Offshore Wind Begins Energy Production in the US

February 19, 2017

Production Begins

While offshore wind resources are more abundant and consistent than their land-based counterparts, until this past December, offshore wind had remained an untapped source of energy here in the United States.[1] According to the U.S. Energy Information Administration, wind accounted for 4.7% of the total energy generated by the U.S. during 2015.[2] However, all wind-generated power has until recently been sourced entirely from land-based installations.

On December 12, 2016 the Block Island Wind Farm off the coast of Rhode Island began commercial operation, becoming the first offshore wind farm to deliver power to the U.S. grid.[3] The two-year installation of the Deepwater Wind project was completed on time and on budget.[4] The now operational site consists of five turbines and a 30 MW installed capacity.[5]

 

Global Market

Although the Block Island project is dwarfed in size by offshore projects in the UK and other European nations, the site’s commencement of operations is a step long overdue in the U.S. shift towards clean energy.[6] The federal government currently projects to have 22,000 MW of offshore capability installed by 2030.[7] To put these numbers into perspective, Europe, the current leader in harnessing the power available from offshore wind had nearly 10,500 MW installed capacity during 2015.[8] The UK led the way with over 5,000 MW installed, followed by Germany with nearly 3,000 MW installed.[9]

According to the National Renewable Energy Laboratory, there is potentially 4,000 GW, or approximately four times the generating capacity of all U.S power plants combined, available to the U.S. from offshore wind.[10] However, while this previously untapped power source is massive, there are many concerns as well. In the U.S. more than 58% of the available offshore wind resources are located in deep waters where conventional foundations are not practical.[11] Further, offshore turbines come at a greater cost than land-based turbines, as they must be able to withstand the corrosion of saltwater and require higher maintenance costs.[12] Offshore wind projects are also not immune to environmental challenges and must comply with the Bureau of Ocean Energy Management’s (BOEM) regulations and guidelines.[13] These challenges lead to a higher cost of generation that must be placed on the consumer.

In the UK new technologies have allowed the cost of offshore wind to fall drastically and quickly. Recent reports show that the cost of offshore wind has dropped to below $100/MWh, a 32% decline since 2012.[14] For comparison land-based wind generation in the U.S. has cost as much as $77/MWh.[15] With the cost per MWh for offshore wind expected to continue to fall in the UK, one can expect the same here in the U.S.[16] As the price continues to decrease more and more investors will be incentivized to enter into the offshore wind market.

 

More Developments

While the first U.S. offshore wind project has only become operational recently, the BOEM had issued 11 commercial offshore wind leases as of November 2015.[17] A BOEM lease gives the leaseholder the right to seek approval for development, but does not assure approval will be given or that construction will ever begin.[18]

On January 25, 2017 approval was given by the Long Island Power Authority to construct what will be the largest offshore wind farm for the U.S.[19] The wind farm will include 15 turbines with an installed generation capacity of 90 MW.[20] The project, which is also to be completed by Deepwater Wind, will include enough space for the installation of as many as 200 turbines, giving the site the ability to greatly expand its generation capacity.[21] The project comes with an expected price tag of $740 million, greatly down from the initially projected $1 billion.[22]

In line with the surge of offshore wind, the Department of Interior announced on January 17 that the BOEM would be holding its seventh competitive wind lease sale on March 16, 2017.[23] Nine companies have qualified to partake in the competitive lease sale for over 122,000 acres situated off North Carolina.[24]

The upcoming lease sale indicates that the U.S. will in all likelihood continue to grow its offshore wind generation capabilities.


[1] Offshore Wind Research and Development, Dep’t of Energy, https://energy.gov/eere/wind/offshore-wind-research-and-development (last visited Jan. 31, 2017).

[2] What is U.S. electricity generation by energy source?, U.S. Energy Information Agency, https://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3 (last updated April 1, 2016).

[3] America’s First Offshore Wind Farm Powers Up, Deepwater Wind, (Dec. 12, 2016), http://dwwind.com/press/americas-first-offshore-wind-farm-powers/

[4] Id.

[5] Id.; David Grossman, America’s First Offshore Wind Farm Set to Open, Popular Mechanics, (Dec. 13, 2016) http://www.popularmechanics.com/technology/infrastructure/a24273/americas-first-offshore-wind-farm-set-to-open/.

[6] David Grossman, America’s First Offshore Wind Farm Set to Open, Popular Mechanics, (Dec. 13, 2016) http://www.popularmechanics.com/technology/infrastructure/a24273/americas-first-offshore-wind-farm-set-to-open/.

[7] Fact Sheet: Offshore Wind – Can the United States Catch up with Europe?, EESI, (Jan. 4, 2016), http://www.eesi.org/papers/view/factsheet-offshore-wind-2016.

[8] Id.

[9] Id.

[10] Id.

[11] Offshore Wind Research and Development, Dep’t of Energy, https://energy.gov/eere/wind/offshore-wind-research-and-development (last visited Jan. 31, 2017).

[12] Id.

[13] Regulations and Guidance, BOEM, https://www.boem.gov/Regulations-and-Guidance/ (last visited Jan. 31, 2017).

[14] Cost Reduction Monitoring Framework, Catapult, (Jan. 24, 2017), https://ore.catapult.org.uk/our-knowledge-areas/knowledge-standards/knowledge-standards-projects/cost-reduction-monitoring-framework/.

[15] The Cost of Wind Energy in the U.S., AWEA, http://www.awea.org/falling-wind-energy-costs (last visited Jan. 31, 2017).

[16] Cost Reduction Monitoring Framework, Catapult, (Jan. 24, 2017), https://ore.catapult.org.uk/our-knowledge-areas/knowledge-standards/knowledge-standards-projects/cost-reduction-monitoring-framework/.

[17] Fact Sheet: Offshore Wind – Can the United States Catch up with Europe?, EESI, (Jan. 4, 2016), http://www.eesi.org/papers/view/factsheet-offshore-wind-2016.

[18] Id.

[19] Diane Cardwell, Nation’s Largest Offshore Wind Farm Will Be Built Off Long Island, Wall St. J., (Jan. 25, 2017), https://www.nytimes.com/2017/01/25/business/energy-environment/long-island-power-authority-offshore-wind.html?ref=energy-environment&_r=1.

[20] Id.; Avery Thompson, New York to Build America’s Largest Offshore Wind Farm, Popular Mechanics, (Jan. 27, 2017), http://www.popularmechanics.com/science/energy/a24954/new-york-offshore-wind-farm/.

[21] Diane Cardwell, Nation’s Largest Offshore Wind Farm Will Be Built Off Long Island, Wall St. J., (Jan. 25, 2017), https://www.nytimes.com/2017/01/25/business/energy-environment/long-island-power-authority-offshore-wind.html?ref=energy-environment&_r=1.

[22] Id.

[23] Interior Department to Auction 122,000 Acres Offshore North Carolina for Wind Energy Development, U.S. Dep’t of Interior, (Jan. 17, 2017) https://www.doi.gov/pressreleases/interior-department-auction-122000-acres-offshore-north-carolina-wind-energy.

[24] Id.

Chase Boswell is a second year student at The University of Texas School of Law. He graduated with Honors from The McCombs School of Business at The University of Texas at Austin with a BBA in finance in 2015. After graduation, Chase hopes to practice corporate law.