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US offshore wind generation ambitions edged a couple of steps
forward in recent days as two states awarded backing for projects
and the aspirations of two further states with robust goals in the
sector won an environmental thumbs up from a federal agency.
Maryland and Massachusetts announced winning
tender bids 17 December, with the former unveiling pricing that
analysts said illuminates the path forward for future tenders. The
tenders are the first step on a path to construction that includes
discussions with in-state utilities and federal permitting
applications.
At least one of those upcoming tenders will be in waters off the
most densely populated part of the Atlantic Seaboard, after the US
Bureau of Ocean Energy Management (BOEM) gave development of offshore
wind generation in the New York Bight—a stretch of the Atlantic
Ocean that encompasses waters off New York and New Jersey—the
environmental nod 16 December.
The latest tender results provide more faith in the nascent US
industry's prospects, IHS Markit Senior Research Analyst Samantha
Bobo said, sending a price signal and offering other projects more
information for their planning.
The New York Bight decision, meanwhile, is a signal to
developers that the state is "free and clear" to hold auctions,
said Bobo. The first of those auctions will be held by the end of
the first half of 2022, she said. "Things have started gaining
speed" in New York, she added.
Maryland offers lowest prices yet for US offshore
wind
The Maryland Public Service Commission (PSC) on 17 December
awarded offshore wind renewable energy credits (ORECs) to two
developers proposing more than 1.6 GW of capacity in waters off the
state's coast. Maryland has now permitted just over 2 GW of
capacity.
In the state's second round of offshore wind solicitations, US
Wind and Skipjack Offshore Energy won PSC backing for 20-year power
purchase agreements with prices that Bobo said were substantially
below the current average of around $90/MWh. Both developers are
already involved in building 368 MW of offshore wind capacity in
the state. Those ORECs were approved by the PSC in 2017.
In the Round 2 application period, which closed in June, US Wind
submitted three alternative bids, and Skipjack submitted two bids.
US Wind's 808.5-MW "Bid 2" was awarded ORECs at a levelized price
of $54.17/MWh. Skipjack's 846-MW "Phase 2.1" was awarded ORECs at a
levelized price of $71.61/MWh. The projects are expected to be
operational before the end of 2026, the PSC said, but have still to
be reviewed by BOEM.
Higher prices in prior bidding activity have been offered
because offshore wind is new technology for the US and subject to
high startup costs, Bobo said, so higher bids offers developers a
cushion.
Bobo said she expected tender prices to fall in the US as
construction starts, although it is too early to say when that
price decline will slow because there are so many variables in
play. Prices need to be low enough that offshore wind is
competitive, especially in the northeastern US, she added.
Skipjack plans to site its turbines 20 miles off the Maryland
coast; US Wind's closest turbines would be 15 miles offshore.
During the application proceeding, Ocean City—a major tourist
destination on the state's Atlantic coastline—requested all
turbines be located at least 30 miles from shore. The PSC turned
down Ocean City's request, arguing the sites are in federal waters
and in BOEM's domain rather than that of the state. Ocean City
officials did not respond to requests for comment 20 December.
The PSC said approval of ORECs for these projects will not leave
any room for additional projects in the second round of
applications and has canceled the anticipated next two application
periods.
The Clean Energy Jobs Act of 2019 increased Maryland's Renewable
Energy Portfolio Standard goals to 50% by 2030 and expanded
capacity for offshore wind energy under the program to at least 1.2
GW.
"The effects of climate change are real and, with its more than
3,000 miles of tidal shoreline, Marylanders are especially
vulnerable," said Jason Stanek, PSC chairman. "That's why it is
important for the [PSC] to take this action that will put our state
on a path of deeper decarbonization and help Maryland achieve its
aggressive clean energy goals—the residents of our state and
region deserve no less."
Skipjack Wind 2 is Danish renewables giant Ørsted's second
offshore wind energy project in Maryland. It will be located
adjacent to the company's 120-MW Skipjack Wind 1 project. Ørsted
will build Skipjack Wind 1 and 2 as one project, with operations
expected to begin in 2026, the company said. Ørsted is building an
operations and maintenance facility plus a steel fabrication center
in Maryland to support its offshore wind projects.
US Wind's 808.5-MW Momentum Wind facility will be a two-phase
project, with 411.6 MW due online in 2026 and 396.9 MW in 2027, the
company said on its website. It was not
available for comment 20 December on how this tied in with the
state's ambitions for turbines to be turning by 2026. The company's
270-MW MarWin facility is expected to be online in 2024.
The tender and the related infrastructure found particularly
fond support from one trade group. Liz Burdock, CEO of the Business
Network for Offshore Wind, said in a statement: "The Business
Network formed nearly a decade ago as a collection of Maryland
small businesses who envisioned the state becoming hub for offshore
wind activity. Today, that dream becomes more of a reality."
