The Dark before the Dawn

Last 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 US 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 will open every door.”

Offshore Wind in Europe: Lessons for the U.S.

Lew Milford, President at Clean Energy Group, was in Europe last week meeting with key offshore wind leaders.  Milford offers the following lessons for the development of the U.S. offshore wind sector.  

There are a lot of great things Europe has that the U.S. doesn’t — comfortable taxis, good table wine, Idris Elba — and then there’s offshore wind, lots and lots of offshore wind.

I spent last week in Europe hearing from key offshore wind leaders — from top officials in industry, government and finance — about how they built a large, successful offshore wind industry. I learned some key lessons, and heard some precautions, about how we should go about offshore wind development in the U.S.

I listened to them with a wary ear. There are many differences between the U.S. and Europe on energy policy and, on some issues, we in the U.S. will never go Europe’s way. Nevertheless, in the area of offshore wind, U.S. energy policymakers can learn a lot from the lessons Europe has to offer.

Here is what I picked up from the leaders in the field.

A Large Commercial Industry. Compared to the U.S. where we have no turbines in the water, in Europe offshore wind is serious business. Total installed capacity of offshore wind power from 55 wind farms (1,662 turbines) in ten European countries by the end 2012 was 4,995 MW megawatts, the combined capacity of several nuclear plants. More than $15 billion in investments has been made in the industry over the last 8 years. There were about 58,000 jobs in the industry in 2012, with growth expected up to 191,000 in 2020. Many of the major European public investment banks like the European Investment Bank, and public pension funds, are investing in the space.

Long-term Policy. Europe’s offshore wind surge did not happen by accident. The simple and strong message from industry leaders was plain: The only way a country (or a state) can develop a strong offshore wind industry is through a long-term policy in favor of offshore wind. Public officials and private sector representatives emphasized that targets committing to build large installations in stages over a twenty-year period have created the industry in Europe and are essential.

The U.S. approach so far — hit or miss, on-again off-again policy — will not work. The European experts all warned against such a self-defeating approach.

The UK and Germany have had fairly stable policies to promote offshore wind for about 20 years. Unlike in the U.S., Europe has a consensus in favor of offshore wind despite changes in governments.

A Commercial Industry, Not R&D. The key issue in Europe is how to get projects to scale, to co-locate multiple gigawatt projects, to raise billions of dollars. The talk there is not about more research, although that is happening. Instead, the industry walks and talks like a serious commercial sector poised for greater growth, unlike in the U.S. where governments tend to view this area as a research arena. The basic technology works, and more R&D won’t get existing technologies to scale. But, R&D and demonstration in new technologies like floating turbines could be important actions for the U.S. offshore wind market development.

How to Attract Supply Chains. European governments compete for the economic development benefits of the offshore wind industry, as in the U.S. But they realize that the most important way to get those benefits for their own countries is through favorable long-term policy — and not by poaching investments from other countries. Again, long-term national targets ensure projects and, in turn, those projects bring jobs and investment: a simple message repeated and confirmed across the European spectrum of opinion.

Critical Public Investment. Public investment is critical to this still-emerging industry. In Germany and the UK, public banks provide long-term debt to offshore wind projects and companies. The projects are expensive, many over $1 billion, so a mix of public and private capital is needed. In contrast, in the U.S., no government, federal or state, has yet committed to a public debt package for offshore wind projects. No state has yet done a financing deal except Cape Wind, through a utility mandate. No green bank has moved into the space, as the UK Green Bank has done with a $1.5 billion commitment over the long term.

Industry-Government Partnerships. Despite the recession and the pull back of banks from lending, the governments and industry look for ways to cooperate to deploy projects. While Europe is besmirched as the heart of government regulation or worse, success in offshore wind is all about private and public sector partnerships. These productive investment partnerships between the wind industry and the government occur with both liberals and conservatives in power.

EU Political Consensus. Many major governments across Europe promote offshore wind as one of the best hopes to produce large-scale sources of no-carbon power. For them, climate matters as a policy driver.

Waiting on the U.S. There are few European offshore wind leaders clamoring to build in the U.S. So far, the relative instability of U.S. offshore wind policy has convinced them to keep their money on their side of the Atlantic. The Siemens work in Massachusetts relating to Cape Wind is one bright spot. Currently, the risks are too high to encourage major European investment in a U.S. industry.

But not everything is perfect on the offshore front in Europe. And in that, there are more lessons for the U.S.

