By Maria Blais Costello, Clean Energy States Alliance
Since 2016, the New York State Energy Research and Development Authority (NYSERDA) has been working to develop offshore wind in the most responsible and cost-effective way possible. Its first procurement of offshore wind power has demonstrated the resounding success of its years of careful study, stakeholder engagement and planning. New York’s goal of 9,000 MW of offshore wind power by 2035 is a cornerstone of New York’s aggressive clean energy ambitions, reflecting unparalleled resource potential and co-benefits that will yield important dividends for New York and the neighboring region’s economies and decarbonization efforts. With its heavy emphasis on proactive and detailed planning, and especially stakeholder engagement, the program has given New York confidence to support the nation’s largest offshore wind mandate and buttresses the region’s aggregated offshore wind goal of 26,000 MW.
State Leadership with a Vision
Under Governor Andrew M. Cuomo’s leadership, New York is combating the urgent threat of climate change with ambitious climate and energy goals and a concrete plan for achieving them. The state’s Climate Leadership and Community Protection Act (CLCPA) provides a comprehensive approach to decarbonizing New York’s electricity sector by achieving 70% renewable energy by 2030 and 100% clean energy by 2040.
Confidence in the state’s ability to achieve these aggressive targets has been built on the recognition of the potential of offshore wind to be a cost-effective energy resource, with unparalleled public health benefits and economic growth potential. NYSERDA is coordinating offshore wind opportunities in New York State to bring clean, locally produced renewable energy to the state.
In the fall of 2018, NYSERDA issued its first solicitation for 800 MW, or more, of offshore wind to stimulate the development of the domestic offshore wind industry, reduce the cost of later offshore wind procurements and allow New York State to realize the economic benefits associated with the construction, operation and maintenance of offshore wind resources.
Through NYSERDA’s Phase I solicitation, Sunrise Wind (880 MW, a joint venture of Ørsted A/S and Eversource Energy) and Empire Wind (816 MW, Equinor Wind US) were selected for contract negotiation pursuant to a rigorous evaluation process that considered proposal price, New York State economic benefits and project viability. Once these facilities reach commercial operation in 2024, NYSERDA will procure Offshore Wind Renewable Energy Certificates (ORECs) from the awarded facilities as they deliver clean offshore wind energy to New Yorkers for 25 years or more.
The contracts that NYSERDA executed with the two projects in October 2019 represent an average all-in development cost of $83.36 per megawatt-hour (2018 dollars) and an expected average Index OREC cost of $25.14 per megawatt-hour. A significant indicator of the success of NYSERDA’s programmatic approach to the market, this first large-scale offshore wind solicitation resulted in OREC prices approximately 40% less than projected by analysis NYSERDA conducted in 2018, signaling that offshore wind is an increasingly competitively priced renewable energy resource.
New York’s OREC contracting structure for these initial projects is based on an index of wholesale market prices, and the indexed REC price will go up or down, depending on prices in the energy and capacity markets. This will mitigate wholesale market volatility and price swings, lowering capital costs, decreasing risk and increasing savings for ratepayers. Totaling 1,696 MW of nameplate capacity, the projects will deliver enough renewable energy to power more than one million New York homes and represent the single largest renewable energy procurement by any state in U.S. history. For less than $1 per month for an average residential customer, the two offshore wind projects will bring the following benefits:
- $3.2 billion in combined economic impact to New York State
- More than $85 million in investments in long-term port facilities and cutting-edge technologies
- More than 1,600 jobs in project development, component manufacturing, installation, and operations and maintenance, directly offering careers with salaries of approximately $100,000 per year
- Approximately $700 million of avoided health impact benefits in the form of avoided hospitalization and premature death associated with asthma and respiratory and cardiovascular diseases
- Carbon emission savings of approximately four million metric tons of CO2 avoided, equivalent to removing 830,000 cars from the road annually
Developing and Implementing a Comprehensive Master Plan
Between 2016 and 2018, NYSERDA developed the New York State Offshore Wind Master Plan, which provides a comprehensive roadmap based on more than 20 studies. The Plan was informed by extensive stakeholder engagement that encouraged the development of offshore wind in a manner that is sensitive to environmental, maritime, economic, and social issues while addressing market barriers and aiming to lower costs. Since the Master Plan’s publication in January 2018, New York has expanded its offshore wind goals fourfold to 9 GW by 2035, as codified under the CLCPA. NYSERDA has continued to evolve its approach to cost-effective and responsible offshore wind development into a responsive offshore wind program, with on-going focus on the following topics:
- Supply Chain, Workforce and Economic Development. NYSERDA is hosting critical business-to-business matchmaking events to support education about this new industry and to bring together local businesses, training providers, labor organizations, and educators to coordinate with offshore wind developers, component manufacturers and service suppliers to identify the technology and training needs of New York’s first projects and future offshore wind projects in the region
- Pre-Development, Open Data, Environmental Science and Fisheries Research. NYSERDA has executed multiple, multi-year contracts to study and actively publish significant meteorological and oceanographic (“metocean”) conditions in the waters off the Atlantic coast of New York, including commitments of $5.5 million for predevelopment data collection, and $2 million in five multi-year projects to further study important environmental considerations and commercial fishing.
