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Offshore Wind: Making an American Industry, Part 1

Positioned between the affluent of Martha's Vineyard to the east and the well-heeled of The Hamptons to the west, Block Island has always been more of a casual paradise, a place for blue collar workers to make summertime memories and sea-loving residents to enjoy the solitude of the other three seasons.

The island mentality has rarely been defined as cutting edge, preferring instead the ideal of self-reliance. The island, though, has long had a problem. Gone are the days when timber and native peat powered the homes of the earliest settlers. For generations, the island has had to look to the mainland to help power its placid lifestyle.

It’s become a central issue for isolated residents, but until recently those on the mainland never fully appreciated the laborious path needed to bring electricity to the island. On schedule, truckloads of diesel fuel drive into the belly of a passenger ferry where they are shipped 12 miles to port. From there, the trucks are unloaded and they go make their deliveries. Then, it’s back to the mainland — once again on the back of the ferry.

With electricity rates that have hit as high as 60 cents per kilowatt hour — about five or six times higher than the national average — Block Island finds itself vulnerable to the volatile nature of oil prices, especially during the summer months when peak load on the island quadruples to about 4 megawatts (MW).

While Martha’s Vineyard and Cape Wind have garnered the most headlines — and the most vocal protests — for an ambitious 454-MW wind farm that has federal approval in the heart of Nantucket Sound, Block Island has moved ahead relatively quickly, at least as far as American offshore wind projects go.

A recent Rhode Island Supreme Court ruling upheld a signed power purchase agreement (PPA) with National Grid. The developer, Deepwater Wind, is hoping for final permits to clear as soon as the end of this year or early in 2013. If that final hurdle is cleared, blades could be spinning three miles off Block Island’s south shore by 2014.

And that would be a first for the American offshore wind market, which has stacks of reports detailing its vast potential but zero installations that will help the market draw international players to the region. Cape Wind has led this battle for years, and it is still in position to become the first large-scale project in coastal waters. But it’s been a long haul of objections, lawsuits, federal rulings and negotiations for PPAs. The project has agreements in place for three-quarters of the power it would produce, and now it is working toward securing the financing needed to begin construction in 2013. On that pace, Cape Wind would start producing power by 2015.

By then, the U.S. offshore market would be even farther behind Europe, which is quickly developing into a manufacturing — and power-generating — force. By the end of 2011, Europe already had 1,371 turbine in its waters totaling more than 3,813 MW, more than 2,000 of which were in the UK. There’s even been recent milestones reached with two full-scale grid-connected floating turbines.

The First One In

All new industries have a first, and it’s been a race of sort to get “wet steel.” The Block Island project is small by most standards, though it’s quite large measured by Block Island’s power needs. The project, which started as an eight-turbine, 28.8-MW wind farm in 2008, has morphed into a five-turbine, 30-MW project that will utilize 6-MW Siemens offshore wind turbines that have just recently reached the market. Transmission lines will feed from the project site to the island, which will then be connected to the mainland grid. The project itself will represent about 1 percent of the state’s power capacity. So even though the prices determined by the PPA — 24.4 cents per kWh in its first year with slight increases each year after that — are far higher than those coming from natural gas and nuclear resources, the average customer can expect to see monthly bills go up between $1 and $3.

But to measure the importance of the first offshore wind project by size or PPA would miss the entirety of what the burgeoning offshore wind industry is working to achieve. The Block Island project is sizable, and yes, it will certainly be visible to those on the island’s south shore. But in governor’s offices from Maine to Virginia, the real goal is to create a new and vibrant industry, one that would be based on the East Coast and one that would build manufacturing and fuel innovation. Like the shipyards and ports that helped make the East Coast an economic hub, an offshore wind industry based on maritime tradition hopes to cash in on the promise of clean energy.

Europe is about a decade ahead in this respect. It has taken slow, methodical steps as it builds out with bigger turbines in deeper waters. The American wind industry hopes to use the European knowledge base as a springboard to massive-scale projects that push the edge of existing technology.

This is in some respects already being done with Deepwater’s Block Island project, which will go in 100 feet of water, a deep dive even by European standards. The real advantages, though, will come when large-scale projects are achieved. That’s the goal of governors across the Atlantic seaboard. That’s the goal of the federal departments that are trying to clear the way for such projects. That’s certainly the goal for Deepwater Wind, which is vying for a federal lease 25 miles off the Rhode Island and Massachusetts shore for a project that could use 200 turbines and surpass 1 gigawatt in scale. Such a project would be many times larger than even the biggest installed wind farm in Europe.

“It’s frustrating [seeing what Europe is accomplishing], but there’s also an opportunity because of it,” said Jeffrey Grybowski of Deepwater Wind. “Because of the investment they’ve made, a huge supply chain has been built and innovation has been set up. The U.S. can now proceed with large-scale projects because of the legwork that was done in Europe. Now, even a moderate pace of building will attract infrastructure and manufacturing.”

Wind Areas Up for Grabs

Deepwater Wind is among a handful of companies hoping to secure a federal lease in the area south of New England, which is prized for the strong consistent winds that made the waters the longtime home of the international America’s Cup sailing race. The area is just one of many swaths of open water that have been or are under consideration to become designated as potential wind farm sites. These federal lease sites already include large areas off the coasts of New Jersey, Delaware, Maryland and Virginia. The Department of the Interior’s self-dubbed “Smart from the Start” initiative aims to streamline the siting and permitting process by creating wind energy areas that would help serve some of the major population centers of the East Coast.

From the federal government’s point of view, the potential is too great to ignore. The initiative hopes to calm the bureaucratic waters in pursuit of an end goal of 10 GW of offshore wind by 2020 and 54 GW by 2030. The scale is just one part of the story. The obvious concern for those in and out of the industry is the cost of electricity. The DOI’s goal includes this as a fundamental part of its modeling, and if its goals are reached, offshore wind prices would be more than competitive enough to spark further investment. The department is looking to get consumer costs down to 10 cents per kWh by 2020 and 7 cents per kWh by 2030. Getting there will require some steady navigation.

Check back Monday for part two of this feature. 

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