First Offshore Wind Project in United States to Launch This Fall

Mainbrace | September 2016 (No. 4)

Jonathan K. Waldron and Joan M. Bondareff

Although skeptics said it couldn’t happen, the first offshore wind project in the United States is scheduled to begin opera- tion by the end of this year, bringing wind power to shore from waters off Block Island, Rhode Island. Bragging rights can go to Jeffrey Grybowski and his team at Deepwater Wind. The project may be relatively small—five turbines producing only 30 megawatts (“MW”) of wind and providing power to about 17,000 homes—but it is a giant step forward in the world of offshore wind in the United States.

Credit can also go to Rhode Island for creating a State Ocean Management Plan identifying potential sites for offshore wind farms, and to the residents of Block Island, Rhode Island, who in large numbers supported the project, which will connect Block Island to the mainland and the grid for the first time. Power from the five turbines will be brought ashore by a large submarine cable, and purchased by National Grid. The price of the power is expected to be somewhat higher than the average price of electricity in the United States overall. However—and most notably— the power will be clean and renewable compared to the diesel fuel that Block Islanders have previously relied on, and it will reduce island electric rates by an estimated 40 percent as well as diversify Rhode Island’s power supply. Serious investors like D.E. Shaw also helped finance the estimated $300 million project, and it is subsidized by investment tax credits for offshore wind that Congress extended last year with a schedule for phasing out the subsidies over the next few years.

Impact of the Jones Act on Deepwater Wind

Developers such as Deepwater Wind had to run the gamut of state and federal laws and regulations, including the Jones Act. They were able to comply with the Jones Act by bringing the giant turbine nacelles from Europe on a jack-up installation vessel called the Brave Tern owned by Fred. Olsen Windcarrier. Smaller vessels transported other supplies to the wind platforms, and these were U.S.-owned, built, and crewed.

The Future of OSW Leasing Looks Positive

The future bodes well for U.S. shipyards, marine suppliers, and labor for future offshore wind projects. While Deepwater Wind is the first of its kind, many other projects are in the works along the Eastern Seaboard. Ten years from the “Smart from the Start Program” created under a 2005 amendment to the Outer Continental Shelf Lands Act, the Obama Administration’s Department of the Interior (“DOI”) has awarded 11 commercial leases in federal waters along the Atlantic Seaboard, and is in the process of issuing leases in waters adjacent to other states. A lease sale is pending for the waters off North Carolina, and one off the end of Long island, New York, is possible by the end of the year. The DOI is also investigating the feasibility of floating wind farms off the coasts of Oregon and California as well as Hawaii; leases have already been awarded on the continental shelves of Massachusetts, Rhode Island, Delaware, Maryland, and Virginia.

New State Support for OSW Development

Support from neighboring states is critical to the development of these larger offshore wind farms. While the DOI has leasing authority on the Outer Continental Shelf, the power must be fed ashore by gigantic cables to power stations on land and eventually into the power grid. Earlier this year, New York State Governor Andrew Cuomo announced his commitment to renewable energy by establishing a goal of acquiring 50 percent of the  state’s energy from renewable sources by 2030. The New York State Energy and Research Development Authority (“NYSERDA”), and its partner the Long Island Power Authority (“LIPA”), may also be interested in acquiring offshore wind from leases expected to be awarded later this year off the end of Long Island. (In July, NYSERDA requested that LIPA postpone consideration of offshore wind proposals until a statewide wind blueprint and clean energy standard were released.) Most of the energy to meet the state’s ambitious renewable energy goal is expected to come from offshore wind.

A similar welcoming sign for offshore wind was established last month in Massachusetts when Governor Charlie Barker signed into law legislation that required utilities and other power purchasers to acquire 1600 MW of wind energy by 2027. Procurement requests for this energy are expected to be issued in 2017. Companies that have lease sales in the region are the potential bidders for these contracts.

Europeans Arrive to Help U.S. Companies

Another factor that has promoted the offshore wind industry in the United States is the entry of European companies experienced in the already well developed industry in Europe. For example, DONG Energy, the largest developer of major wind farms in Europe, has acquired two leased areas, one off Massachusetts and one off the coast of New Jersey. U.S. Wind, a subsidiary of Italian energy firm Renexia, has purchased the lease off the coast of Maryland. Maryland has also supported offshore wind by enacting legislation establishing a system of ocean renewable energy credits (“ORECs”)—modelled on New Jersey legislation—while capping the price Maryland residents and businesses would have to pay. Copenhagen Infrastructure, another Danish company, just acquired a 100 percent interest from Offshore MW LLC in a leased area just south of Massachusetts. Both DONG Energy and Copenhagen Infrastructure are poised to participate in the upcoming Massachusetts utility tenders for offshore wind.

Deepwater Wind is a success because of the persistence of its leadership team, the experience of its partners, and its supporters in the state. In summary, the success of this project amounts to a welcoming beacon for wind farms all along the Atlantic Seaboard, bringing clean, renewable energy to the grid and consumers.