The Dark before the Dawn

Author: Valerie Stori, Clean Energy Group | Project: Offshore Wind Accelerator Project

blogphoto-offshore-wind-at-dawnLast week’s offshore wind conference hosted by the American Wind Energy Association (AWEA) brought together over 800 attendees, including industry leaders, policy makers, investors, consulting firms, manufacturers, environmental organizations, and other wind energy enthusiasts. The conference celebrated the achievements of the offshore wind industry over the last year, but also stressed the importance of extending federal tax credits and creating long-term, clear and stable policy to attract investors. In his Wednesday morning presentation, Bryce Martin, managing director of D.E. Shaw & Company, spoke to the uncertainty of the U.S. support schemes, cautioning the audience with reserved optimism, that it “is darkest before the dawn.”

Tom Kiernan, Chief Executive Officer at AWEA, and Secretary of Interior Sally Jewell, both who addressed the audience at the conference’s opening, likewise expressed optimism and confidence regarding the progress made over the last year from the first lease auction for commercial wind energy development in federal waters to the deployment of the first demonstration floating turbine off the coast of Maine. Yet Kiernan also stressed the need for a stable tax policy framework, adding that wind lobbyists are working hard on Capitol Hill to push for an extension of the production and investment tax credits. Similarly, Green Giraffe Energy Bankers, an international specialist advisory boutique focused on the renewable energy sector, reiterated that offshore wind project costs are a heavy weight for a company to bear—not only are stronger off-take mechanisms critical for attracting investors, but also tax credits are crucial for lowering costs. Nicolas Gourvitch of Green Giraffe added that the uncertainty has been deadly for the industry’s growth.

And while policy uncertainty has delayed and even driven away offshore wind developers, industry leaders remain optimistic:

  1. Maryland and New Jersey both have incorporated offshore wind carve-outs into their renewable portfolio standards.
  2. Several offshore projects are in the final stages of permitting, design, and approval. Cape Wind, for example, has power purchase agreements for 77% of its energy and is fully permitted at the state and federal level.  Deepwater Wind expects to have permits in hand by the first quarter of 2014 for its 30MW project in state waters off Block Island. Additionally, it recently secured the first commercial wind energy leases from the Bureau of Ocean Energy Management (BOEM), acquiring nearly 165,000 acres offshore Rhode Island and Massachusetts for wind development in federal waters with shallow waters and high capacity factors.  The company hopes to have 200-300MW on-line by 2018.
  3. Secretary Jewell announced at the conference that BOEM would be holding additional auctions for wind energy leasing areas for Maryland, New Jersey, and Massachusetts in early 2014. In addition, in 2014, the U.S. Department of Energy will be selecting up to three demonstration projects to advance to commercial operation by 2017; each project will be eligible for up to $47 million in funding over four years.

To move offshore wind forward, Kiernan delivered four key points for making the business case for offshore wind: Offshore wind is critical for diversifying our county’s energy portfolio; it helps to suppress prices and will lower costs for consumers; it delivers power during hours of peak energy use; and it reduces transmission congestion and costs. An array of state and federal policy support is vital to realize the benefits of offshore wind development. In the words of Emily Dickinson, “Not knowing when the dawn will come, I open every door.”

Energy Innovation in the States: From Energy Storage to Offshore Wind

Author: Lewis Milford, Clean Energy Group | Projects: Clean Energy Innovation, Offshore Wind Accelerator Project (OWAP), Resilient Power Project

blogphoto-green-city-innovationThere are those who say that the U.S. needs to focus more on innovation to create new clean energy technologies, rather than relying entirely on existing technologies like solar PV and land-based wind. They are right.

But such criticism, which is usually rightfully directed at declining federal support for clean energy innovation, often overlooks the powerful clean energy innovation that is supported by states. State policy innovations across the country are helping to accelerate development of many new clean energy technologies that are not yet mainstream or fully commercialized.

A recent case in point is energy storage technology and California. Last week, California used creative policy mandates to help usher in large-scale energy storage. This is an emerging clean energy sector that uses new types of batteries and other technologies to store electricity during times of high demand, excess generation, or when “intermittent” renewable resources like solar and wind are not generating power.

The new order from the California Public Utility Commission (CPUC) is also a lesson in how state policy innovation should be used to create new technology markets like offshore wind. Its elements could be a template for how any state uses policy to accelerate adoption of emerging clean energy technologies.

