Van P. Hilderbrand
Much has been written regarding the difficulties and opposition faced by the Cape Wind energy project off the coast of Massachusetts, and about the successes of the U.S.’s first commercial-scale offshore wind energy project to get “steel in the water,” Rhode Island’s Block Island Wind Farm. All this attention is justified because offshore wind may finally be fulfilling its promise as a crucial resource in the U.S. energy mix.
These pioneer projects, however, represent the tip of the proverbial iceberg when it comes to the potential of U.S. offshore wind. Market and regulatory
Jeffrey Karp
themes have converged recently – low energy prices, technology improvements, favorable federal and state policies for renewables – that show the sector may have reached an inflection point, from New England to the mid-Atlantic. In fact, as of late 2014, the U.S. Department of Energy reported 14 offshore wind projects in advanced stages of development in the U.S. with over 4.9 gigawatts (GW) of capacity.
Consider a few examples:
Merrill Kramer
Massachusetts: In late July 2015, the Bureau of Ocean Energy Management (BOEM) approved DONG Energy’s acquisition from RES Americas of a 25-year commercial wind lease area in federal waters 55 miles off the coast. No details yet about a proposed project.
Rhode Island: Banking on the success of the Block Island project, the same developer, Deepwater Wind, is planning a 150- to 200-turbine project also in the Rhode Island Sound. The project, Deepwater ONE, will be capable of generating from 900 to 1,200 megawatts (MW) of electricity.
Maryland: A 68-turbine project is being planned by U.S. Wind Inc., off the coast of Ocean City, capable of generating 500 MW of electricity.
New York: The Long Island-New York City Offshore Wind Collaborative is working on a utility-scale project to be located about 15 miles off the Rockaways on Nassau County’s southern shore. Further, BOEM, in conjunction with several coastal state governments, is poised to look at more leases in New York and New Jersey.
Lessons Learned
As new projects move through the various stages of development, they will benefit from the experiences in Massachusetts and Rhode Island. Cape Wind, which was expected to lead the way in opening the U.S. offshore wind markets, demonstrated the benefits of centralized federal agency jurisdiction and streamlined permitting by BOEM. Today, many of the regulatory hurdles and legal uncertainties that could slow down future offshore projects have been clarified, including how to secure requisite federal and state permits.
The Block Island project’s speed through the approval process was partially due to Deepwater Wind’s successful engagement with state, federal, and public stakeholders to address environmental and other concerns. This lesson of early and frequent engagement will help keep future projects from stalling amid the maze of permitting, environmental laws and requirements, and political opposition.
Despite Momentum, Untapped Opportunity
Currently, the only established supply chain to support offshore wind is in Europe. The success there illustrates the importance of creating a clear framework and achieving critical mass in developing infrastructure and distribution which is required to drive down costs. Today in the U.S., the supply chain is aimed at supporting onshore wind. Thus, an unprecedented opportunity exists for U.S. manufacturers, suppliers, and distributers to gain the requisite skills and strengthen the coastal supply chain. Otherwise, when commercial-scale U.S. projects are constructed, the work likely will be done by European firms.
Financing remains a challenge. Banks and equity investors are wary of new technologies and the risks perceived to be associated with large offshore wind energy projects. Yet the landscape appears to be shifting on the financing front. The Block Island project secured $290 million in debt and equity financing earlier this year. Given the speed with which the Block Island regulatory approvals were obtained, regulatory risks may become less of a concern for investors. Lenders are also beginning to understand that future projects will benefit from economies of scale that will drive offshore wind competitiveness. Coupled with the added legal certainty and a more favorable political climate, financing opportunities are poised to increase as new technology and financing models are proven.
Outlook For Offshore Wind Energy Development
The economic, energy supply and climate landscape all point to a bullish outlook for offshore wind energy. The question now is whether states, particularly in New England where available land is scarce and electricity rates are high, can lead this scale-up in U.S. offshore wind capital investment and project development. Recent developments suggest they can.
Sullivan & Worcester represented the Conservation Law Foundation in support of the Cape Wind project, including in federal court litigation. Attorneys Van P. Hilderbrand Jr., Jeffrey M. Karp and Merrill L. Kramer can be reached at vhilderbrand@sandw.com, jkarp@sandw.com and mkramer@sandw.com.
