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Offshore Wind: Making an American Industry, Part 2

In the choppy seas of American offshore wind development, calm waters are often followed by stormy skies. Nowhere is this more apparent than in the Mid-Atlantic waters off Delaware, Maryland and Virginia. All three states have made some strides in the growing industry, but the path has been anything but clear.

So far, NRG Bluewater Wind has been given uncontested rights to negotiate a lease for a 450-MW wind farm off the coast of Delaware. The leasing rights allowed the project to move ahead, but it ultimately stalled in December over what parent company CEO David Crane termed “the difficult and unfortunate realities of the current market.” The company maintains the rights to negotiate the federal lease, and it says it may one day build the Mid-Atlantic Wind Park, but the sudden retreat serves to underscore the challenging financial, logistical and community pressures that go into building a large-scale project in uncharted waters.

Meanwhile to the south, a recent report by the Environment Maryland Research & Policy Center noted that an offshore wind industry would be able to fill two-thirds of the state’s energy needs using current technology. Aside from the benefits of new energy generation, the report goes on to conclude that turning the state into an industry hub would benefit the Eastern Shore region with manufacturing jobs and it would give an economic boost to Central Maryland as well if steel production were to be turned toward an offshore wind industry.

The potential economic impact has spurred a renewed interest in crafting legislation that would speed up development. Offshore wind supporters are rallying behind a state bill that would add a monthly surcharge to each customer that would help boost efforts to develop a major project in the federally leased area. The support has been so vocal that on one evening proponents formed a handheld circle around the state house in Annapolis with chants of “All we are saying is give wind a chance.”

In Virginia, the political pressure has been perhaps a bit less obvious, but it has become a central issue nonetheless. Republican Gov. Bob McDonnell recently hailed a single Gamesa 5 MW prototype slated to go in as early as 2013 as the type of test project that could propel the industry to the head of his state’s list of potential job creators. The jubilation was short-lived, though, as Gamesa announced in early May that it was backing off the project because the market is not yet well enough developed. The single turbine project was sure to a relatively expensive testing ground, and it would not have achieved the scale that everyone thinks is necessary to make the individual projects worthwhile. Still, even without many projects moving ahead, states from South Carolina to Maine see the potential to lure businesses, jobs and eventually a cheaper form of energy to its shores, and they’re at least exploring the market conditions.

Utility Perspective 

Offshore wind is usually seen as a monumental challenge that has tremendous rewards, but also one that deserves its due diligence. For Virginia Dominion Power, the state’s largest utility, offshore wind is an alluring prospect. While it’s not listed as part of its official long-term goals — mostly because the current costs remain too high — it is investing time and money to determine whether the technology can achieve the pricing necessary to move forward. It’s also studying the many other issues that come with a new industry off its coast.

The utility is a major political player in the state and it has engaged in discussions on everything from policy and permitting to industry concerns. Dominion Virginia Power has so far funded two studies to help better understand what the costs will be, what the demands are, how the power gets to the grid and how the transmission would need to be designed.

It is also looking to potentially bring the federal wind area under its domain. Dominion Virginia Power recently became one of eight companies to show interest in obtaining the lease rights to all 113,000 acres 23 miles off the coast. That hasn’t stopped some critics, namely the state’s Sierra Club, from contending that the utility giant is working to lock up the land so that no other developers can access it. It’s an accusation that doesn’t sit well in Dominion Virginia Power’s Richmond offices.

The utility has faced outside pressure because of its limited renewables portfolio. It has 410 MW of renewable capacity, mostly in hydropower and biomass. Still, the company says offshore wind presents something that the other forms of renewable energy do not — the ability to truly scale up to achieve the low costs it’s looking for. This potentially pairs well with its own non-binding target of getting 15 percent of its power from renewable sources by 2025.

“For the wind energy areas identified, it’s a great resource we have,” said Mary Doswell, a senior vice president for alternative energy at Dominion Virginia Power. “We have shallow water going out for 30 miles. We have category 5 winds. We have large shipbuilding facilities. Offshore wind is the one renewable that gives us the capability of scale.”

But the bottom line for the utility is, well, the bottom line. And right now, that bottom line would be far more expensive than that of any other source in a state where the average electricity rate is 11 cents per kWh. The company recently received a DOE grant that it says will help it work toward reducing costs by 25 percent. Even such a feat won’t get the technology to where it’s the best available option, but it will give the utility a better understanding of which levers to pull when trying to bring down end prices. There’s a natural downward price momentum, says Doswell, that further increases the chances that the DOI’s target of 10 cents per kWh by 2020 is achievable.

It’s those measures that have been taken that, Doswell says, proves to any critics that the company has every intention of fully exploring offshore wind.

“We want to see the costs come down,” said Doswell. “We’re actively participating in making it happen. We’re trying to find a way to make this work.”

Farther Afield

The deeper south you go, the farther behind each state is in becoming the industry’s leading job- and power-generator. Some efforts have been made in North Carolina, which last year created a state task force to study how the industry would affect jobs, power rates, tourism and the overall economy. But a state like South Carolina, which like North Carolina and Virginia, boasts ideal offshore wind conditions, has done little to keep up with the states in the northeast.

The area from Virginia to South Carolina is certainly more susceptible to the hurricanes that often batter the coastal regions. In that respect, New England is better suited for large wind farms. But that Southern Atlantic region has the wide, shallow waters that push installations farther from shore where the wind is the most consistent and the strongest. Yet it is still able to do so with existing technology that anchors each turbine to the ocean floor.

Those ideal offshore conditions are generally 12 nautical miles offshore and in areas with water less than 30 feet deep. According to the National Renewable Energy Laboratory, North and South Carolina account for more than half of that resource. When you add the two states with Virginia and Georgia, it tallies up to more than 80 percent of that resource.

The scope of geographic differences along the Atlantic coast point to the many opportunities to take the lead in a market that has yet to develop. Perhaps that’s why some key stakeholders in regions along the Eastern seaboard are eager to see their state emerge as the hub of a new American industry.


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Volume 18, Issue 3


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