In the October 17 order, the CPUC said it must act to help jumpstart this “nascent market” of energy storage. It acted because of the important renewable goals the state must meet—and storage is critical to fill in for the “intermittent” renewable resources on the grid.

How the CPUC, spearheaded by CPUC Commissioner Carla Peterman, did it is an object lesson in the power of smart state energy innovation:

  • Targets. It set a mandated 10-year target by 2024, when utilities must acquire 1325 megawatts of energy storage.
  • Utility Sharing.  Each of the three largest utilities in the state was assigned a specific procurement target to reach that 10-year mandate.
  • Interim Purchases. The order sets a schedule of two-year, interim procurement targets that utilities have to reach to get to the 10-year level.
  • Private Business Models. The order limited the amount of utility-owned storage to 50% of the mandates, opening up the business to private developers.
  • Only Emerging Technologies.  The CPUC did not allow older “pumped storage,” a proven technology, to be included in the mandate, so not to undermine the order’s innovation-driven purpose. Whether this is sufficient to accelerate truly new storage technologies, or whether it will boost existing ones like batteries –without a carve out for truly new technologies —  is an open question.
  • Competitive Solicitations. The way utilities are to acquire new storage technologies is through a series of competition solicitations, forcing least-cost bids from developers.
  • No Upfront Cost Controls.  Because storage is an emerging technology with little cost experience at scale, the state was smart to avoid doing elaborate cost studies or imposing up-front cost caps that are often used to slow down policy support and stymie technology development. Instead, the CPUC order allows the market to develop over time, to determine the costs and benefits of emerging technologies, and allows utilities to defer acquisition if the costs prove to be too high– a classic case of learning by doing and letting the market drive the future policy positions.

There are other details in the order. But overall, it shows, once again, that states are leading the way on technology innovation, while the Beltway fails to increase federal spending for clean energy innovation.

The CPUC order also suggests how state policy can accelerate the introduction of other emerging clean energy technologies like offshore wind – through a systematic strategy that includes long-term mandatory targets, interim purchase commitments, integration of new private-sector business models and flexible cost controls.

That last point is especially important for offshore wind. Some proponents think that elaborate up-front cost studies are critical to drive state policy, when in fact the opposite is true for emerging technologies.  Market development at scale will determine costs and policy support should be flexible to accommodate those evolving costs in the future. Because it is impossible to predict future cost trends for emerging technologies, it is better to avoid stalling policy by waiting for the elusive perfect cost studies to be done. That is a key take-away from the California storage order that should be applied to other emerging clean energy technology policies.

While federal action in DC dawdles, the states continue to lead the way on clean energy innovation. They prove once again—like the proverbial joke about walking and chewing gum—that states can do deployment and innovation at the same time.


This blog post also appeared in The Huffington Post and The Energy Collective.

Offshore Wind and Japan: Will the U.S. Win or Lose This Technology Race?

Authors: Lewis Milford and Valerie Stori, Clean Energy Group | Projects: Offshore Wind Accelerator Project (OWAP), Clean Energy Innovation

blogphoto-Offshore-Wind-TurbineThe nuclear power crisis in Japan may open up new opportunities for offshore wind innovation, based on recent developments following the Fukushima Daiichi meltdown in March 2011. Japan’s rapid response to find alternative energy solutions, including decisive government action, suggests how the U.S. could gain a foothold in a new segment of offshore wind—floating turbines.

Following the devastating earthquake and tsunami and the subsequent nuclear disaster in the spring of 2011, Japan decided to curtail its nuclear power industry and committed to diversifying its power supply through renewable energy technologies.

Most recently, Japan invested heavily in deep water offshore wind floating technology demonstration projects. The country has seized the opportunity to move away from reliance on nuclear power and focus on building a nascent, but economically powerful industry. Whereas Europe has had the upper hand and decades of experience innovating and constructing “fixed” offshore wind turbines, floating turbine technology is still a competitive field where no single technology-type or manufacturer dominates or has a significant lead.

And the market potential is huge—deep offshore designs can unlock potential markets off the U.S. Pacific coast, Japan, the North Sea, and the Mediterranean Sea, and presents a global export opportunity. In fact, a 2011 U.S. Department of Energy report estimates that more than 2000 GW of offshore wind capacity are in deep water.

To accelerate the growth of renewable energy development, Japan introduced a feed-in-tariff (FIT) in July of 2012, requiring utilities to purchase electricity from renewable sources at fixed prices. The generous FIT (23.1 Yen/kWh) has incentivized both land-based and offshore wind development and has also led to a growth in the domestic production of turbines.

