Unlike oil and gas programs, where lessees know that refineries will purchase the oil they find, offshore wind developers are left largely to their own devices to identify the companies who will purchase their resource. The lack of extensive coordination between state and federal laws and policies has been one factor that has stymied development of offshore wind. The other is the price point at which offshore wind can be delivered compared to the decreasing cost of natural gas.
Studies show benefits
Two recent studies have once again touted the potential benefits of offshore wind. One report was prepared by IHS Global Insight for the Atlantic Wind Connection (the developer of the backbone to connect all offshore wind farms with one transmission link), and released last October at the AWEA Conference in Virginia Beach, Virginia. This report predicted that developing 7 GW of wind off the Atlantic coast would lead to a total of 173,000 new jobs and an increase of $4.6 billion in federal, state, and local government revenues. A similar and recent report prepared by the National Wildlife Federation (NWF) confirmed that we are at a “Turning Point for Atlantic Offshore Wind Energy.” The NWF report concluded that developing offshore wind (52 GW) could generate $200 billion in new economic activity, create 300,000 jobs, and sustain power for about 14 million homes while still protecting marine wildlife. Whichever study you rely on, the potential is great for renewable energy and job creation.
Authority for offshore wind leasing beyond state waters is in the hands of the Bureau of Ocean Energy Management (BOEM) of the Department of the Interior. However, BOEM cannot dictate to states and consumers whether to accept or buy the power generated by the wind farms. This is left strictly in state hands. And the policies for purchasing and encouraging offshore wind have varied greatly among the Atlantic States. It is important for the U.S. to have a single coordinated policy for federal leasing and state offtake (or power purchase) agreements if wind development in the U.S. is to catch up with that in Europe.
A complex situation
Bringing wind generated power to shore presents its own challenges. Some developers, especially utilities with power stations located close to shore, are proposing direct transmission cables between the offshore wind farms and the local power stations. In contrast, the Atlantic Wind Connection (AWC), a consortium of Trans-Elect and Atlantic Grid Development, sponsored by Good Energies, Google, and Marubeni Corporation, has proposed to construct a single transmission line or backbone to connect all the offshore wind farms and bring up to 7,000 MW of offshore wind into the electric grid. AWC estimates their link will supply power to 1.9 million households. In May of last year, BOEM found there was no competitive interest in such a backbone and has begun an environmental review of the project. The backbone also has to be permitted by the Federal Energy Regulatory Commission (FERC).
While BOEM is the principal federal leasing authority for offshore wind on the outer continental shelf of the U.S., and has recently issued two notices of proposed lease sales for Wind Energy Areas off Virginia and Rhode Island/Massachusetts, the actual sales will not occur until sometime in 2013. Other agencies may also weigh in with regard to their specific concerns, for example, shipping, wildlife protection, and aviation. For instance, a year ago the Coast Guard began a Port Access Routes Study to identify potential conflicts between offshore wind development and shipping lanes, but has not completed the study. The Department of Defense has reserved the final say on whether offshore wind farms interfere with their missions especially off the coast of Virginia. None of these issues will be resolved until the final leases are awarded and specific terms incorporated.
This is a critical time for the development of offshore wind farms. As the recent studies indicate, there is huge potential for offshore wind and its attendant job creation, including for the construction of offshore supply vessels. But the threat of changing policies and lack of a level playing field with other sources of energy makes it challenging to compete. There is no single one-stop shop of federal permitting that simplifies the application and approval process. The same goes for financial incentives. Only the well-heeled developer can afford to pursue the process to completion, and only the patient consumer can expect one day to benefit from this clean source of abundant energy off our Eastern Seaboard. WPE
For further reading:
“Whither Offshore Wind?” by Joan Bondareff, Of Counsel at Blank Rome, was first published in Blank Rome’s quarterly maritime newsletter, Mainbrace (November 2012, no. 3). www.blankromemaritime.com.