Massachusetts to work with familiar faces
Also on 17 December, Massachusetts said it had selected two
offshore wind projects, Mayflower Wind and Vineyard Wind, to move
forward to contract negotiations with state utilities on a combined
total of 1.6 GW of capacity.
The projects are a 400-MW proposal from Mayflower Wind and a
1.2-GW proposal from Vineyard Wind. The winning bids were selected
following a May 2021 request for proposals (RFP).
Massachusetts currently plans to build 5.6 GW of offshore wind
energy. The state's first procurement led to the
800-MW Vineyard Wind 1 project. A second procurement saw the
804-MW Mayflower Wind Low-Cost Energy project win out. The combined
energy output of the selected and contracted offshore wind projects
represents about 25% of Massachusetts' annual electricity demand,
the office of Governor Charlie Baker said.
Vineyard Wind is backed by Avangrid Renewables and its parent
company, renewables giant Iberdrola, along with Denmark's
Copenhagen Infrastructure Partners. Iberdrola CEO Ignacio Galán
said the project, also known as Commonwealth Wind, will "be a key
project in helping the US to achieve the 30 GW offshore wind target
by 2030."
The Commonwealth Wind plan also includes initiatives to convert
former coal-fired power plant sites in Massachusetts into a cable
manufacturing facility and an offshore wind assembly and turbine
staging port.
The same development partnership's Vineyard Wind 1 project is
currently under construction. It received the green light from
BOEM in May. The record of decision came shortly after BOEM began
to prepare an environmental impact statement for a facility, the
880-MW Revolution Wind project that straddles waters off the coasts
of Massachusetts and Rhode Island.
Mayflower Wind—backed a joint venture of Shell Renewables
and Energy Solutions and Ocean Winds (a partnership between Engie
and EDP Renewables)—won the chance to build 804-MW of offshore
wind capacity in an earlier bidding round, meaning it will now
provide more than 1.2 GW of power to the state.
With Massachusetts' and Maryland's announcements, the Business
Network for Offshore Wind said total US state offshore wind
procurement tops 17 GW, compared with 9.1 GW in January 2021 when
the Biden administration entered office.
Burdock said that Biden entering the White House has
"transformed US offshore wind into a national industry with
developments on three coasts supported by an emerging supply chain
that reaches deep into America's heartland."
BOEM said in May it plans to hold lease sales on
the West Coast in 2022, and a month later revealed it was also eyeing
offshore wind opportunities in the Gulf of Mexico. Before that
though, will be a New York Bight lease sale.
However, Burdock said, excitement should be tempered because the
global growth of the offshore wind industry continues at a
"blistering pace," which she said will put further strain on supply
chains. As a result, encouragement of US supply chain development
must be a state and federal priority, she said.
New York Bight
New York plans to build 9 GW of offshore
wind—the largest target for any state. New Jersey, meanwhile,
wants to build 7.2 GW of offshore wind capacity
by 2035. Both are looking to develop manufacturing related to the
offshore wind industry and supply chain capabilities.
In August, BOEM completed its environmental
review for Ørsted and Eversource's 130-MW South Fork wind farm in
waters off New York and Rhode Island, and approved construction in
November. South Fork was the second project to reach this point in
its timeline after Vineyard Wind 1. Four other projects have also
won State of New York backing so far: Empire Wind 1, Empire Wind 2,
Sunrise Wind, and Beacon Wind.
Now, with environmental review of offshore wind leasing in the
New York Bight, the upcoming lease sale will only heighten the
anticipation about the prospects for those waters and pressure on
the supply chain. The environmental assessment of nearly 800,000
acres of waters found no significant impact from the leasing.
While the environmental nod is positive and the supply chain
ramps up, executives say there is also a lot of work to be done
when it comes to the infrastructure to ship the power produced to
New York load centers.
There are challenges on the points of interconnection, many of
which have problems when comes it to landing cables, according to
National Grid Ventures Director of Incubation Hilary Flynn. There's
also the issues of cost and upgrading the existing onshore network,
especially on Long Island, for transportation into New York City,
she said during a 9 December discussion of the New York Bight's
prospects. National Grid Ventures has offshore wind joint ventures
with Ørsted and RWE.
The biggest part of this challenge is the limited right-of-way
opportunities, especially on Long Island, where much of the network
is 138 kV, and needs to be upgraded to 345-kV line to accommodate
the amount of power likely to be shipped from the expected New York
Bight offshore wind facilities, Hitachi Energy's Srinivas Pilltula
told the same event.
Pilltula said he hopes the development of the New York Bight
will move the debate forward on offshore grid networks that can
mitigate the congestion many foresee with the construction of so
much capacity in coastal waters. Such networks, often known as mesh
systems, are an alternative to individual radial connections for
each project.