Domestic production is expected to expand in anticipation of the government’s announcement that it will issue a separate FIT rate for offshore wind in the spring of 2014.  And while there are no official targets for offshore wind deployment, offshore wind is on the political agenda and the budget set aside for the project is 18.8 billion Yen.  It is estimated that 5-6 GW could be installed by 2030.

The anticipated FIT and Japan’s focus on domestic renewable energy deployment are driving innovation in offshore wind technology, primarily in deep water technology, which is where 80% of its offshore wind resource lies.  With the government’s support, several Japanese developers are constructing and deploying deep water offshore pilot projects.  Several scale models and full-scale spar turbines have already been deployed.

And in an interesting political twist of fate, a new public-private Fukushima Consortium—Marubeni, Mitsui, Mitsubishi, Japan Marine United, Statoil, University of Tokyo, and Hitachi, among others—has plans to deploy three different prototype floating turbines off the Fukushima coast, right off the site of the nuclear failure. This project is largely government-funded to the tune of US$242 million.

The first of the floating turbines to be deployed is a 2MW Hitachi turbine on a semi-submersible structure; two 7MW floating turbines shall follow. The goal is to ultimately reach full commercialization by 2018 with 1GW of offshore wind capacity.

But it is not only project developers and component manufacturers who see the economic potential of offshore wind development.  Investors such as the Goldman Sachs Group Inc. recognize the promise of offshore wind and have established Japan Renewable Energy, which plans to invest as much as 50 billion Yen into clean energy projects in Japan over the next five years.  Norwegian energy company Statoil, which is eager to build floating offshore pilot projects in international markets, has signed an agreement with Hitachi to use Statoil’s Hywind technology off the coast of Japan.

On the surface, Japan’s offshore wind installation capacity and current project development look very similar to the offshore wind deployment in State of Maine. Despite each having a strong manufacturing base and university R&D centers, both lag far behind the offshore wind industry in Europe and have much to gain from Europe’s decades of experience not only building offshore wind farms, but also in developing innovative technologies.  Still, both are trying hard to catch the wind and recently set goals of achieving 5GW of offshore wind energy by 2030. It makes sense for these two political entities to focus on deep-water offshore wind—the resource is greatest at these depths and both have workforces accustomed to employment at sea.

But that’s where the similarities end.  Maine may have laudable goals, but they lack teeth.  Japan on the other hand, has established a very strong FIT, and its offshore wind industry is expected to get even stronger in April 2014. The FIT legislation requires utilities to purchase the power produced by offshore wind farms.  Contrast this to the situation in Maine, where local politics have led to the withdrawal of a major European power player, Statoil, which was to bring its floating turbine technology to a 12MW project off the coast of Boothbay Harbor.

And while Japan and the U.S. talk about jobs, jobs, jobs, Japan is investing in and developing technologies at a much more rapid pace.  Once its domestic power generation base is achieved, the Japanese government expects to export the floating turbine technology to markets across the globe. Some have ventured that the domestic production of turbine and turbine components can have an economic effect that rivals Japan’s auto industry.

European countries see the same potential—at the national level, they also are investing in demonstration projects and research that will move the technology from the research stage to full commercial deployment.  The U.S. Department of Energy (U.S. DOE) has also invested in offshore wind demonstration projects; in 2012, US$168 million was dedicated to funding seven offshore wind demonstration projects over six years; three of these are floating projects.

Understandably, governments and politics vary across political borders. But the take home message is clear:  public support in the form of clear and long-term policies is needed to draw developers, alleviate risk, and attract private investment.

The development of floating offshore wind in Japan could signal a familiar pattern: The U.S. loses out once again to the next generation clean energy technology, while it dawdles away on policy confusion. And it could be this technology—floating turbines—where there is a real opportunity to develop industry authority against European manufacturers who dominate the pile and gravity foundation market.

Other countries are taking offshore wind development far more seriously than the U.S. It’s not too late, but the U.S. needs to up its game to see offshore wind as a scalable, commercial sector.

The field is still wide open for the first mover in deep water technology. The U.S. has a scalable manufacturing sector, an experienced oil and gas sector (from where floating technology originates), significant federal R&D investment, and a large domestic market. U.S. DOE’s investment in R&D is significant and critical for domestic innovation, but investment is also needed in launching commercial-scale projects.

