In Anticipation of an Offshore Wind Energy Pipeline, Employment Growth In New Bedford

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

blogphoto-Offshore-Wind-FarmA little over a year ago, the Massachusetts Clean Energy Center (MassCEC) began construction of the New Bedford Marine Commerce Terminal, a multi-purpose facility designed to support offshore wind deployment on the Atlantic coast. The Terminal is ideally situated in close proximity to the major offshore wind projects currently under various stages of development and consideration and it has been engineered to handle the heavy and oversized loads associated with an offshore wind industry. In December and January, MassCEC came close to meeting its employment goal of 170-200 jobs for the project; the terminal employed 120 people, nearly 20 of whom were from New Bedford. (Monthly employment statistics are available in these monthly presentations.)

MassCEC, a state agency leading the development of the clean energy sector, is interested in using the Terminal to support the commercial deployment of offshore wind along the Atlantic coast. But the charge of the agency is not solely to advance clean energy—other agency priorities include job creation, workforce development, and infrastructure investment. The New Bedford terminal presented an opportunity to invest in both clean energy and workforce development in a city with the State’s highest unemployment rate. The Port already served as an anchor for economic opportunity–over 4,400 people are employed at the port, and the city itself is home to more than 200 maritime-based businesses. The MassCEC investment in the port supports not only infrastructure and construction, but also the creation of up to 200 jobs and workforce training. Various agreements lay out the terms for hiring, workforce development, and apprenticeships.

As the terminal prepares to host an offshore wind industry, MassCEC and the New Bedford Economic Development Council (NBEDC) are preparing for an industry that presents unique workforce challenges. Supporting a local workforce is a key goal for MassCEC and the New Bedford Economic Development Council. Both have worked hard to promote local union labor; in fact, MassCEC signed a labor agreement obligating contractors to hire workers for the terminal’s construction. A year since construction began, MassCEC reports that it is close to meeting its employment goals. Eighteen percent of the marine commerce terminal’s jobs went to New Bedford residents and forty percent went to South Coast residents.

But even ordinary maintenance on an offshore turbine requires a unique skill set. Maintenance routinely involves helicopters and solo mechanical and/or electrical work in high wind environments. The workforce must be trained in many disciplines. MassCEC is rising to the workforce challenge through various agreements and funding for workforce training. As part of its Pathways out of Poverty program, MassCEC awarded $250,000 to the NBEDC for the Bridge to Greener Futures project—an effort that provides low-income youth with academic and occupational skills, leading to college courses in clean energy. Currently, nearly 30 students are participating in the program.

In addition, the labor agreement setting out hiring goals, other labor agreements set out “helmet to hardhat” apprenticeship goals for the trade unions participating in the terminal project. One agreement requires apprenticeship training for returning veterans. Another agreement set a trade hire goal at 20% in apprenticeships. The apprenticeships are funded in part through a $250,000 grant from the Commonwealth Corporation.

Although it will still be a few years before an offshore wind industry takes off in the US, officials from New Bedford and the MassCEC have seen first-hand the revitalization of the Bremerhaven port in Germany. The Massachusetts delegation toured the port and experienced the City’s transformation—ten years after initial government and private investments, 5,000 jobs in the region are tied to offshore wind. Massachusetts’ early investment in workforce training is a sign of hope for the city and the region; now the city eagerly awaits final approval of nearby proposed offshore wind projects and the promise of a robust, specialized industry reliant on a commercial port and workforce with technical capacity.

For more information, see “Marine Commerce Terminal Meeting Jobs Goal” in ecoRInews, and MassCEC’s Pathways Out of Poverty project page.

Reforming the Energy Vision: Moore’s Law and the New York Department of Public Service

Author: Todd Olinsky-Paul, Clean Energy Group | Projects: Resilient Power Project, Clean Energy Innovation

blogphoto-Power-LinesWe have been tracking various state and federal initiatives that address resilient power and related issues, such as the integration of renewables and other distributed generation resources, the need to move to a more decentralized power system, and the need to create functioning markets for societal benefits such as resiliency and clean energy.  For the most part, these initiatives, while positive, have been fragmentary: an RFP here, a new regulatory standard there, “smart grid” programs that somehow seem to end up with the installation of a few new meters.  But recently New York State announced that it will be taking a giant step toward a more holistic approach to the problem.

