EDITOR’S NOTE: On May 17, ACORE is hosting a State of Industry Webinar entitled “Is the U.S. Primed for an Offshore Wind Boom?” More information and registration details are available here: http://bit.ly/2oIB9Em
Proponents of renewable energy in the U.S. have watched as a growing number of once promising innovations—from solar and onshore wind farms to geothermal and distributed generation—have increasingly achieved commercial scale around the country. Yet the development of large-scale offshore wind projects has lagged that of its renewable counterparts in the U.S., as well as the development of offshore wind in Europe. The latter comparison was made all the more evident by last month’s successful bids by Danish company Dong Energy and German utility EnBW to construct separate offshore wind farms in Germany without the aid of federal subsidies, a significant benchmark in the ascension of the world’s offshore wind industry.
There is a lot to like about the prospects for offshore wind development in the U.S. The basic ingredients are all there: higher sustained wind speeds offshore with the potential to increase electricity output by 50 percent compared to onshore wind farms, coupled with the added advantage that winds tend to blow strongly during late summer afternoons, when electricity consumption is peaking; technological advances leading to larger turbines with higher power ratings; and a cost structure that has seen significant improvement in the more mature European offshore wind industry as increasing efficiencies and scale have taken hold.
A path-breaking federal lease sale off the coast of Long Island, New York in December 2016 reflected the growing industry optimism. Norwegian energy giant Statoil paid USD $42.5 million for the rights to develop a 79,350-acre offshore site. The lease comprises an area that could potentially accommodate more than 1 GW of offshore wind, sufficient to power roughly 700,000 homes. In a company press release issued at the close of the auction administered by the U.S. Department of the Interior's Bureau of Ocean Energy Management (BOEM), the company declared, “The US is a key emerging market for offshore wind – both bottom-fixed and floating – with significant potential along both the east and west coasts.”
What will it take to realize that potential? The future trajectory of offshore wind in the U.S. ultimately depends on the interplay of a number of factors:
- Federal government: With many of the most appealing offshore lease sites sitting in federal waters, the willingness of the Interior Department to identify, study and ultimately auction off potential lease areas is critical. Under President Obama, the BOEM held six competitive lease sales for offshore wind tracts, helping to seed future development. Will the Trump Administration continue to facilitate access to offshore wind tracts?
Early indications seem encouraging. When Avangrid Renewables placed the high bid for a 122,405 acre site offshore Kitty Hawk, North Carolina on March 16, 2017, the Interior Department put out a press release that included a supportive quote from Secretary Zinke, who said, “Renewable energy, like offshore wind, is one tool in the all-of-the-above energy toolbox that will help power America with domestic energy, securing energy independence, and bolstering the economy.”
As seasoned Washington observers are aware, an official expression of support from a Cabinet secretary marks a deliberate statement of policy that, in this case, suggests offshore wind has been included in the government menu under the new Trump Administration.
- State government: Just as critical as federal support, if not more so, is the extent to which state governments view offshore wind as a policy imperative that they are willing to help facilitate, particularly if it aligns with a broader political goal, as is the case with New York Governor Andrew Cuomo’s commitment that 50 percent of the state’s electricity will come from renewable energy sources by 2030.
The Kitty Hawk lease offers an illustration of the counter-factual case. The lease site, which is roughly 42,000 acres larger than the New York offshore lease, sits in an area well known for its steady wind conditions. Yet Avangrid, a subsidiary of Spanish energy company Iberdrola, bid just over $9 million for the rights to the lease, less than one-fourth of what Statoil put up in New York.
The pivotal difference? While population density played a role, with Kitty Hawk located comparatively far from the nearest urban centers, the key factor is thought to be the North Carolina state government’s apparent lack of interest in facilitating purchase power agreements for offtake of an energy source that, at this point in the United States, remains substantially higher than competitors like natural gas and coal.
- Cost curves: As the industry starts to take hold in the U.S., costs will eventually come down. The question is how much and at what pace. While it is impossible to predict future costs with certainty, it can be helpful to look at cost curves in analogous industry spaces. In the onshore wind market, for example, the American Wind Energy Association found that the cost of wind-generated electricity in the United States declined 66 percent from 2010 to 2016. Meanwhile, in the maturing European market for offshore wind, according to Bloomberg New Energy Finance, the cost of constructing offshore wind farms has fallen 46 percent in the last five years, and 22 percent alone in 2016.
Challenges to cost declines in the U.S. include the development of a U.S.-based supply chain; uncertainty over revisions to the “Jones Act,” which has traditionally exempted the offshore energy industry from bans on the use of non-U.S. vessels for shipments to offshore installations; and broader issues such as a shortage of skilled workers that has long plagued America’s manufacturing industry.
- Technology: Underpinning these numbers are technological developments. As larger wind turbines with higher capacity continue to take hold, costs decrease accordingly. Other technological gains, such as stronger, reinforced wind turbines suited to the higher wind speeds of the offshore, allow the industry to flourish in new locations.
Perhaps the most significant technological leap just around the corner in offshore wind involves the arrival of floating wind turbines, a technology being pioneered by Statoil in a pilot project off the coast of Scotland. The advent of floating wind turbines is essential to the eventual build-out of wind farms offshore the U.S. West coast states and Hawaii, where the continental shelf drops sharply downward from the shore, in contrast to the more gently sloping outer continental shelf of the East coast and Gulf of Mexico.
