Offshore Wind Choppy

 

THE WATERS FOR OFFSHORE WIND DEVELOPMENT seemed relatively calm in late 2011, but that was only on the surface.

Without a headline announcement - think Google buying into a transmission project - the offshore wind industry may seem inactive, or at least too quiet. That's hardly the case.

The first federal lease for offshore wind in federal waters was announced over a year ago. Secretary of the Interior Ken Salazar said in October that the second lease was imminent. That made some ripples, but nothing tsunami-like as the one that was granted to Cape Wind in Massachusetts in late 2010.

"There were a lot of milestones achieved and it has been a big year in terms of developing offshore wind," said Chris Long, manager, offshore wind and siting policy for the American Wind Energy Association. "Just since February, Secretary of the Interior Ken Salazar and Energy Secretary Steven Chu unveiled their coordinated strategic plan to pursue the deployment of 10 gigawatts of offshore wind by 2020 and 54 gigawatts by 2030."

To that end, the federal government unveiled its "Smart from the Start" initiative to expedite offshore development. Until a year ago, developers were looking at a seven-year time frame for permitting. And that was before potential opponents petitioned the courts.

Reviews have evolved into a site assessment, combining simultaneous environmental and resource studies, which is a major driver in shortening the process.

Under the program, NRG Bluewater Wind won the exclusive rights to negotiate with the federal government to build an offshore wind farm off the Delaware coast. Those negotiations are ongoing and Salazar hinted they would be completed soon. Lease areas have also been identified off New Jersey, Maryland and Virginia, with Salazar suggesting five could be negotiated over the next year.

That's the prime area for the Atlantic Wind Connection, a proposed transmission backbone that could serve up to 7 gigawatts of wind in the Mid-Atlantic region. That generated additional buzz when Google said it was one of the original investors in the project.

The biggest issue for the wind industry for both offshore and land-based wind remains a stable tax policy. With energy incentives under increased scrutiny in Congress, that could be problematic.

"For offshore wind, that means the long-term extension of the investment tax credit," said AWEA's Long.

With a development time horizon of several years, the usual approach of wind incentives with a time horizon doesn't work. So, with wind-friendly senators, the industry has changed its approach to embrace an open-ended ITC with a cap of 3,000 megawatts.

Sen. Thomas Carper, D-Del., and Sen. Olympia Snowe, R-Maine, introduced the Incentivizing Off- shore Wind Act. When a developer is awarded a tax credit, it will have five years to install the offshore wind facility. Federal regulation of offshore wind development took another step forward during the year with the release of a draft environmental assessment. The Department of Energy is funding a broad study that will assess the most promising sites for high offshore wind production along all of the U.S. coastal regions.

"We'll do some investigations to see what the potential issues are," said John Daniel, senior principal consultant, ABB, and the principal investigator and overall coordinator of the project.

A technical investigation would be needed to consider whether individual wind farms would be better served by one or two connection points or if a backbone of several hundred miles in length should service multiple sites. And could there be a "ring structure" of connections that could function as its own grid in the event of outages or other issues at one or more points of the backbone?

That project team is expected to provide its final report and recommendations to the Department of Energy in September 2013, which would be in plenty of time for developers to tap into its recommendations.

In Rhode Island, Deepwater Wind survived a court challenge to its power contract with National Grid for its demonstration project off Block Island. Last summer, the state supreme court ruled an agreement at above-market rates was valid. Deepwater is developing a project for several hundred megawatts farther offshore.

The New York Power Authority abandoned its planned 100-megawatt project in Lake Erie when it determined that project costs were too high.

And the first offshore wind project in the United States, Cape Wind in Massachusetts, enters its tenth year of development under yet another cloud. The Department of Interior approved its construction plan, paving the way for the installation of turbines. But a federal appeals court late in the year vacated a "determination of no hazard" granted by the Federal Aviation Administration that had said the site posed no threat to communications to an air base on Cape Cod.

"We really don't see it as a setback," said a Cape Wind spokesman, Mark Rodgers. "The court determined that when the FAA wrote up their determination they left out things. They could have included a lot more in the document to make it much more robust and persuasive to the judge."

Cape Wind also has yet to resolve its lack of customers for one-half of its output, thwarting project financing. A quick fix would be a contract with Massachusetts utility NSTAR, but that has not been settled. And that reluctance to purchase offshore wind generation has delayed approval of NSTAR's proposed merger with Northeast Utilities.

Rodgers said the company's goal remains that construction could start at the end of this year.