Wind Energy in the Tristate Area: Are the Winds Finally Changing for Offshore Development?
In an effort to increase collaboration between Young Professionals in Energy (YPE) chapters across the country, YPE NYC and YPE Philly have established ongoing coordination on events and communications that began with our networking event last October and will continue in the future, including a multi-chapter happy hour in the fall and guest blog posts. This month, we're excited to feature Rory Sweeney, a member of YPE Philly's Executive Board and an energy professional focused on tracking developments in federally-regulated power markets and providing external-communications services for a variety of industry clients. He also produces and co-hosts the GT Power Hour podcast.
In mid-September 2018, I moderated (and wrote about) a panel discussion at a conference in northern New Jersey during which panelists discussed coastal states’ efforts to capture the market for offshore-wind in the U.S., and mentioned that overtaking Rhode Island and its (still) front-running 30-MW Block Island pilot project shouldn’t be their focus.
“I hope we can kind of get away from this concept of ‘one state’s going to be the winner in this race to build offshore wind.’ I think if we do it right, all states will benefit, and there’s a great benefit to coordinating ocean planning,” said Kit Kennedy, a senior director in the Natural Resources Defense Council’s Climate & Clean Energy Program, at the time.
An Internet search for the phrases “epicenter of” and “U.S. offshore-wind industry” reveals that Kennedy’s hope for a communal approach has mostly fallen on deaf ears, with states up and down the East Coast laying claim to or seeking the title. New York and New Jersey have characteristically been among the loudest voices, and the White House backed their bids in March when it unveiled five new leasable areas in the New York/New Jersey Bight and $8 million for offshore wind research co-led by the New York State Energy Research and Development Authority (NYSERDA) as part of announcing a federal goal of 30,000 MWs of offshore wind by 2030.
That action addressed what had long been one of NYSERDA’s main concerns with achieving New York’s goal of offshore-wind industry leadership. Until the Biden administration’s March announcement, the federal Interior Department’s Bureau of Ocean Energy Management (BOEM) had previously identified only one area for leasing in the shallow coastal waters of the Bight, all of which was already under lease to Equinor — the rebranded name of Norway’s state-owned multinational energy company, Statoil. In 2020, NYSERDA warned that with northern and southern neighboring states also increasing their demand for offshore wind, leasable acres, and supply chains, the opportunity for New York to lead the industry might dry up if the PSC didn’t act quickly to authorize more and bigger procurements.
New York had already signed several contracts but the PSC heeded the advice and authorized NYSERDA to procure more, leading to what are now five projects under contract. Equinor’s leasehold is among them, accounting for 3,306 MWs from that site as well as a second one east of Long Island. Combined with 1,010 MWs of power-purchase agreements that state energy authorities have signed with Deepwater Wind (a partnership between New England utility Eversource and Ørsted, developer of the Block Island project and the only company actually operating offshore wind in the U.S. so far), the projects put New York nearly halfway toward achieving its goal of 9,000 MWs of offshore-wind generation by 2035. That goal was set in Governor Cuomo’s 2019 Climate Leadership and Community Protection Act (CLCPA), which also requires at least 70 percent of power in the state be from renewable resources by 2030, 100 percent carbon-free generation by 2040, and an 85-percent reduction in greenhouse-gas emissions by 2050.
Meanwhile, New Jersey is also jockeying to lead the offshore race, releasing late last year a strategic plan to achieve Governor Murphy’s 2019 executive order that requires 7,500 MWs of offshore wind by 2035.
As noted in a previous blog post, NYSERDA’s first round of contracts in 2018 created markets and attracted industry investment that the authority said resulted in a 40-percent reduction in development costs below original estimates and will help limit the impact it’s expected to have on average residential bills to an estimated increase of $.73/month. Those calculations don’t account for the roughly $30 million in state funding to develop the master plan and administer the solicitations, but NYSERDA estimates the initial solicitation alone could create $3.2 billion in combined “economic activity” (though it admits the net impact of the contracts over their life could range between a net cost of $388 million to a net benefit of more than $1.896 billion). The authority hasn’t finished the same analysis for its second round, which was executed in early 2021.
