The DOI’s fourth competitive renewable energy lease sale on the Outer Continental Shelf has nearly doubled the federal offshore acreage available for commercial-scale wind energy projects.
Despite the expanded acreage, the U.S. offshore wind industry continues to face unique challenges of high costs, mitigation of environmental impacts, project installation, and grid interconnection, and continued federal offshore wind energy area lease sales and technology demonstration investments will remain significant in growing this nascent domestic industry.
Lease Sale Represents Largest to Date
On January 29, 2015, the Department of the Interior’s (DOI) Bureau of Ocean Energy Management (BOEM) held a competitive lease sale for offshore wind energy development in the Massachusetts Wind Energy Area (WEA), 12 nautical miles offshore Massachusetts. RES America Developments, Inc. and Offshore MW LLC won Lease Area OCS-A 0500 (187,523 acres) and OCS-A 0501 (166,886 acres), respectively. Lease OCS-A 0502 (248,015 acres) and Lease OCS-A 0503 (140,554 acres) did not receive bids. The auction was the fourth competitive renewable energy lease sale on the Outer Continental Shelf (OCS) and generated a total of $448,171 in high bids. Together, the two areas nearly double the acreage leased for wind energy through competitive sales. The BOEM announced the lease sale in November 2014 to auction approximately 742,000 acres of the Massachusetts WEA – expected to be the largest in federal waters.
Each lease owner will have a preliminary one-year term to submit a site assessment plan (SAP), describing activities for assessment of wind resources and ocean conditions of the lease area. After BOEM’s approval of the SAP, the lessee will have up to five years to submit a wind project construction and operations plan (COP). After BOEM’s environmental review of the proposed project and COP approval, the lessee will have an operation term of 25 years.
According to analysis from the National Renewable Energy Laboratory (NREL) analysis and the DOI, the area leased in the latest auction could support approximately 2 GW of commercial wind generation, capable of powering more than 700,000 homes.
Costs Continue to Challenge Offshore Wind Industry
In order to achieve this capacity, offshore wind development has to overcome key barriers related to high costs, mitigation of environmental impacts, project installation, and grid interconnection. Offshore wind turbines require a more robust design than land-based turbines, as conventional foundations – large steel piles or lattice structures fixed to the seabed – are not practical for turbines located in deeper waters. The design must also minimize maintenance requirements given the greater potential for corrosion from seawater, and high costs of maintenance crew and replacement component transport.
Another hurdle is that offshore wind-power demand is affected by competing power generation technologies and fuel costs. Within the power sector, this includes changes in natural gas prices and coal-based generation capacity, as lower electricity prices spurred by lower natural gas prices make offshore wind investment less economically attractive. However, regional natural gas pipeline constraints and continued coal-fired generation retirement could increase competitiveness offshore wind projects.
Other market barriers include integration of offshore wind energy into existing grid infrastructure, limiting turbine interaction with avian and aquatic life in the offshore environment,and ensuring feasible construction through the study of available ports, vessels, and supply chain infrastructure. The program supports innovative components, controls, integrated system designs, and improved modeling and analysis tools to improve performance and reliability and reduce offshore wind project costs.
Ongoing Federal and State Policy Interventions Key to Industry Development
To overcome financial and technical barriers, federal and state policy certainty and predictability are essential to support long-term investments in wind power. At the federal level, the Renewable Electricity Production Tax Credit (PTC) and the Business Energy Investment Tax Credit (ITC) are the primary cost-competitiveness drivers. On the state level, Maryland has started promulgating rules for Offshore Renewable Energy Credits (ORECs) for up to 200 MW; the Maine Public Utility Commission has approved a term sheet with a University of Maine team for a pilot floating wind turbine project.
The DOE’s Wind Program invests in initiatives to mitigate market barriers that limit offshore wind deployment. The BOEM has previously awarded five competitive wind energy leases off the Atlantic coast – two leases offshore Massachusetts-Rhode Island, two offshore Maryland, and one offshore Virginia. To date, competitive lease sales have generated more than $14.5M in high bids for more than 700,000 acres in federal waters. The DOI’s efforts to accelerate offshore wind energy development began in 2011 under the “Smart from the Start” program aimed to expedite commercialization of wind energy on the OCS. The DOI identified WEAs to facilitate federal and state coordination for renewable energy development.
The Wind Program’s ongoing advanced technology demonstration (ATD) supports offshore wind development through the installation of optimized turbines and systems. From 2006-2014, DOE’s Wind Program announced awards totaling more than $300M for 72 projects focused on offshore wind. In May 2014, DOE announced ATD-funding of up to $46.7M each for three projects – Fishermen’s Energy, Dominion, and Principle Power for final design and construction of pilot projects off New Jersey, Virginia, and Oregon, respectively.
Originally published by EnerKnol.
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