- Transmission and Grid Development. New York is conducting analysis to better understand ways to facilitate the development of an offshore transmission grid and to learn about opportunities for transmission and energy storage to support the achievement of New York’s goals to get 70% renewable energy by 2030 and 100% carbon-free grid by 2040. These analyses will inform renewable energy-related proceedings at the Department of Public Service, as well as the state’s ongoing renewable energy procurement efforts.
- Stakeholder Engagement. During the development of the Master Plan, NYSERDA’s Offshore Wind Team held 13 public meetings and open houses, six public webinars, and two technical conferences. In conjunction with the first solicitation, the Offshore Wind Team conducted more than 100 briefings with key stakeholders such as community fishing, and with the public, and elected officials that specifically focused on communities that might serve as hosts to various offshore wind project components.
NYSERDA’s Offshore Wind Program and the success of its initial contracts have ushered in a seismic shift in the state’s approach to large-scale renewable energy generation. NYSERDA’s first offshore wind contracts utilize an innovative Index OREC contracting structure where payments rise and fall inversely to a composite average of New York’s energy and capacity market prices, which provides protection for ratepayers and projects against volatility in utility bills and project revenue, respectively. Private developers’ positive response to the first procurement and an analysis of the benefits of the Index REC model for land-based renewable procurements encouraged the Public Service Commission in January 2020 to adopt the Index REC model for future procurements under the state’s large-scale renewable generation program.
NYSERDA’s Offshore Wind Program works closely with Climate Jobs NY, a growing coalition of labor unions united to combat climate change and reverse inequality and whose goal of educating fellow workers, building alliances, and advocating for policy solutions seeks to demonstrate that there is not a conflict between a healthy planet and good jobs. It also works closely with academic and training institutes including the State University of New York’s Farmingdale and Stony Brook locations that will serve as the anchor for the $20 million Offshore Wind Training Institute, so that training can begin as early as 2021, when the industry is expected to need a significant number of new skilled employees.
Through the concentrated work of its Technical Working Groups, of novel composition, structure, and active responsibility, New York has fostered constructive dialogue with critical local and regional stakeholders such as the commercial fishing industry, navigation representatives, environmental activists, workforce development and supply chain experts to cultivate a regional dialogue between proponents, opponents, and undecided stakeholders in grappling with the development of an offshore wind industry in the mid-Atlantic.
After NYSERDA unveiled its Mitigation Plan approach, the State of Connecticut’s Department of Energy and Environmental Protection implemented a similar approach in its 2019 offshore wind procurement to widespread stakeholder approval. More broadly, the Program is emerging as a global offshore wind center-of-excellence alongside such mature markets as the United Kingdom, Norway, and Denmark. Through regular engagements with the Consulate Generals and respective national energy agencies, NYSERDA’s Offshore Wind Program is beginning to serve as the basis for best practices along such topic lines of economic incentives to supply chain localization and stakeholder engagement, even within such mature markets.
NYSERDA’s Offshore Wind Program was awarded a 2020 State Leadership in Clean Energy Award by the Clean Energy States Alliance. Guest speakers from NYSERDA presented on the Offshore Wind Program in a CESA webinar on August 4, 2020 – watch the webinar recording here.