The statements and views expressed in the postings on the Ocean & Offshore Energy Projects and Policy Blog are my own and do not reflect those of Nixon Peabody LLP. This Blog does not provide specific legal advice. Reading or visiting this Blog does not create an attorney client relationship. This Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

Wednesday, December 29, 2010

What Happened? 2010 Edition.

2010 has been a big year for offshore wind energy. We have seen regulatory revolutions and revelations, lingering litigations, project progress, legislative luminaries, and capital commitments-- not to mention these annoying alliterations! Here are my top 10 news items for 2010:

1. Salazar Signs Approves Cape Wind and Signs Submerged Land Lease

In April, Interior Secretary Ken Salazar granted federal approval to Cape Wind’s long-suffering offshore wind project slotted for construction in Nantucket Sound off the coast of Massachusetts. In October, Salazar took the stage at AWEA’s Offshore Wind Conference in Atlantic City and signed the first ever submerged land lease for an offshore renewable energy project. As a conference attendee and witness, I admit that I may have teared up—but just a little!

2. Google Invests in Atlantic Wind Connection Backbone Transmission Cable

In October, internet giant and financial juggernaut Google announced its intentions to invest undisclosed, but potentially enormous sums of money to build an undersea cable to connect and transmit energy from offshore wind projects to distribution centers between New Jersey and Virginia. The project, known as the Atlantic Wind Connection, filed a plan with the FERC on December 21.

3. New Jersey Enacts Offshore Wind Economic Development Act
Speaking of transmission and infrastructure, New Jersey enacted legislation that not only calls for the production of at lease 1,100 megawatts of offshore wind generation, but also offers direct financial incentives to businesses that build manufacturing, assemblage, and water access facilities for qualified offshore wind projects. These incentives include tax credits and funding from the New Jersey Economic Development Authority (NJEDA).

4. MMS becomes BOEMRE in the wake of the Gulf Spill; BOEMRE to Handle Offshore Wind Regulation

Following the tragic and unfathomably destructive BP oil spill in the Gulf of Mexico, the Obama administration restructured and renamed the former Mineral Management Services and created the new Bureau of Ocean Energy Management, Regulation and Enforcement. Although some un-named (and snarky) industry insiders have been known to pronounce the new DOI bureau acronym as “bummer”, there is nothing depressing about the new “Smart from the Start” initiative that BOEMRE will be overseeing in the New Year!

5. Salazar Introduces Streamlined Permitting Process: “Smart from the Start”

In response to resounding complaints from project developers, financiers, and just about everyone else with an interest in offshore renewables, DOI Secretary Salazar announced a revised permitting process designed to eliminate regulatory redundancies and “needless red tape.” The new program, which Secretary Salazar's office has titled "Smart from the Start", and which began with BOEMRE’s immediate identification of several designated Wind Energy Areas in November, hopes to diminish the length of the permitting process by two to five years.

6. Deepwater Wind Announces a 1,000 MW Project for the Rhode Island Sound

In early December, Deepwater Wind announced that it has revised its original plan for a 100 turbine, 350 megawatt wind farm and has instead submitted plans for federal approval for a 1,000 megawatt wind farm in the Rhode Island Sound. The plan also includes a transmission line that would distribute electricity produced by the project to distribution centers between Massachusetts and New York.

7. 1603 Renewable Energy Tax Credit Extended for Another Year

In late December, Congress passed a one-year extension of the 1603 renewable energy investment tax credit as part of a multi-billion dollar tax cut package. The tax credit could provide a financial boost to offshore wind projects if construction begins before December 31, 2012.

8. Various Utility Commissions Reject, Approve, Reconsider and Litigate Various PPA Agreements for Proposed Projects

In March, the Rhode Island Public Utilities Commission rejected a power purchase agreement for Deepwater Wind’s Block Island project (starting at 24.4 cents per kilowatt hour) as “commercially unreasonable.” Rhode Island legislators then directed the commission to reconsider and the contract was approved. The PPA has been challenged yet again though, and the RI Supreme Court is expected to address the issue in 2011.