Costs Are Too High. The costs of offshore wind are still too high in Europe too. While they went down when more and larger projects were placed in shallow waters, costs are going up for projects in deeper water. As a result, European policy continues to be focused on cost reductions. So the U.S. is right to be concerned about high costs. The European industry and government leaders are working to do something about this. For them, more volume is the best cost-reduction strategy. And R&D funds are being allocated to develop newer, cheaper designs for accessing deeper water.

The Politics of Energy Price Spikes.
 The high energy costs are not politically popular. There are many reasons for fairly large spikes in energy bills across Europe, and one is thought to be the public investment in offshore wind. Governments have not solved that problem. In fact, in the UK, the Labor Party (now the minority party) promised last week to freeze energy bills if they win the next election. Again, this justifies a concern by U.S. energy officials.

Some Policy Still in Flux There. There is an ongoing debate about changes to the current policy for offshore wind in Europe. The difference from the U.S. debate is that there is general EU consensus in favor of the technology. There the discussion is instead over the details of already strong support policies, especially in the UK, to move to more market-based strategies. These potential changes have caused the industry to worry about the reliability of future government support. So policy flux is a problem there too, but on a much lesser level than in the U.S. 

Stability Is the Message. 
But all in all, the message from Europe on offshore wind is one of stability and success, with a positive view of the future of the technology.

Here in the U.S., the coastal states and the federal government have a lot to learn from the decades of European experience with offshore wind. For states in the U.S. struggling with existing efforts or those looking to create new offshore wind policy, lessons from across the Atlantic are a good starting point for rebooting the offshore wind policy framework in the U.S.

(This article first appeared in the Huffington Post http://www.huffingtonpost.com/lewis-milford/offshore-wind-in-europe_b_4018542.html)

DOE Releases 2012 Wind Market Reports

According to two recently released U.S. Department of Energy’s 2012 Wind Market Reports, wind was the nation’s fastest-growing electricity source last year—both wind energy production and manufacturing reached record highs!  And the number of workers employed directly and indirectly by the wind energy sector grew to 80,000, up from 75,000 in 2011. 

 

The 2012 Wind Technologies Market Report, produced by DOE and the Lawrence Berkeley National Laboratory, details the growth of American-made turbine components.  Increasingly, turbine components are being made right here in the U.S.:  in 2007, 25% of turbine components were domestically produced; by 2012, that figure had risen to 72%.

 

But that’s not all the good news—according to the report, wind turbine efficiency has improved drastically; the report finds that turbine capacity has increased by 170% since 1998 due to technical and design innovations that have allowed larger turbines to harness increased energy from less windy areas.

 

The report covers a wide range of topics, including: wind turbine prices, project performance trends, policy developments, and a future outlook.  The offshore wind sector is limited to a brief summary of recent developments, including offshore projects that are further along in the development process.  These projects equal 2,820 MW of expected capacity. 

 

The Department also released the 2012 Market Report on Wind Technologies in Distributed Applications, which it developed with the Pacific Northwest National Laboratory.  The distributed wind sector (with turbines ranging from a few hundred watts to multi-MWs) also experienced growth between 2011 and 2012 and nine out of the top ten wind turbine models installed in the U.S. were made domestically. 

 

DOE will be hosting a webinar to discuss the distributed wind report on August 21st.  More details here: http://www.windpoweringamerica.gov/filter_detail.asp?itemid=3903

New Jersey Offshore Wind: Dead or Alive?

If you read the local press last Friday, you would think the New Jersey Board of Public Utilities (BPU) turned down the Fisherman’s offshore wind project once and for all. But the transcript of the board deliberations tells a different story.

On Friday, the press reported that the NJBPU rejected the latest plan for a 25 MW offshore wind project nearly three miles off the coast of Atlantic City.  The project was filed initially with BPU in May 2011 shortly after Governor Christie signed the Offshore Wind and Economic Development Act (OWEDA) creating an offshore wind incentive. 

Fishermen’s Energy, the project developer, had been awaiting BPU’s ruling on its application.  Via the news channels, BPU’s rejection of a settlement negotiated between Fishermen’s Energy and the state Division of Rate Counsel looks like a flat denial.

But if you read the transcript of the hearing, which became available this morning, it seems the Board has given the developer time to meet the objections of staff and get the project moving forward. 

