could be:

– Reduced greenhouse gas emissions. A 1.8% reduction in cumulative greenhouse gas emissions— equivalent to approximately 1.6 billion metric tons of carbon dioxide—could save $50 billion in avoided global damages.

– Decreased air pollution from other emissions. The United States could save $2 billion in avoided mortality, morbidity, and economic damages from cumulative reductions in emissions of sulfur dioxide, nitrogen oxides, and fine particulates.

– Reduced water consumption. The electric power sector could reduce water consumption by 5% and water withdrawals by 3%.

– Greater energy diversity and security. Offshore wind could drive significant reductions in electricity price volatility associated with fossil fuel costs.

– Increased economic development and employment. Deployment could support $440 million in annual lease payments into the U.S. Treasury and approximately $680 million in annual property tax payments, as well as support approximately 160,000 gross jobs in coastal regions and around the country [2]. 4

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Key Challenges Remain

To support a robust and sustainable offshore wind industry in the United States, challenges across three strategic themes need to be overcome.

• Reducing costs and technology risks. Today, the cost of offshore wind energy is too high to compete in most U.S. markets without subsidies. However, continued global market growth and research and development investments across the following three action areas could significantly reduce the costs of offshore wind toward competitive levels:

– Offshore wind power resource and site characterization. A better understanding of the unique meteorological, ocean, and seafloor conditions across U.S. offshore wind development sites will allow for optimized designs, reduced capital costs, greater safety, and less uncertainty in preconstruction energy estimates, resulting in reduced financing costs.

– Offshore wind plant technology advancement. Increasing turbine size and efficiency, reducing mass in substructures, and optimizing wind plants at a systems level for unique U.S. conditions can reduce capital costs and operating expenses and increase energy production at a given site.

– Installation, operation and maintenance, and supply chain solutions. The complexity and risk associated with installation and operation and maintenance activities requires specialized infrastructure that does not yet exist in the United States. Reducing or eliminating the need for specialized assets, along with leveraging the nation’s existing infrastructure, will reduce capital and operating costs in the near term and help unlock major economic development and job creation opportunities in the long term.

• Supporting effective stewardship. Effective stewardship of the nation’s ocean and Great Lakes resources will be necessary to allow for the development of a sustainable offshore wind industry in the United States. DOI, through BOEM, oversees the responsible development of energy on the Outer Continental Shelf. Offshore wind developers, financiers, and power purchasers need confidence in a project’s ability to navigate regulatory and environmental compliance requirements in a predictable way. To improve this balance and support effective stewardship, action is needed in the following two areas:

– Ensuring efficiency, consistency, and clarity in the regulatory process. Further work can be done to improve consistency and identify and reduce unnecessary burdens in BOEM’s existing regulatory process. This may include establishing more predictable review timelines and maintaining a reasonable level of flexibility given the early stage of the industry’s development.

– Managing key environmental and human-use concerns. More data need to be collected to verify and validate the impacts of offshore wind development on sensitive biological resources and existing human uses of ocean space. Improved understanding and further collaboration will allow for increased efficiency of environmental reviews and tighter focus on the most important issues.

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• Increasing understanding of the benefits and costs of offshore wind. Building a better understanding of the impacts of offshore wind on the electricity grid, unique electricity market costs and benefits, and environmental externalities can help create the conditions needed for near-term deployment.

– Offshore wind electricity delivery and grid integration. Impacts of significant offshore wind deployment on grids need to be better understood at state and regional levels, and the costs and benefits associated with different offshore transmission infrastructure configurations and strategies need to be characterized.

– Quantifying and communicating the benefits and costs of offshore wind. The environmental and economic benefits and costs associated with offshore wind need to be quantified and communicated to key stakeholders to inform decisions on near-term offtake agreements, other project-specific matters, and policies affecting offshore wind.

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A Robust and Credible Plan for Federal Action

Federal government action can supplement the work of states, utilities, the wind industry, the environmental community, researchers, and other stakeholders to facilitate offshore wind development. DOE and DOI aim to provide essential federal leadership to help overcome certain challenges and help the nation to realize the benefits of offshore wind. This strategy lays out 34 concrete actions in seven action areas that DOE and DOI can take to facilitate responsible, robust, and sustainable offshore wind development in the United States.

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