Likewise, the Massachusetts Department of Public Utilities approved National Grid’s PPA with Cape Wind. This PPA has also been challenged.

9. Maine Takes The Lead In Deep Water Floating Turbine Technology

Following a 2009 DOE Grant, Dr. Habib Dagher and his team at the University of Maine Advanced Structures & Composite Center have taken the lead in the U.S. market with regard to developing floating turbines designed for deep water wind farms. Maine has identified and approved three test areas in state waters where the team plans to test its floating turbines.

10. Steelworkers Union Files Trade Case Against China

In early September, the Steelworkers Union filed a 5,800 page petition with the office of the US Trade Representative to the WTO alleging that China has made unfair use of billions of doallars of subsidies, and has instituted performance requirements preferential practices and other "trade-illegal activities to advance its domination of the [renewable energy] sector." The focus of the USW's latest petition is the export to the US of Chinese-made equipment for alternative energy projects like land based and offshore wind turbines and solar-energy projects. The Union's petition identifies five major areas of "protectionist and predatory practices used by the Chinese to develop their green sector at the expense of production and job creation here in the US." These five areas include:
a. Restrictions of access to critical materials;

b. Prohibited subsidies contingent on export performance or domestic content;

c. Discrimination against imported goods and foreign firms;

d. Technology transfer requirements for foreign investors; and,

e. Trade-distorting domestic subsidies.

On Oct. 15, the U.S. Trade Representative announced its intention to proceed with further investigation of the case. On December 22, the US Trade Representative announced that it will be seeking World Trade Organziation dispute resolution with regard to China’s Subsidies for Wind Power Equipment Manufacturers.

Monday, December 13, 2010

Largest U.S. Offshore Wind Farm Proposed for Rhode Island

Rhode Island-based offshore wind developer Deepwater Wind submitted an application to the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) to build the largest offshore wind project in the United States: a 200 turbine, 1,000-megawatt offshore wind project in Rhode Island Sound. The project, called the Deepwater Wind Energy Center, also includes a proposal for an undersea transmission network designed to stretch from Massachusetts to New York. The turbines and installation would cost an estimated $4.5 billion to $5 billion, and the transmission system will cost an additional $500 million to $1 billion.

If approved, the Deepwater Wind Energy Center will be installed in four phases, with construction starting in 2014. The first 50-turbine phase will go on line in 2015 with additional construction phases to follow.

The Deepwater Wind Energy Center proposal replaces Deepwater Wind’s 2008 proposal to construct a 350-megawatt, 100-turbine project. Deepwater Wind reports that the aggressive new proposal was motivated by technological innovations that increase energy generation potential while diminishing costs, as well as DOI’s recently announced "Smart from the Start” regulatory initiative.

Diminished timelines for regulatory approvals may help to overcome investor reluctance. Regulators previously predicted time frames of 7 to 9 years before an offshore wind project could be brought online. Investors typically shy away from projects with start-up timelines longer than (at the most) 5-6 years. Deepwater Wind, along with most U.S. offshore wind developers, has lauded the proposed revisions to the regulatory process under the Smart from the Start program which among other things, promises expedite permitting for qualifying offshore renewable energy projects and may enable regulators to issue the first submerged land leases to developers by late 2011 or early 2012. See also here.

In addition, technological improvements to wind turbines have the potential to materially impact economy of scale analysis of offshore wind projects and make larger projects far more cost-effective. Here, Deepwater’s 200-turbine plan will produce more than triple the energy wattage than the 100-turbine plan. This is in part due to innovations in turbine design. While most existing European and Asian offshore wind installations have used 3 to 3.6 megawatt turbines, manufacturers (including Areva Renewables and REpower Systems) have now made 5 and 6-megawatt turbines available.

