After 15 years of frustration and hundreds of millions of dollars spent on false starts, the pendulum is finally swinging in a promising direction for the offshore wind industry in the U.S.
Up and down the Northeast coast, by far the most densely populated and power-hungry region of the country, developments are moving forward briskly. Nearly a decade since having been first proposed, the Block Island Wind Farm demonstration project has been built and is generating. Maryland also seems poised to award a utility-scale contract in May of this year on the back of 2013 legislation. Talks are again percolating in New Jersey, a state that has long flirted with offshore wind and in 2010 became the first jurisdiction to pass legislation specifically targeting its procurement. Progress stalled under the administration of Gov. Chris Christie, but there is renewed hope that New Jersey will finally take the plunge in 2018 under potential new Democratic leadership. Finally, the industry knew it had attained legitimacy last summer, when Massachusetts passed and signed into law “An Act to Promote Energy Diversity,” directing the state’s utilities to competitively procure 1,600 MW of offshore wind power by 2027.
Now, much of the industry’s attention has shifted to New York, home to 20 million people, a $1.5 trillion economy and electricity prices that are among the highest in the nation.
In bold Big Apple fashion, New York’s Energy Research and Development Authority announced that it would be participating in the federal government’s lease auction for the designated wind energy zone located 12 miles off of Long Island. The move was unprecedented, as no government entity had participated in the five previous federal offshore wind area lease auctions held by the Department of the Interior. A key driver for the decision from Albany was the recognition that offshore wind is the only large-scale resource that can be effectively leveraged to meet the state’s aggressive “50% by 2030” renewables target.[adleft zone=’190′]
If successful, New York will carry out a robust program of pre-development activities on the site to dramatically reduce development risks and collect relevant data. Private developers would then, likely not before 2018, compete in a cost-of-energy shootout that will ultimately deliver the lowest possible levelized cost of electricity to consumers. Finally, the elusive hat trick of offshore site control, power off-take and minimal ratepayer impact could be a reality in the U.S.
In recent months, four similarly designed European offshore wind tenders have yielded shockingly impressive results, with the latest coming in at approximately $0.07/kWh, including transmission costs. Europe did not get to this point overnight, having built upward of 15 GW to date at price levels that would cause revolt on this side of the Atlantic. Similarly, the emerging U.S. sector will have to create scale at a price premium but will benefit from an enormous head start down the cost curve, thanks, in large part, to the many painful and expensive lessons already learned by the Europeans. Much of that cost-saving knowledge is already being transferred to the U.S. With political will and some patience, the U.S. will catch up.
New York is uniquely positioned to create the scale and entice the investment in local infrastructure that is required to make all of this a reality. When you consider proximity to load, market price of electricity, thirst for renewables and viability of alternatives, no other coastal state in the region comes close to New York’s potential demand for offshore wind that must be exploited.[adright zone=’190′]
The Netherlands, with a similar population but an economy half the size of New York’s, is currently tendering 700 MW annually, with a plan to ramp up to 1 GW. The Dutch are well on their way to meeting their 4.5 GW by 2023 target, with no plans to stop there. With the New York industry lobby calling for a 5 GW by 2030 target, there is clear optimism that the state will go Dutch on offshore. If it does, and progress follows plans in Massachusetts and elsewhere, it will be awfully difficult for anyone to break the American offshore wind wave – not even climate change deniers and a kid from Queens in Washington.
Sunny Gupta is an offshore wind strategist based in New York City. He can be reached at (917) 691-9881 or email@example.com.