Additionally, any form of offshore generation in New York has the potential to rebalance the distribution of electricity generators (and prices) from the state’s less-populated western and northern regions to the highly congested New York City and Long Island zones — not to mention displacing local thermal generation and reducing local air contaminants — without requiring the additional onshore transmission infrastructure that additional onshore generation would entail.
“Offshore wind in the U.S. presents one of the biggest infrastructure opportunities of the 21st century. Successful execution would mean tens of thousands of jobs created, billions of dollars of investment in ports and supply chains, and new manufacturing opportunities in the U.S. — and this is on top of significant emissions reductions brought on by new large scale renewable energy,” said Jamil Khan, a New York energy professional who helped develop the Sunrise Wind project.
But now comes the hard part: actually getting the power. Aside from the engineering, regulatory and cost-allocation challenges ahead, it appears unlikely that many projects avoid protracted opposition from stakeholders who see the development as a threat, including the fishing industry and shore-dwellers in both New York and New Jersey who fear potential lifestyle impacts.
Next, the ability of the international offshore-development industry to speed U.S. expansion remains limited by the Jones Act, which requires vessels transporting cargo between U.S. ports to be built and flagged in the U.S. This means that the U.S. must build its own fleet to service the industry rather than contract specialized ships already existing elsewhere. At an estimated cost of $500 million, the first one is being built in Texas for Virginia-based Dominion Energy, which is partnering on the 12-MW Coastal Virginia Offshore Wind project, the second of Ørsted’s pilots.
NYSERDA identified five ports and two training facilities as focal points for providing industry needs. Investment in the South Brooklyn Marine Terminal alone will total $400 million — equally split between public and private dollars — and create 1,200 manufacturing jobs, according to the governor’s office. Equinor has committed to transforming Albany’s port into the first U.S. facility for manufacturing offshore-wind towers and transition pieces. New Jersey has pledged $200 million to develop the New Jersey Wind Port, the nation’s first port exclusively geared to serving the offshore-wind industry.
But the states are otherwise potentially taking much different paths to getting the power shipped ashore. For one thing, New York has the unique advantage of NYSERDA as a central procurement agency and NYISO as a grid operator coordinating just one state’s interests. New Jersey’s grid operator is PJM, which oversees a 13-state (plus D.C.) footprint stretching west to Chicago and south into North Carolina. It’s prohibited from unilaterally deciding to build its infrastructure out to offshore generation and must instead rely on states for engagement and direction. Connecticut, Rhode Island and Massachusetts — as participants in the grid operated by ISO-New England — are similarly constrained by stakeholder-consensus requirements.
New York has used its unity to move quickly, consistently considering development of a comprehensive offshore-grid plan but so far choosing the expedient route in its solicitations of requiring each project to install its own transmission lines to connect to the onshore grid. As two industry reports noted last year, that disjointed, one-off approach only works for so long: “If each … project builds a separate [line] to the onshore transmission system, viable landing sites and cabling routes will become constrained. A planned transmission approach can make better use of the limited landing sites.”
New Jersey is taking a holistic approach to developing its offshore infrastructure. In February, the Federal Energy Regulatory Commission (FERC) approved an agreement between the state’s Bureau of Public Utilities (BPU) and PJM to solicit competitive bids for developing an offshore-transmission system to support its offshore solicitations. PJM plans to open the proposal window through mid-2021 and announce the results in 2022. Additionally, the BPU has approved the purchase by a subsidiary of PSEG, the state’s largest utility, of a 25% stake in a large project east of Atlantic City. Such preparations to bring offshore development within the state’s existing structures are likely to streamline future coordination and engagement; however, Garden State residents will likely foot much of the bill for the infrastructure due to PJM’s cost-allocation methodology for state-initiated projects.
Which approach proves more successful has yet to be decided, and it will likely take years to determine a winner. To fully appreciate the scale of the challenge, imagine deciding to relocate part of your heart beyond the borders of your body. There could be any number of ways to achieve that given enough technology and money, but maintaining circulation would obviously be the top priority. The same holds true with our electricity grid, where reliability is equally critical: if we’re going to depend on it, it has to work.