Using larger turbines improves the economies of scale for developers like Deepwater Wind and can translate into better pricing for rate-payers. Deepwater Wind CEO Bill Moore has predicted that the 200-turbine project will be more cost-effective than Deepwater’s much smaller Block Island wind farm (turbines, wattage) and could reduce prices a third lower than the 24.4 cents/kWh rate set under Deepwater Wind’s Block Island project power purchase agreement with National Grid. “This ‘second generation’ of offshore wind farms will be larger and farther from shore, and will produce lower priced power, using more advanced technology than the offshore projects announced to date. We expect the offshore wind industry in the United States to follow the European experience, where a more mature industry is building larger projects farther from shore,” Moore said in a press release.

Provided the project obtains a myriad of state and federal regulatory approvals, the Deepwater Wind Energy Center will be located in a 270 square-mile area between Rhode Island and Massachusetts in federal waters directly south of Sakonnet Point between Block Island to the west and Martha’s Vineyard to the northeast. This area is subject to a Memorandum of Understanding between the states of Massachusetts and Rhode Island, and is referred to as the “area of mutual interest.” The proposed project area is consistent with Rhode Island’s recently issued and approved Special Area Management Plan (SAMP)—essentially, an ocean-zoning plan designed to identify and protect fishing grounds, shipping lanes and glacial rock formations. Deepwater Wind submitted an application for a submerged land lease on the area of mutual interest in October 2010.

The multi-state transmission network, known as the New England-Long Island Interconnector (NELI) will extend from Massachusetts to New York and would enable Deepwater Wind to sell power to any of the states located along the seaboard where the network will be located including Connecticut, Massachusetts, New York and Rhode Island. The ability to distribute and sell energy to multiple states ensures that Deepwater will be able to sell all of the power produced by its project and also ensures that the investment cost of construction that is factored into power rates will not fall on ratepayers in Rhode Island alone.

As of this writing, it is not clear whether the NELI transmission system will ultimately interconnect with the planned Atlantic Wind Connection subsea transmission system which is planned to extend from New Jersey south to Virginia.

Tuesday, November 23, 2010

DOI and BOEMRE Announce 'Smart from the Start' Program Revisions to BOEMRE's 2009 Regulations

At 2pm EST, Secretary of the Department of Interior Ken Salazar announced the launch of a new offshore wind energy initiative for the Atlantic Outer Continental Shelf entitled ‘Smart from the Start’. Sec. Salazar explained that the new program will facilitate siting, leasing and construction of new projects to encourage the efficient (but prudent) development of offshore renewable resources. In summary, the 'Smart from the Start' program comprises two tracks of revised provisions to BOEMRE's May 2009 regulations. The first track concerns the leasing process, and the second track pertains to transmission system development.

The new program, which promises to significantly shorten the time projected to obtain a subsea lease under the current regulations (7-10 years), intends to simplify the leasing process for offshore wind projects where there is only one qualified and interested developer. The revised regulations call for BOEMRE to identify Wind Energy Areas ("WEAs")-- that is, offshore locations that appear most suitable for offshore wind energy projects-- off the coasts of a number of Atlantic states including Maryland, Delaware, New Jersey, Virginia, Rhode Island, and Massachusetts within the next 60 days.

By January 2011, Requests for Interest and Calls for Information ("RFI"s) will be issued for the initial WEAs to support environmental assessments for project based leases. An RFI has already been issued for coastal areas off of Maryland, and RFIs are currently in development for New Jersey, Virginia, Rhode Island, and Massachusetts.

Also in January 2011, BOEMRE will initiate and coordinate Environmental Assessments ("EA") pursuant to the National Environmental Policy Act ("NEPA") at the identified WEAs to evaluate potential impacts associated with site assessment activities. As part of the EA process, the revised regulations also require BOEMRE and DOI to coordinate closely with other federal agencies to compile existing site assessment data. If the EAs reveal a Finding of No Significant Impact ("FONSI"), BOEMRE could extend leases to prospective developers for the WEAs by the end of 2011/early 2012. Developers will still need appropriate and comprehensive site-specific NEPA review of individual projects.

Later in 2011, BOEMRE will work to identify additional WEAs in other Atlantic States, possibly including New York, Maine, North Carolina, South Carolina, and Georgia.