The announcement came in the form of the New York Department of Public Service’s “Reforming the Energy Vision” (REV) program.  Essentially, Governor Cuomo has tasked the DPS with revisioning the entire electrical system.  The effort begins with a 91-page report and proposal that is impressive in its breadth.  Its purpose is to explore how a distributed grid architecture can be implemented on a wide scale.

The REV document begins by correctly identifying the current grid structure as a dinosaur that has failed to evolve with the rest of the world.  Restructuring, which was expected to lead to more competition and lower cost, has benefited large utility customers to some degree, but not most smaller commercial and retail customers.  Over the past winter, the report notes, “Many residential customers with average usage levels saw their winter electric bills increased by over 80 percent.”

To some degree, this is related to climate change and an increased reliance on natural gas, which can cause price volatility.  But high costs, the report points out, are also inherent in the inefficiency of the bulk power model, which requires that generation and transmission infrastructure be sized to meet peak loads.  In New York State, retail peak demand is approximately 75% percent higher than the average load, resulting in a total rate of system utilization of less than 60%.  The report notes that this is considered a normal rate in the utility industry, and points to a number of factors that hamper the efficiency of electricity markets, among them the lack of electricity storage capacity, constrained transmission, and demand insensitivity to price.  Electricity markets have “tolerated” these conditions, according to the report, “but at a cost.”

The report also calls out a number of stresses and opportunities for change in the traditional electricity system, including:

  • New York struggles with an aging electricity infrastructure, which will require an estimated $30 billion infusion of capital over the next decade;
  • Peak demand is growing, while the sales base for utilities remains flat;
  • Predictions of increasingly severe weather will exacerbate existing problems and complicate planning, and this, coupled with the heightened resiliency needs of the digital economy and rapidly dropping costs for distributed generation technologies, may impel some customers toward self-generation;
  • Heavy dependence on natural gas for electricity generation has increased price volatility;
  • As rechargeable electric vehicles move into the mainstream, they may pose capacity challenges for some distribution circuits.

The solution proposed by New York’s DPS is to change the architecture of the electricity grid from a top-down, centralized “hub and spokes” model to a more distributed model.  The DPS report anticipates that this change will result in greater efficiency and less volatility, and that customers will benefit from lower costs, greater reliability and reduced emissions.  Customers will also gain the opportunity to “optimize their individual priorities with respect to resilience, power quality, cost, and sustainability.”

Central to this new model are the distribution utilities, which the DPS sees as playing the role of Distributed System Platform Providers (DSPPs).  These DSPPs are supposed to mediate between the customer and the bulk power system, coordinating customer activities to improve efficiency and reduce the need for infrastructure investments.  The DSPPs are also supposed to coordinate Distributed Energy Resources (DER) markets, in which both generators and retailers will participate, which will allow the monetization of services that are not compensated in existing markets (see table).

CostBenefitTableNYREV
It is difficult to overstate the importance of the DSPPs in the DPS vision.  For example, “The DSPP will create markets, tariffs, and operational systems to enable behind the meter resource providers to monetize products and services that will provide value to the utility system and thus to all customers. Resources provided could include energy efficiency, predictive demand management, demand response, distributed generation, building management systems, microgrids, and more.”

The DPS correctly characterizes this vision as a “dramatic transformation” of the existing system, that will require a revision of the existing regulatory paradigm.  Expectations of utility performance will change, as will the assumptions that underlie ratemaking.  Customers will be transformed from passive consumers of electricity to active participants in electricity and related commodity markets.

Energy storage is also expected to play a significant role in the new electricity system.  But, rather than setting a capacity goal for storage as was recently done in California, DSPPs are supposed to “identify economic applications of storage” in conjunction with market participants.

To reach its vision of an electricity system of the future, the DPS recommends “incremental steps… requiring input from parties and market participants as the Commission’s proceeding moves through its policy-making and implementation phases.”  But the DPS also notes that “Moore’s Law will tend to outpace regulatory change.”  Loosely interpreted, Moore’s Law states that technology advances at an exponential rate – much faster, in other words, than the recommended “incremental steps” of policymaking.

This may already be happening.  For example, a recent Morgan Stanley report highlighted predictions that in many states, installing customer-sided PV with battery backup could soon be cheaper than purchasing utility power.  The specter of such technological advances mooting incremental regulatory changes, such as those recommended in the NY DPS report, is already giving utility investors sleepless nights.

The Cuomo Administration and the New York Department of Public Service should be commended for their willingness to name and confront the issue, as should some progressive utilities that are embracing distributed generation rather than pretending it doesn’t exist.  However, much depends on next steps, both in New York and across the nation.  And those with the most to lose in the energy economy should be leading this charge, because – as Moore’s Law reminds us – innovation doesn’t wait for policy.

