The Biden Administration's ambitious 30 Gigawatt offshore wind energy plan announced March 21, faces execution challenges more numerous and complex than any clean energy initiative in my memory. Here's a no-doubt partial list which surfaced in my recent conversation with an experienced clean energy project developer friend of mine:
NIMOV (Not In MY Ocean View) opposition which has either already - or predictably will soon - develop from beach front home- and other property- owners, typically people with wealth and prominence used to getting their way, including through the courts when necessary: think families with their own Kennedy-style 'compounds' all up and down the East Coast, hotel and other business owners, and even maybe their municipal governments. NIMOV opposition may not be ultimately successful in killing projects but it usually helps slow down their permitting and discourage investor interest;
Clean Energy Generation Source Competition: Think roof-top and ground-based solar which a number of Northeastern state including my own state of New Jersey have been encouraging with increasing success for years through various incentives s and broadening public acceptance and demand. Think also of inexpensive Canadian hydro-power, with Hydro-Quebec probably champing at the bit to sell more of the current 15% of New England's total electrical power to New England and/or through New England to other Northeastern and mid-Atlantic states. And we have to keep in mind that off-shore wind is still classified by off-taker as "intermittent baseload" while hydro power is baseload and therefore regarded as the more reliable and attractive a generation source;
Off-shore site Leasing and Environmental Review: The White House fact sheet of 3/29/2021 specifies one vast region with several distinct constituent areas in which they he US DOI's Bureau of Ocean Energy Management (BOEM) plans to establish a "New Wind Energy Area" for turbine site leasing - the BOEM-defined "New York Bight " off the coast of New York's Long Island and northern and central New Jersey. It is unclear how many GW of capacity the Administration is targeting for this one New Wind Energy Area and how many it GWs it is expecting to encourage in other East or West Coast off-shore wind turbine site leasing areas, although the announcement does emphasize the BOEM's intent to prepare an Environmental Impact Statement for the 1.1 GW Ocean Wind project off the coast of central and southern New Jersey, joining the EIS reviews already underway for the proposed 0.8 GW Vineyard Wind and 0.132 GW South Fork Wind projects off Massachusetts and Rhode Island, respectively. The BOEM hopes to launch EIS processes for "up to an additional ten projects later this year," but doesn't specify on which coast these projects are expected to be. These EIS processes will take many years to complete, due not only to the sheer technical complexity involved at waterborne sites but also due to their being the typical targets of NIMOV challenges;
Off-Shore site connection and transmission grid development: The connection and and transmission of each off-shore turbine's output is it's own system of technical and environmental review challenges. The Atlantic Wind Connection (AWC) was a proposed $5 Billion transmission backbone that could have served windfarms off New York and New Jersey, with lead partners Google, Good Energies and Murabeni, that failed to attract enough other investors to continue development. With a "State Agreement Approach" (SAA) Solicitation, the New Jersey Board of Public Utilities (NJBPU) and the regional independent electrical grid operator PJM hope to induce interest from new group groups of transmission grid investors to develop the power gathering and transmission infrastructure for 7.5 GW of power produced off participating state coastlines in 15 years.
On-Shore Transmission, Port Facilities, and Manufacturing Plant Permitting and Regulation by Multiple Agencies in Multiple Jurisdictions: There are many forms of on-shore regulation that the 30 GW program with which the generation, transmission and ancillary support project sponsors will need to successfully engage in order for the program to succeed. Here are some that leap foremost to my mind:
- electric power rate regulation, a function carried out at least a little differently by every by every state which hopes to have its utility company off-takers and ultimately its wholesale and retail consumers gain access to clean energy sources at the lowest possible cost;
- siting as well as environmental and economic regulation of onshore inter- connection facilities;
- environmental and rate regulation of the grid system operators (ISOs and RTOs) of which there are three operating in the Northeastern and Mid-Atlantic states of the US: PJM Interconnection, LLC (PJM), New York Independent System Operator, Inc. (NYISO) and ISO New England Inc. (ISO-NE). Each acts under that watchful eyes of multiple Federal and state regulators and they must also coordinate their planning and operational work with each other, which I believe they try do through terms of this: "Amended and Restated Northeastern ISO/RTO Planning and Coordination Protocol";
- federal state and local environmental, economic and workforce regulation of ports and manufacturing facilities which must develop and maintain special facilities for offshore wind construction, operation and maintenance functions;
Intergovernmental policy and program coordination: In order for the 30 GW plan to have any hope of expeditious implementation the various federal agencies involved, ( USDOT, USDOE, NOAA; USEPA and USDOI, USDHS, etc., etc.) will need to be very tightly coordinating their offshore wind encouragement and development activities among themselves under strong White House and OMB direction. And the federal agencies will need to be in constant communication and proceeding in tight coordination with their multiple state and sometimes local counterpart agencies which will need to be communicating and coordinating carefully amongst themselves. For the Northeastern, and Mid-Atlantic states, would a specialized Federal Power Marketing Administration with sweeping eminent domain powers be a helpful force in ensuring that all the necessary communications and coordination take place?
When the Coalition of Northeastern Governors (CONEG) was formed in 1976 at a conference in Saratoga, NY (in which yours truly played a wet-behind-the-ears policy staff support role), formation of a "Regional Energy and Development Corporation" was included as the first item in the resulting Agenda for Action for the Northeast document presented to President-elect Jimmy Carter and his key domestic policy advisors s few weeks after the 8 Governor signed off on the idea. Maybe the National Offshore Wind Research and Development Consortium (NOWRDC, an entity created by DOE and the New York State Energy Research and Development Authority (NYSERDA) to support R&D projects in the offshore wind generation and transmission spaces) is being expected to play a broad interstate coordination role but that entity currently lacks the participation of New Jersey and Delaware, as does CONEG at present. Maryland and Virginia are both members of NOWRDC but not of CONEG at present. And beyond the ability to make grants, etc. it does not appear to have any of possible tools like eminent domain authority that could be used to encourage close intergovernmental communication and cooperation
Project Financing: With a global average installed capacity cost of $3,800/KW in 2019, I roughly estimate that the installed capacity cost of 30 GW of offshore wind generation capacity to be at least $115 billion, and I don't think that includes ancillary costs like specialized construction and operational support facilities in ports, etc. The White House fact sheet indicates that the federal government is committing:
$3 billion of US DOE loan guarantee authority under the Office of Loan Programs' Title XVII Innovative Energy Loan Guarantee Program and "partner with offshore wind and offshore transmission developers, suppliers, and other financing partners" to support generation and transmission projects.
Far smaller amounts are being committed by other federal agencies including e.g. the Department of Transportation ($230 million) for "port and intermodal infrastructure-related projects'; The National Offshore Wind Research and Development Consortium (NOWRDC, $ 8 Million) ; The US Department of Commerce's NOAA Northeast Sea Grant program with $! million focused on fisheries impacts, etc.
The rest of the amount necessary to get 30 GW installed and serving power consumers on the nation's coasts will have to be raised from the national and global capital markets for equity, debt, and tax credit monetization. Given the challenges outlined above - and it's nowhere near a complete list - I'm not at all optimistic that the federal government's commitment of roughly $3.5 Billion can be reasonably expected to induce private investors to commit their own $113 Billion+. Maybe the capital market participants will look at these and other challenges and the financial risks they embody and collectively decide that they can all be overcome/mitigated with enough certainty that that the many project and corporate financing transactions necessary can be structured and closed with the necessary alacrity.
Kommentare