August 24, 2015

The Tides Are Turning for Offshore Wind in the US

By Val Stori

Offshore wind excitement is growing in the Northeast with the recent arrival of foundations for Deepwater Wind’s Block Island offshore wind farm. This ground-breaking, demonstration-scale project’s impacts are reverberating all the way to the Gulf Coast, where the specialized turbine foundations were constructed by Gulf Island Fabrication. Closer to home in Warren, RI, Blount Boats is building the nation’s first offshore wind farm crew vessel. And out at Quonset Business Park, Specialty Diving Services has been busy manufacturing ladders, platforms, and railings for the steel foundations. Overall, Deepwater Wind estimates that it will bring 330 jobs to Rhode Island.

Other states are paying close attention to this project, keeping a close eye on costs and public reaction. International developers with expertise in offshore wind construction are also paying attention. Danish developer DONG Energy has purchased commercial leasing rights from RES Americas, Inc. for a large wind development area off the coast of Massachusetts, indicating that the US market has the potential for significant development. Senators Susan Collins of Maine and Tom Carper of Delaware have introduced a bipartisan bill calling for a 30% investment tax credit for the first 3000 MW of offshore wind.

Despite the tremendous potential of offshore wind, its high cost is a major barrier to development. The overnight capital costs of OSW are estimated to run over $5000/kW, compared to land-based wind projects which average $2000/kW. Deepwater Wind’s initial power purchase contract with National Grid for power from its 30 MW Block Island wind project is priced at $244/MWh with an annual 3.5% escalation.

Getting to scale is a key step to reducing costs. The European experience has demonstrated that a market of sufficient scale and duration can reduce costs.  Europe has installed over 8 GW and costs have decreased dramatically. A recent report by BVG Associates predicts that offshore wind projects in the UK will be cost-competitive with new natural gas plants by 2020.  The 3000 MW target in the Carper/Collins bill is large enough to attract international developers with offshore wind expertise to construct manufacturing plants and invest in the US supply chain. At this scale, offshore wind can attract investors, support a domestic supply chain, and drive economic development.

If offshore wind can be developed at a significant scale along the Northeast and Mid-Atlantic coast, it would provide a range of benefits to the region, including improved grid reliability, reduced transmission costs, less expensive peak load generation, and economic development. Furthermore, offshore wind is the largest renewable resource in the region that can help meet RPS mandates, comply with the EPA Clean Power Plan, and achieve individual state renewable energy targets.

New York, for example, has just released its state energy plan with an ambitious goal of 50% renewable energy by 2050; offshore wind is the only large-scale renewable resource that can meet New York’s energy demands. The state energy plan recognizes offshore wind’s potential and outlines steps the state can take to support offshore development, including collaboration with other states. The OSW technical potential in the region and off New York’s coast is significant—11.6 GW, of which 4.7 GW are estimated to be economically recoverable.  Offshore wind could supply 12% of the state’s electric generation while displacing 12.3 million metric tons of carbon dioxide.

New York City has pledged to reduce its GHG emissions by 80% by 2050. Through a recently released request for information, the city is seeking to identify new sources of large-scale renewable energy that can reduce peak demand, spur economic development, and reduce the city’s emissions. Offshore wind could be a key part of the solution.

There is reason to be hopeful about a vibrant offshore wind industry in the US. First and foremost, by this time next year, the first turbines will be spinning off our Atlantic coast. Several commercial wind energy areas have been leased to a variety of developers, including an area off of Long Island with the potential to generate 1GW of capacity. New York, as one of the biggest energy consumers in the country—the city’s purchasing power alone is significant at nearly $650 million per year—can help set the stage for developing a domestic wind industry.

The Block Island five-turbine, 30 MW project is small, but it is a big step forward symbolically.  With foundations in the water and Rhode Islanders at work constructing the project, the US has advanced towards capturing its offshore wind energy potential. Both Rhode Island and Deepwater Wind should be applauded for their leadership, foresight, and planning. Other states should follow Rhode Island’s lead.

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