On the transmission side, the 'Smart from the Start' program requires BOEMRE to move aggressively to process applications to build offshore transmission lines. The identification of wind energy areas should assist the siting and feasibility reviews associated with potential offshore transmission lines.

The Department of the Interior posted a press release quoting statements made by the Secretary and the Director of BOEMRE at today's announcement:

“The Cape Wind lease is an historic milestone in America’s renewable energy future, but to fully harness the economic and energy benefits of our nation’s vast Atlantic wind potential we need to implement a smart permitting process that is efficient, thorough, and unburdened by needless red tape,” said Secretary of the Interior Ken Salazar.

“Our ‘Smart from the Start’ Initiative for Atlantic wind will allow us to identify priority Wind Energy Areas for potential development, improve our coordination with local, state, and federal partners, and accelerate the leasing process,” Salazar noted. “If we are wise with our planning, we can help build a robust and environmentally responsible offshore renewable energy program that creates jobs here at home.”

“This coordinated initiative will help to capture the great potential that offshore wind power offers our country and our economy,” said Deputy Secretary David J. Hayes. “Smart planning and early environmental reviews will pay great dividends in spurring responsible renewable wind energy development.”

“This accelerated and focused approach to developing the nation’s Atlantic wind resources will encourage investment while ensuring projects are built in the right way and in the right places,” said Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael R. Bromwich.

“We believe the regulatory change we are proposing, along with our efforts to identify priority Wind Energy Areas offshore, will result in a more efficient and coordinated permitting process for offshore wind,” said Bromwich.

DOI posted a factsheet on the Smart from the Start program HERE and a factsheet on the Direct Final Rule HERE.

Big News Day for Offshore Wind: Cape Wind and Major Federal Announcement!

Stay Tuned for a Major Federal Announcement Regarding Offshore Wind Regulation and Permitting!!

US Department of the Interior ("DOI") Secretary Ken Salazar is slated to announce “a major new initiative to accelerate the responsible siting and development of wind energy projects along the Atlantic coast” at 2pm today at the Ft. McHenry National Monument in Baltimore, Maryland. Although the DOI and the Bureau of Ocean Energy Management ("BOEMRE") have not released official details on the substance of the announcement, there is speculation that the DOI will be authorizing a new, more streamlined permitting process for offshore wind and hydrokinetic energy projects that could eliminate some of the duplicative requirements that are presently mandated.

Deputy Interior Secretary David Hayes, Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael Bromwich, Delaware Senator Tom Carper, Maryland Gov. Martin O’Malley and Jim Lanard, president of the Offshore Wind Development Coalition are also expected to be in attendance during the announcement today.

Check back here after the announcement for more specifics!

More Progress for Cape Wind!

On Monday November 22, 2010, the Massachusetts Department of Public Utilities announced that it has issued a final approval for the 15-year Power Purchase Agreement ("PPA") between National Grid and Cape Wind. This approval signifies another hard-won victory for the proposed Cape Wind offshore wind project.

Under the PPA, National Grid, one of the main electricity providers in Massachusetts, will purchase 50 percent of the power generated by the Cape Wind project. The Massachusetts Department of Public Utilities has approved rates starting at 18.7 cents per kilowatt hour beginning in 2013, with a planned gradual increase of 3.5% to be introduced over the next 15 years. This will results in an average increase of one to two percent for most consumers' electric bills.

In its press release, Massachusetts Department of Public Utilities Massachusetts Department of Public Utilities chair Ann Berwick stated: "It is abundantly clear that the Cape Wind facility offers significant benefits that are not currently available from any other renewable resource. These benefits outweigh the costs of the project."

The Cape Wind Offshore Wind project, which will involve the installation of 130 wind turbines in the waters of Nantucket Sound, still must obtain additional federal permits from the U.S. Army Corps of Engineers, as well as from the U.S. Environmental Protection Agency before construction can begin.

Wednesday, October 27, 2010

DOE, BOEMRE & NOAA Award $5 Million in Grants to 8 Ocean Renewable Energy Research Projects

On October 26, 2010, The Department of Energy (DOE), Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), and the Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) announced their joint decision to award nearly $5 million to eight research projects designed to support offshore wind energy facilities and wave, tidal, and currents and thermal gradient energy projects.

