Built on a legacy of global private- and public-sector clean energy advancements, U.S. offshore wind energy is proving to be a smart infrastructure investment. The Block Island Wind Farm is in the water and generating electricity. The first commercial-scale project in New York has been approved, and others are coming. During the Trump administration, offshore wind energy won’t just survive – it will thrive. It is a bold statement, but the facts back it up.
Offshore wind costs are dropping in Europe at the technological pace of consumer electronics. Governors from Maryland to Massachusetts have enacted policies that support 5.3 GW of offshore wind. Traditional investors are divesting themselves of their fossil fuel investments. Corporate America is fueling renewable energy purchasing at a pace that has never been seen. These winds of change are creating a thriving offshore wind industry.
Lost in U.S. presidential election news, Denmark announced the winning bid of EUR 49.9/MWh for Kriegers Flak, the country’s largest offshore wind farm. The Nov. 9 announcement was historic and shattered Europe’s offshore wind industry price goal of 100 British pounds/MW by 2020 – four years ahead of schedule.
In Europe, offshore wind energy costs are dropping, and jobs are increasing. As of 2014, the European Wind Energy Association (EWEA) has determined there are approximately 2,500 wind turbines installed and connected to the electricity grid across the continent. This equates to about 5 GW of offshore wind. EWEA employment data collected and tabulated illustrates that in the span of five years, employment in offshore wind had tripled, with 75,000 full-time equivalents in 2014. Offshore wind commitments in New Jersey, Massachusetts and New York create a Northeast regional offshore wind pipeline of 5.3 GW, a similar size to Europe, so comparable job growth is expected.
States are leading
These eye-popping European jobs numbers and lower costs are easing the way for state support. In July 2016, Gov. Charlie Baker, R-Mass., signed the Massachusetts Energy Diversity Act. With the stroke of a pen, the first U.S. offshore wind pipeline – 1,600 MW – was in place. This landmark legislation establishes demand at a level required to support investment in the emerging offshore wind market, generating supply-chain opportunities and thousands of jobs.
Gov. Andrew Cuomo, D-N.Y., committed to acquiring 2.4 GW of offshore wind by 2030 in his 2017 State of the State address. This announcement follows Statoil Wind’s record-breaking winning bid of more than $42 million for the New York offshore wind energy area leasing rights. This is more than twice the price paid for the other 11 U.S. offshore wind leases combined. The lease shows strong investor confidence in U.S. offshore wind energy.
With each state’s iteration, offshore wind energy policies evolve. Policies are now better reconciling citizens’ interests with enough economic potential to spur development of an offshore wind energy market; attract investment; and bring experienced developers – such as DONG Energy, the world’s leading offshore wind developer, Statoil and other European developers – to the U.S.
In 2010, New Jersey passed the first legislation incorporating the concept of an Offshore Renewable Energy Credit (OREC) and set a floor of purchasing 1,100 MW. New Jersey’s offshore wind legislation remains intact, even under Republican Gov. Chris Christie, and in a post-Christie era, New Jersey will advance quickly. The same is true for Maryland, its OREC in effect, with two developers – Deepwater Wind and US Wind – currently competing for financing.
The Maryland Public Service Commission will decide on May 17 to approve a project. A sense of urgency not to be left behind is being created in New Jersey and Maryland, with Massachusetts and New York aggressively making offshore wind commitments and trying to capture the majority of the 75,000-job supply chain.
Momentum continues on the West Coast. At the request of the state, the U.S. Bureau of Ocean Energy Management (BOEM) recently initiated its BOEM Taskforce. The Business Network for Offshore Wind hosted a California Offshore Wind Industry Meeting in March, at which more than 100 industry participants shared their experience with federal, state and local officials. Under a Trump administration, California is more emboldened to embrace floating offshore wind and solidify its role as a clean energy national and world leader.
The Obama administration put methodologies in place that cannot be undone – the long-term lease contracts with offshore wind developers for offshore wind energy areas being one example. Approvals for Site Assessment Plans and Construction Operations Plans will continue to move through the BOEM regulatory process, managed by career government employees.
Changing market dynamics
The global market for renewable energy has dramatically changed over the last 16 years since the U.S. elected its last Republican president. According to the Guardian, “The shift to a low-carbon economy already has its own momentum; however, with the cost of solar and wind power tumbling in recent years, nearly 100 coal power plants were retired in 2015, with renewables accounting for two-thirds of all new electricity generation.”
Two of the nation’s biggest coal-fired power plants announced plans to close due to economic reasons. The closing of the Navajo Generating Station in Arizona and the Killen and Stuart coal-fired power plants in Ohio follows the announcement of the shuttering of New York’s Indian Point nuclear plant, which is expected to be replaced by offshore wind. Pacific Gas & Electric Co. is closing its Diablo Canyon nuclear plant, creating an electricity-generation hole that could be filled by an offshore wind project.
In the current climate-conscious global community, the commitment to divest interest in fossil fuels and fund clean energy is strengthening. Societe Generale, the French multinational banking and financial services company, says in an announcement that it will stop dedicated coal financing and step up its commitment to renewable energies effective Jan. 1.
A December 2016 report on The Global Fossil Fuel Divestment and Clean Energy Investment Movement states, “On the one-year anniversary of the Paris climate agreement, the value of assets represented by institutions and individuals committing to some sort of divestment from fossil fuel companies has reached $5 trillion.” The clean energy funding trend is supported by many countries, institutions, corporations and individuals.
Many large U.S. power consumers have clearly demonstrated that, with or without their local utilities, they are moving toward a renewable future. As of September, 62 of the country’s largest corporations had indicated their energy priorities by endorsing the Corporate Renewable Energy Buyers Principles. A Price Waterhouse Cooper survey on corporate renewable energy procurement finds that corporations’ commitment to purchase is driven by a desire to meet sustainability goals and reduce greenhouse-gas emissions, generate an attractive return on investment, and limit exposure to energy price variability.
A Power Forward 2.0 study for Calvert Investments found that Fortune 100 companies, such as General Electric, General Motors and Walmart, are saving $1 billion annually and using 15 conventional power plants’ worth of renewable energy. These are some of the same companies serving on President Trump’s business advisory council providing strategic advice and input to policy.
The bottom line is progressive governors and state legislatures in blue coastal states will continue to lead the development of offshore wind energy. States have always lead – and will continue to lead, even under the Trump administration – on climate change and renewable energy; the federal government cannot repeal state renewable portfolio standards or any state renewable or offshore wind legislation.
There is no doubt that President Trump will be fossil-fuel friendly. The offshore wind industry may see a slowdown in the BOEM permitting process, and a second round of offshore wind energy leases could be delayed. However, Republicans generally support eliminating regulatory processes and barriers. As the jobs emerge, especially in the manufacturing sector, it will be difficult to impede offshore progress at the federal level.
The cost reduction trajectory has offshore wind on a similar growth pattern to onshore wind and solar. It is the low-cost economics of these renewables that are fueling their growth. According to the 2016 Energy Information Administration International Energy Outlook, coal is the slowest-growing energy source, and consumption is projected to decrease in every region of the world through 2040. Consumption trends are being altered as technology develops for renewable energy. The Invest movement is moving the energy sector away from fossil fuels. Global macroeconomics are shifting and are difficult to alter.
The confluence of falling costs, state policy, the divestment of fossil fuels and corporate commitments is a perfect storm for U.S. offshore wind.
Liz Burdock is executive director for the Business Network for Offshore Wind. She can be reached at email@example.com.