For more information on the NY REV proposal, visit the NY PSC’s website.

The Myths about Government that Kill Innovation

Author: Lewis Milford, Clean Energy Group | Projects: Clean Energy Innovation, Clean Energy Finance

MazzucatoThere is a steady drumbeat of statements arguing for limited government: Government should not pick winners. Government should not correct market failures. Only private companies should take risks. Instead of strong policy, let’s just lightly nudge the market to achieve social ends. Government has never done innovation right.

We have heard these sorts of statements for so long–especially regarding clean energy—that they have become wrong-headed and dangerous myths, says a tremendous new book by an American professor writing from England.

These myths need to be exposed and rejected in favor of a more robust role for government in solving big problems like climate change and scaling up clean energy, according to Professor Mariana Mazzucato in her newly reissued book now in paperback, The Entrepreneurial State.

Her full-throated defense of smart government action is explained in the book’s Forward by Carlota Perez of the London School of Economics.

Debunking myths is never easy. Swimming against the tide requires determination, a serious commitment to the truth and massive evidence. This is what Mariana Mazzucato displays in this book, which successfully challenges the widespread belief that the State cannot pick winners, that it is clumsy, bureaucratic and incapable of entrepreneurial risk taking.

Her key point is that the most radical innovative technologies, in different sectors—from the Internet to pharmaceuticals—trace their funding to a courageous government that repeatedly funded radical innovation and risk taking.

What Mazzucato does—unlike the critics of state action who prefer to rely only on an ideological anti-government stance—is focus on the factual history of how major innovations have actually made their way into the marketplace. What she finds is not news to students of innovation. But it runs counter to every myth-making charge by those trying to limit and destroy the affirmative role of the state in important issues like clean energy and climate.

She details how governments time and again have made investments in risky, early-stage technologies where the private markets would never have gone—from IT, to nanotech, to biotech, to transportation, to defense, and energy, and to all the components that make up the iPhone we know today, where Steve Jobs brilliantly rode on the back of government innovation research to create new products, without taking the big risks that the government actually took to make his products possible.

She demonstrates again and again how all the major “General Purpose Technologies” of our time came from the risk taking of government investment. And she argues that we need to get away from the false notion that the government has always taken a back seat to the private marketplace when it comes to funding next-generation innovations.

She makes a brilliant case that the real danger is believing in these false myths from the past to make bad, limited and ineffective policies for the future.

She brings her arguments forcefully to the clean energy space.

Interestingly, Mazzucato dismisses the proponents of green banks and venture capital that only want do small things to move the financial markets to invest in clean energy:

It is…unrealistic to think that the highly capital-intensive and high-risk areas in clean technology will be ‘led’ by venture capital or ‘nudged’ by a small and unstructured green investment bank.

Instead of making small fixes to help private banks finance low-risk projects like energy efficiency, she argues for larger, well-capitalized development banks that can take on high-risk and capital-intensive projects like offshore wind or solar.

She particularly explains why those who wait for the market to just catch up and take over are fooling themselves in the clean energy infrastructure world —and that we can’t simply wait for the market and large companies to solve the big problems of the day like climate change without a strong government role.

The green technology is still in its early stages: it is characterized by both market and technological uncertainty. It will not develop ‘naturally’ through market forces…In the face of such uncertainty, the business sector will not enter until the riskiest and most capital-intensive investments have been made, or until there are coherent and systematic policy signals in place. As in the early stages of IT, biotech and nanotech industries, there is little indication that the business sector alone would enter the new ‘green’ sector and drive it forward in absence of strong and active government policy. Thus while ‘nudging’ might incentivize a few entrepreneurs to act, most business actors will need stronger signals to justify their engagement in clean technology innovation.

And time is important, as she notes,

Leaving direction setting to the ‘market’ only ensures that the energy transition will be put off until fossil prices reach economy-wrecking highs.

In the end, she is calling for a return to truth telling about the role of government to help create massive technology transitions. Her concluding remarks deserve the last word.

This book is an open call to change the way we talk about the State, its role in the economy, and the images and ideas we use to describe that role. Only then can we begin to build the kind of society we want to live in, and want our children to live in –in a manner that pushes aside the false myths about the State and recognizes how it can, when mission driven and organized in a dynamic way, solve problems as complex as…solving climate change.