The projects were selected following a competitive joint funding process (a "Broad Agency Announcement") and were chosen as part of the Obama administrations' newly created National Ocean Council which was established on July 19, 2010.

The awards were granted to the following projects**:

(1) Parametrix (Auburn, Washington): Bayesian Integration for Marine Spatial Planning and Renewable Energy Siting

This research seeks to apply advanced probabilistic statistical methods to integrate oceanographic, ecological, human use data, stakeholder input, and cumulative impacts for the purpose of evaluating ocean renewable energy siting proposals.
Approximate award amount: $499,000 (over two years); Funding agencies: BOEMRE, DOE, NOAA

(2) Cornell Lab of Ornithology (Ithaca, NY): Characterization & Potential Impacts of Noise Producing Construction & Operation Activities on the Outer Continental Shelf

This 3 year project, expedited through the Cornell Ornithology Lab's Bioacoustics Research Program, will measure, characterize and evaluate the influences of construction and operation noises from construction and operation and maintenance of offshore renewable energy projects on resident and migratory marine vertebrates. Approximate award amount: $499,000 (over three years); Funding agencies: BOEMRE, NOAA

(3) University of Rhode Island (Kingston, RI): Development of Environmental Protocols and Modeling Tools to Support Ocean Renewable Energy and Stewardship

This project intends to develop and test standardized protocols for baseline studies and monitoring of environmental impacts associated with offshore renewable energy projects. Specifically, the URI researchers hope to craft a consistent and reliable (yet flexible) process for conducting environmental impact evaluations for offshore renewable energy projects. The project will be conducted as part of Rhode Island's ongoing effort to develop a comprehensive Special Area Management Plan ("SAMP"). Approximate award amount: $745,000 (over two years); Funding agencies: BOEMRE, DOE, NOAA

(4) University of Washington School of Aquatic and Fishery Sciences (Seattle, WA): Evaluating Acoustic Technologies to Monitor Aquatic Organisms at Renewable Sites

This two year research project will evaluate the ability of three classes of active acoustic technologies (echo sounders, multibeam sonar, and acoustic camera) to characterize and monitor animal densities and distributions at a proposed hydrokinetic site, the Snohomish Public Utility District's tidal energy demonstration project. Approximate award amount: $746,000 (over two years); Funding agencies: DOE, BOEMRE, NOAA

(5) Pacific Energy Ventures (Portland, OR): Protocols for Baseline Studies and Monitoring for Ocean Renewable Energy

This two year project will attempt to develop a consistent evaluational and monitoring protocol for considering the environmental impact of offshore renewable projects. The protocol will be consistent with related European programs. Although PEV plans to develop their protocol specifically around west coast marine resources, they hope to create a tool that can be used in other regions and marine ecosystems. Approximate award amount: $499,000 (over two years); Funding agencies: BOEMRE, DOE, NOAA

(6) University of Arkansas Center for Advanced Spatial Technologies (Fayetteville, AR): Renewable Energy Visual Evaluations

This research project is designed to develop a "Visual Impact Evaluation System" for Offshore Renewable Energy. The proposed system will allow a user to design the spatial layout and content of an offshore facility, import and prepare geospatial data that will affect visibility, run a series of sophisticated visual analyses, define atmospheric, lighting and wave conditions and, finally generate one or a series of realistic visualizations from multiple viewpoints. The system will also accept three-dimensional computer models of facilities submitted by project applicants or available from third parties, and will include pre-built models of many facilities. Output during the two year project will be in the form of maps, tabular reports and high-quality rendered images. Approximate award amount: $497,000 (over three years); Funding agency: BOEMRE

(7) University of Texas Bureau of Economic Geology (Austin, TX): Sub-Seabed Geologic Carbon Dioxide Sequestration Best Management Practices

This research project will employ existing knowledge and experience with onshore carbon sequestration monitoring and risk assessment, existing and proposed policy (both domestic and international), and international collaboration with groups already conducting offshore carbon dioxide transport and sequestration to compile information needed to establish best management practices for U.S. offshore geologic sequestration. Approximate award amount: $497,000 (over three years); Funding agency: BOEMRE