Japan is showing that a country can do both. The U.S. should follow its lead and become a real competitor on the world stage for offshore wind.


This blog post also appeared in the Huffington Post Green Blog

Battery Storage and Wind Energy: The Stanford Study

Author: Todd Olinsky-Paul, Clean Energy Group | Projects: Resilient Power Project, Energy Storage and Climate

Stanford StudyWith renewable energy costs falling and deployment rising, and resilient power a hot topic post-Sandy, it makes sense that a wonky, non-sexy technology like energy storage has stepped out of the shadows to take center stage. The problem is that, while everyone knows that energy storage is very important, nobody has figured out how to optimize it yet. So when a group of Stanford University scientists came out recently with a report that analyzes energy return on energy investment for the use of batteries with grid-scale solar and wind installations, the news made energy blog headlines all over the internet.

Unfortunately, many of those headlines were misleading or just plain wrong.

For example, CleanTechnica’s report on the study came under the heading, “Study: Battery Energy Storage Benefits Solar, Not Wind.” The Energy Collective ran the story under the similar headline, “Study: Battery Energy Storage Works for Solar but Not Wind.” IEEE Spectrum used the headline, “Storing Energy from Solar and Wind Isn’t Always the Best Idea.” And Gizmag ran the story under the headline, “Scientists Challenge Economics of Storing Renewable Energy.”

A closer look at the Stanford study shows that there’s less going on here than meets the eye.

The study is titled “The Energetic Implications of Curtailing Versus Storing Solar- and Wind-Generated Electricity.” Like most scientific studies, it focuses on a very narrow and well-defined question: how does the addition of battery storage affect the energy return on energy investment (EROI) ratios of wind and solar resources? In other words, if you add a battery to a wind or solar generation facility, does the battery save as much potential energy (that would otherwise have been curtailed, or not produced, due to lack of demand or transmission capacity) as was required to manufacture and deploy the battery in the first place?

After doing a life-cycle analysis of the battery types in current use, and analyzing the amount of wind and solar energy such a battery could save from curtailment, the study’s authors conclude that pairing batteries with solar generation generally saves more energy than is required to produce the battery; however, in the case of wind generation, more energy is often required to produce the battery than is saved during periods of excess production. Therefore, a simple EROI calculation indicates that it makes sense to pair current battery technology with solar, but not with wind.

This is a good thing to know. But an EROI calculation alone is not a good basis on which to make policy or investment decisions. Energy storage can provide many services and benefits, beyond simply storing electricity for later use that would otherwise have been wasted. For example, it can provide resiliency benefits, keeping local portions of the grid energized when generators fail or storms knock out transmission lines; make more electricity available at times of high demand; defer or obviate the need for upgrades in transmission and distribution equipment; provide ancillary services to the grid; and smooth the output of intermittent resources, benefiting grid operations and reducing the need for fast ramping of dispatchable resources. To ignore all these benefits in favor of a simple energy in/energy out equation is to focus on an extremely narrow slice of the energy storage benefits pie.

In fact, the authors of the Stanford study go out of their way to point out the many benefits of energy storage that are not considered in this study. They state,

It is important that the netenergy framework presented here is used appropriately and that our results do not lead to simplistic or wrong conclusions. The value of available energy depends on time, location and need. The economic value of storing energy depends on many factors including extant policies, market forces, and power grid generation availability and power demand conditions…. the framework cannot adequately draw conclusions regarding the economic costs and benefits of storage in a given context…. We have focused on only one measure of the value of storage. It is equally important to consider other benefits provided by storage. (Energy Environ. Sci., 2013, 6, 2809)

In other words, this study tells you one thing only: that given the authors’ assumptions about battery cycle life and patterns of generation from intermittent renewable resources, pairing a battery with a wind farm may require more energy invested than will be saved over the life of the battery. The study says nothing about the many other services the battery could provide. Moreover, battery technology is advancing rapidly, meaning that by the time policymakers get around to adjusting incentive structures to reflect this study, the underlying calculations will almost certainly have changed.

So, does it make sense to use batteries at wind farms? Well, that depends on lots of variables, and the EROI is only one of them. Ultimately, the answer must be decided taking into account the specific location, technology, economics and resources involved; just as the answer to the question, “should we build another gas station on Main Street?” depends on many factors – not merely a calculation about whether the proposed gas station would distribute as much energy, in the form of gasoline, over its lifetime as was required to build, operate and maintain it.