On December 6, 2016, the American Council On Renewable Energy (ACORE) convened its National Defense and Security Initiative for an executive meeting with leading military officials. ACORE’s National Defense and Security Initiative is a unique partnership between ACORE and the Department of Defense (DoD), that brings together renewable energy industry leaders, financiers, and stakeholders to increase the use of renewable energy by the military. During this meeting, the Assistant Secretaries for Energy from the Army, Navy, and Air Force and key staff provided an overview of their strategic use of renewable energy and the expected path forward under a new administration.
On August 3rd, 2015, President Barak Obama and the Environmental Protection Agency (EPA) announced the final version of the Clean Power Plan (CPP). The CPP sets the first national standards to address carbon pollution from existing power plants and demonstrates to the global community that the United States is willing to take action to combat climate change. The CPP uses Section 111(d) of the Clean Air Act (CAA) to set state-specific carbon dioxide (CO2) emission reduction targets with an overall nationwide reduction of 32 percent below 2005 levels by 2030. While setting these targets, the CPP is designed to allow states maximum flexibility in how they achieve their individual objectives.
On Thursday, September 22nd, ACORE presented the US-Canada Renewable Energy Forum, with the support of the Canadian Consulate in New York, Brookfield Asset Management and Phillips Lytle, LLP. Held during Climate Week NYC, the forum discussed recent policy developments and worked to identify opportunities for collaboration and cross-border projects to increase the development of renewable energy in the United States and Canada. The forum was attended by over 70 people representing a diverse mix of financiers, developers, policy experts, government representatives and NGOs.
One of the biggest developments in the renewable energy marketplace in the last 12–24 months has been the rapid growth in corporate renewables purchases. A vanguard of commercial and industrial companies is now playing an increasingly important role in the evolution of renewables—both in terms of their growing share of the market and their increasingly sophisticated needs and procurement approaches. As a result of this influence, ACORE worked with PwC to survey companies headquartered in the U.S. to better understand what is driving corporate renewables purchases, and what is holding companies back from doing even more.
With most residential rooftop area in the U.S. unsuitable for traditional PV panels, the community solar model provides many customers a cost effective alternative for “going solar.” Community solar brings policy benefits like net metering, similar to rooftop installations, and models have developed, and continue to evolve, that allow customers to access community solar through their incumbent utility, as owners in a cooperative group, or as a nonprofit.
On March 17, the American Council On Renewable Energy (ACORE) hosted its annual Renewable Energy Policy Forum, where speakers and attendees came to a broad consensus that consistent policy is the missing link in the national renewable energy playing field. Industry leaders noted that many had looked to the Clean Power Plan (CPP) as a source for political guidance. However, now that the climate rule has been put on hold, uncertainty remains. Senator Ron Wyden (D-OR) affirmed that the recent tax extenders for wind and solar will allow for the renewable industry to strategically prepare for upcoming years. But in order to achieve a more stable tableau for all renewables, Congress must agree on comprehensive tax reform – the Senator called the current tax code “a rotting dead carcass” and a “monument to yesteryear.” Business leaders also agreed that even negative consistent policy is preferable to inconsistency – and long-term consistent policy is not yet part of the American play book.
This year’s annual National Renewable Energy Policy Forum, hosted by ACORE, took place on the heels of an important policy update for key technologies. In December 2015, Congress approved a combined tax and budget package giving wind and solar what amounts to between five and seven years of policy “certainty” for investors and developers. But tax policy is only one part of the equation. We got another important boost that same month from the successful international climate meetings in Paris where 129 nations came together and, in essence, agreed to move to a low-carbon economy. But just a few weeks later, the Supreme Court issued a surprising stay of EPA’s carbon-cutting regulatory initiative, the Clean Power Plan, which threw sand in the gears of an implementation effort that was just gaining momentum. The stay is likely to delay implementation efforts by more than a year, even as states respond in dramatically different ways. In the meantime, it will be up to the renewable sector and its allies to maintain the public and private sector momentum behind the shift to renewable generation.
Below is our quick overview of the key discussions and leading news stories emerging from this year’s Policy Forum. Three major stories reported on from this year’s Policy Forum:
Fortune 500 companies are at an all-time high in terms of value – some $17+ trillion dollars as of this time last year. The explosive growth of tech businesses in particular, Google, Amazon, Apple and many more, has set the standard for modern capitalism in terms of profits and advancement up the Fortune list. But one key to success for these companies has flown relatively under the radar: the sustainability-driven push towards using renewable energy.
This past March, the American Council On Renewable Energy (ACORE) used day one of its annual National Renewable Energy Policy Forum to highlight the work being done by corporate leaders to power their operations increasingly using clean, renewable energy. With over 150 companies having signed the White House’s American Business Act on Climate Pledge – covering $4.2 trillion in annual revenue and a combined market capitalization of over $7 trillion – Corporate America's commitment to clean energy is undeniable and growing rapidly. ACORE’s Corporate Procurement Working Group Executive Meeting: “Advancing Corporate Energy Solutions,” hosted many of these businesses, and highlighted several critical challenges and opportunities ahead of the sector as this trend continues.
After COP21 in Paris, there are still many questions being posed: how will the U.S., and the world, meet these ambitious emissions reductions targets? Will time run out before we can cut emissions enough to avoid the irreversible consequences of climate change? Should the U.S. turn to other technologies like nuclear generation to meet emissions targets? To answer these questions, many leaders from around the world are looking to Denmark to study how this small country has become a leader in implementing renewable energy solutions and serving as a catalyst for change. Within Denmark, one needs look no further than Samsoe for inspiration.