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Is Offshore Wind About to Take Off?

Monday, November 19, 2018

Caroline McHugh

Law Clerk

It’s all happening,” declared a June 2018 article about offshore wind development in the United States. Indeed, the National Renewable Energy Laboratory has identified a trend toward a viable U.S. offshore wind industry that is gaining momentum. Despite this trend, it has been 17 years since the first offshore wind project was proposed, and the 30-megawatt (MW) Block Island Wind Farm is still the only operating project. Has the time finally arrived for this industry?

In 2001, Cape Wind, LLC, initiated the development process for what was to be the first offshore wind farm in the United States. As the first of its kind, the project was delayed by regulatory uncertainty from the beginning. It also faced powerful local opposition. Every step of the development process was challenged by opposition groups, including landowners on Cape Cod concerned about impacts to the viewshed and fisheries. After 16 years of litigation, the developers ultimately abandoned the project.

Offshore Wind FarmDespite its insurmountable hurdles, Cape Wind broke trail for future projects and taught regulators and developers valuable lessons. While Cape Wind struggled and the 2008 recession stifled some later wind developments, the U.S. Department of Energy began supporting offshore wind research and development and issued a National Offshore Wind Strategy jointly with the U.S. Department of the Interior (DOI). States commissioned studies and amended statutes to allow for project development. The Block Island Wind Farm in Rhode Island state waters was also permitted and constructed, and it began operating in 2016.

Now, at least 13 states have established policies to support and encourage offshore wind as part of their energy mix. There are at least eight projects in the planning and development process, and DOI’s Bureau of Ocean Energy Management (BOEM) has issued 12 active commercial federal leases. For now, project development is concentrated on the Atlantic Coast, where the water is shallower and access to energy markets is easier.

In total, wind industry developers estimate that roughly 2,000 MW of new offshore wind capacity will be operational by 2023. Recent state commitments demonstrate the motivating effect of adopting Renewable Portfolio Standards (which require utilities to procure a portion of their electricity from renewable sources). The Trump Administration has also recently shown support for offshore wind as an important element of the Administration’s energy policy. Support from the Administration may facilitate the federal permitting process.

Offshore wind projects will be reviewed in a now-familiar regulatory framework. BOEM has nearly a decade of experience regulating renewable energy projects on the Outer Continental Shelf under its rules promulgated in 2009. The agency has also undertaken other initiatives, such as the Smart From the Start Initiative, to streamline planning and environmental review.

So, what is next for these projects? Despite the political support and clarified federal permitting process, developers still face several tests:

  • Environmental review. Project construction and operation plans (COPs) will require individual environmental review in compliance with federal statutes, including the National Environmental Policy Act, the Endangered Species Act, and the National Historic Preservation Act.
  • State regulatory processes. Projects require a variety of state permits, including review by environmental agencies and utility regulators.
  • Public opinion. Residents of coastal states may support renewable energy development for its economic benefits (such as job creation and reduced electricity prices, particularly in northeastern states facing high electricity costs) or climate benefits, or may express concerns about visual impacts or impacts to fishing economies. Project opponents may object throughout the environmental review processes and in court.
  • Financing and power purchase agreements. Developers have encountered problems obtaining financing and securing power purchase agreements. However, recent experience in Massachusetts indicates that the generation costs are decreasing, which will make it easier for developers to sell the power.

Even with these challenges, the outlook is promising. State and federal administrations are supportive. Regulators are equipped with clear policies. Developers, including European and multinational companies, are ready to apply their experience in a new market. If project developers can effectively address the concerns of coastal state residents, the United States is likely to finally experience a wave of offshore wind growth.

All blog posts are the opinion of its author(s) and do not necessarily reflect the views of ELI the organization or its members.