Gregory K. Lawrence/Partner/McDermott Will & Emery LLP, Chicago/mwe.com
The development of offshore wind farms would drive job creation and stimulate industries such as offshore shipping and installation work.
The American Recovery and Reinvestment Act (ARRA) has accelerated the already dramatic growth in America’s wind energy output. The 8,558 MW of new wind generation capacity added in 2008 was 43% of all new U.S. energy generation, and another 5,800 MW was added through the third quarter of 2009 – bringing total wind output to more than 31,000 MW. Some 13 states have more than 500 MW of wind capacity. From 2009 through 2012, the ARRA’s tax credits and loan guarantees could spur 40,400 MW in new wind generating capacity. Even more dramatic expansion is being discussed: Early in 2010 the Department of Energy’s National Renewable Energy Laboratory (NREL) suggested that it was feasible to shift 20% or more of the Eastern Interconnection’s electrical load to wind energy by 2024 – if $90 billion or more is invested in 225,000 MW of new wind-power generation and in 22,000 additional miles of power lines. The wind energy gold rush is on.
Rules for the Outer Coast Shelf
But where will this new wind energy infrastructure will be located? Today’s large-scale wind U.S. power installations are land-based, with the four top states being Texas, Iowa, California, and Minnesota. Yet according to NREL, the best winds are not on land, but on the outer continental shelf (OCS) and the Great Lakes. The OCS extends seaward from the coastal United States to a point at which U.S. jurisdiction ends, which can cover anywhere from 60 to 350 nautical miles. The U.S. has complete jurisdiction over Lake Michigan and shares jurisdiction with Canada over the other four Great Lakes. Offshore wind development would drive job creation and elevate other industries such as offshore shipping and installation and development of marine-friendly equipment and operation and maintenance regimes.
Despite this, there has been little wind energy development in offshore areas. The closest an OCS wind program is to existence is Cape Wind in Nantucket Sound off the southern coast of Massachusetts. It plans to use 130 wind turbines to produce up to 468 MW. Cape Wind’s environmental assessment and approval process has been significant, contributing to a doubling of the project’s initial cost estimates. Interior Secretary Ken Salazar has sought a last round of public comments and hopes to finalize permitting in the first half of 2010. As for the Great Lakes, no offshore wind project has yet been developed, but several efforts are possible.
In an effort to spur offshore renewable energy development, Congress in 2005 gave authority over offshore production, transportation, and transmission of renewable energy to the federal Minerals Management Service (MMS). The agency undertook extensive rulemaking proceedings to create a renewables program, which culminated in a Final Rule issued April 22, 2009. In it, the MMS introduced its OCS Alternative Energy Program and implementing regulations.
Under the new rule the MMS will issue two types of leases, commercial and limited, for OCS wind generation. Emphasis is on the former, which lets developers produce, sell and deliver power on a commercial scale for a period of up to 30 years, with the opportunity for renewal. All leases will be awarded through a competitive process modeled after that used for offshore oil and gas leases. The commercial lease could take up to two years to secure, especially because of extensive environmental analysis.
Plans for the OCS
On June 23, 2009, the MMS issued five exploratory leases for renewable wind energy production in OCS areas off New Jersey and Delaware. The leases, the first of their kind, authorize preparations to construct meteorological towers from six to 18 miles offshore. They will collect site-specific data on wind speed and direction to plan wind energy installations. Securing the leases were Bluewater Wind New Jersey Energy and Bluewater Wind Delaware LLC, Fishermen’s Energy of New Jersey LLC, and Deepwater Wind LLC.
Other East Coast OCS projects have been publicized, but they are far from final. These are key examples as of early 2010:
•In Delaware, Delmarva Power signed a power purchase agreement with Bluewater Wind in June 2008 for up to 200MW of offshore wind production.
•In September 2009, the Maryland Energy Administration announced an initiative aimed at examining its 31 miles of coastline for wind energy potential.