First, it becomes clear that the developer and the NJ rate counsel have reached a stipulated agreement on the project –which would be the first time any state agency has agreed on the use of NJ ORECs to finance an offshore wind project. That is news to most people. It means that the rate protection agency is satisfied with the impact of the project on electric rates. (Also the utilities do not seem to be opposed to the project).

Second, it is the BPU that is the decision maker, so what it says matters most. Rather than a blanket rejection, as reported Friday, it seems that the Board actually has given the developer 10 days to respond to BPU staff objections. Perhaps the most important is the $19.2 million capped contingency fee that New Jersey ratepayers would pay Fishermen’s Energy if the anticipated Department of Energy grant and the ITC tax subsidy to the project fell through.

 

Third, other issues are raised by staff too, including whether the project’s net positive benefits to ratepayers (the net benefits test) would be met with the fund as structured. 

 

Fourth, the transcript provides some interesting remarks on the ultimate project costs. It seems the agreement with rate counsel would have the per kilowatt hour costs drop as low as about 18 cents, which is reasonably low for offshore wind. That is with all state and federal subsidies included. The costs will escalate over time. But that low number will surprise many for offshore wind.

And finally, for what it’s worth, BPU Commissioner Fox remains optimistic about the future of offshore wind in New Jersey: 

…today’s decision should be viewed as an indication of this agency and also administration of New Jersey[interest} in offshore wind, [we] clearly want to see it move ahead.  

Oceana urges U.S. Senators to support tax credits for offshore wind

In a recent op-ed, which first appeared on The Beacon, Oceana marine scientist Matt Huelsenbeck urges Senators to include a long-term extension for the Investment Tax Credit as part of their formal submission to the Finance Committee.  Huelsenbeck writes about recent encouraging developments in U.S. offshore wind development including floating turbine technology to access deeper water and a greater wind resource, and the Bureau of Ocean Energy Management’s announcement in June that it will begin the nation’s first competitive lease sales for offshore wind development in Rhode Island and Massachusetts.  However, he notes, political support is still lacking to establish the industry.  Extending the ITC will provide long-term stable financing and will help address one of the main barriers to offshore development—high capital costs and long lead times.  The offshore wind industry needs more certainty about the ITC if the U.S. is to get serious about “developing the untapped wealth of clean, renewable energy off its shores.”  

Huelsenbeck contributed this op-ed to LiveScience's Expert Voices: http://www.livescience.com/topics/expert-voices-op-ed-and-insights/

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Trade group says Europe installs 1GW of offshore wind capacity in first half of 2013

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A new report from the European Wind Energy Association (EWEA) says that more than 1 gigawatt of offshore wind capacity was fully connected to the grid in Europe over the first half of 2013.

More from Business Green:

The European Wind Energy Association (EWEA) said 277 turbines have been connected between January and the end of June, delivering 1.045GW of new capacity, almost double the 523MW installed over the same period in 2012.

Last month in #offshorewind: April news recap

Don’t worry, Gov. LePage. We promise that wind turbine really works.

In case you missed this month’s offshore wind news highlights, we’ve got you covered:

April 25
EDITORIAL: Don’t wait to approve New Jersey Energy Link

The whole project can get moving as soon as Trenton enacts legislation to admit the New Jersey Energy Link into PJM’s Regional Transmission Plan. Then, the BPU can start working on the appropriate regulations, and South Jersey would be in the wind-energy business. What are we waiting for?

[read more]

April 23
Atlantic Wind Connection project at Paulsboro terminal would create jobs — a lot of jobs.

A study by Bechtel found that a total of 1,980 jobs would be created over the next 10 years during the construction and installation of three 20,000-ton converter platforms for the New Jersey Energy Link.

[read more]

April 23
MassCEC begins construction on first-of-its-kind offshore wind support facility

Construction has begun on South Terminal of the New Bedford Marine Commerce Terminal, the first facility in the nation designed to support the construction, assembly, and deployment of offshore wind projects. Massachusetts Clean Energy Center chose contractor Cashman-Weeks NB to construct the terminal.

[read more]

April 18
Governor claims Univ. of Maine tricks people with motor-powered wind turbine (Ed. Note: We’re not making this up!)

"They have an electric motor so that they can show people wind power works. Unbelievable. And that’s the government that you have here in the state of Maine," said Maine Gov. LePage. … Asked by the Bangor Daily News if LePage’s conspiracy theory was true, a spokesperson for the university laughed before making clear that the turbine will not spin in the absence of wind. 

[read more]