•The New Jersey Board of Public Utilities announced in October 2009 that it has selected Garden State Offshore Energy – a joint venture of PSEG Renewable Generation and Deepwater Wind – to develop a 345.6-MW wind project off the coast of New Jersey.
•Also in October 2009, the Governor of Maine announced that the University of Maine and several consortium partners were awarded $8 million of federal funds to begin research and testing to deploy prototypes of two 10 kW and one 100 kW floating offshore wind turbines.
•In December 2009, Deepwater Wind secured a 20-year power purchase agreement to sell electricity from up to 8 wind turbines producing 28 MW off the coast of Rhode Island.
All these deals were announced with emphasis on the jobs they could generate: anywhere from 3,000 to 15,000 per project, using federal figures of 15.6 jobs created for every $1 million in renewable energy investment. That includes everything from fabricating wind turbine components, to building and operating the interconnection grid.
Plans for the Great Lakes
Another tangible effort is under way in the Great Lakes. In December 2009 the New York Power Authority (NYPA) released a request for proposals (RFP) to develop offshore wind power projects anywhere in the New York State waters of Lake Erie, or Lake Ontario, or both. The NYPA is soliciting proposals to develop a utility scale, offshore wind power project totaling about 120 to 500 MW, to interconnect with transmission grids controlled by the New York Independent System Operator. The NYPA would purchase the full output of the wind power project under a long-term power purchase agreement (PPA). The RFP process will culminate in completion of PPA negotiations by May 31, 2011, with a target commercial operation date of 2015.
Details of the NYPA’s proposal illustrate major technical hurdles that offshore wind developers will face, even under the relatively benign conditions of the two lakes (at least two nautical miles offshore, in water depths of 150 feet). The RFP calls for developers to meet 12 different sets of requirements, including those that cover:
•Turbine and turbine support structure manufacturing and construction standards, including corrosion abatement and ice abatement strategies.
•Offshore substation and interconnection line siting and permitting.
•A site plan that includes geotechnical evaluation and lakebed leasing arrangements.
•A comprehensive construction plan that includes all provisions for vessels and rail and port facilities to be used and that ensures no interference with the operation of either the St. Lawrence Seaway or the Welland Canal.
•All environmental, regulatory, and other agency and municipal permits, approvals and certifications required for construction and operation.
•Financing to support the project through construction and PPA completion.
•A comprehensive pricing proposal that covers fixed capacity charges, fixed energy price, fixed price for renewable energy credits or other tax credits, and use of funds provided through the ARRA.
•An operation and maintenance plan that ensures high levels of safety, environmental protection, equipment availability and performance.
There are also plenty of political requirements, such as producing long-term economic benefits for the region and helping to achieve New York State’s energy policy goals of using renewable, alternative energy sources to provide 30% of New York’s energy portfolio by 2015. Any company and project that meets all these standards and is successfully built will constitute the world’s first freshwater wind farm.
The NYPA project is the most recent offshore wind effort under way in the Great Lakes, but – as on the Eastern OCS – there is no shortage of others under consideration. The most advanced is in Ohio, where Cuyahoga County leaders are pushing a $92 million project to build three to eight wind turbines three to five miles off Cleveland’s coast. The pilot project would, depending on the size of the turbines, produce 5 to 20 MW, and government officials say they would like to see the 260-foot-high turbines operating by 2013, two years before the NYPA target date. Cuyahoga County and its partners have invested more than $2 million in studies analyzing the feasibility of such a project, and one point in its favor is that the proposed location has a lake depth of only 40 to 50 feet. Another project being tentatively discussed is a proposal by Scandia Wind Offshore LLC for a 1,000 MW wind farm on Lake Michigan near Ludington.
Many issues must still be resolved before commercial-scale wind energy projects begin operating on the OCS or in the Great Lakes. Examples include cost, multiple regulatory approvals needed to connect offshore energy generation to the existing electricity grid, and vocal objections from local groups that oppose development. Nonetheless, the combination of government incentives, state and proposed federal renewable energy portfolio standards, and potential investment payoffs is moving offshore wind energy projects from low-profile possibilities to highly publicized opportunities.