(8) University of Massachusetts Marine Renewable Energy Center (Dartmouth, MA): Technology Roadmap for Cost Effective, Spatial Resource Assessments for Offshore Renewable Energy

This research project will develop a technology roadmap, using primarily existing data, for the application of advanced spatial survey technologies, such as buoy-based LIDAR, to the assessment and post-development monitoring of offshore wind and hydrokinetic renewable energy resources and facilities. Once the roadmap has been completed, researchers will perform field tests to assess its viability. Approximate award amount: $748,000 (over two years); Funding agencies: BOEMRE, DOE

** These research project descriptions are paraphrased from a DOE press release issued on October 26, 2010.

Tuesday, October 12, 2010

Google Invests in Offshore Wind Transmission Cable: Boon or Bane?

This morning, Google and Good Energies (a New York based financial firm) announced that they inked a deal to provide 37.5% of the equity investment costs for a proposed $5 billion backbone transmission line, which is being called the "Atlantic Wind Connection" ("AWC"), and which will be used to link future offshore wind farms along the Atlantic Seaboard. Google and Good Energies join Marubeni, a Japanese trading company which has committed to a 10% stake in the project.

The project developer, Trans-Elect, describes the project as a 350-mile underwater spine that will run bi-directionally up and down the Atlantic coastline from Virginia to Maine. As has been discussed in a prior post, the AWC has been touted to resolve certain inherent problems with offshore wind generation, including the proverbial elephant in the room: intermittency. Trans-Elect says it hopes to begin construction in 2013.

Several media sources have reported that U.S. Government officials have indicated cautious optimism about the AWC project: “Conceptually it looks to me to be one of the most interesting transmission projects that I’ve ever seen walk through the door...It provides a gathering point for offshore wind for multiple projects up and down the coast.” (See here). Notably, Secretary of the Department of the Interior specifically referenced the AWC during his keynote speech at the AWEA Offshore Wind Conference last week.

There are some questions regarding the economic impact that will result from a transmission system that essentially negates the individual utility of each individual offshore wind installation. In the present regulatory environment, the end-user prices for electricity are set by state regulators and therefore, vary from state to state. Therefore, electrons generated from a facility in State A will garner a different price if they are deployed to State A or to State B. The Regional Transmission Operator ("RTO") makes the decision where a facility's electrons will be deployed based on grid conditions (i.e., where electricity is needed based on demand), not on pricing. This means that offshore wind generators must account both for the uncertainty resulting from intermittency, as well as uncertainties arising from where the RTO will direct their electrons.

This much uncertainty doesn`t bode well with investors. Unless there is some unifying policy or legislation to standardize end-user prices (or the utilities' sales price) for electrons generated by state based offshore wind installations, there is insufficient revenue predictability to assure debt investment in offshore wind. Insufficient debt financing can lead to a disproportionate cost burden being levied on state residents who may or may not reap the benefit of these costs. Without some tangible and guaranteed financial benefits, why would any state utility board or other authority support state financing (via mechanisms such as New Jersey's Offshore Wind Economic Development Act) of offshore wind projects? And without state support, most projects just can`t make the numbers work.

One way to resolve pricing variances between the states would be to implement some sort of unifying federal policy, regulation or legislation. Alternatively (and perhaps in light of agreements such as the Atlantic Offshore Wind Energy Consortium, more practically), states could enter into regional cooperative agreements to conform end-user and/or utility pricing as an incentive for renewable energy projects facing intermittency and high upfront development costs. However, adding new regulatory challenges to an already hyper-regulated industry seems like an inefficient way to get offshore wind farms built in our lifetimes.

Moreover, none of the above seems to jibe well with the law of Occam's razor-- there are just too many decision makers and moving parts. So what would be the alternative to a bi-directional backbone transmission project and what are some of the potential benefits thereto?

Local transmission lines only would omit the need for state and regional regulation/policy considerations to some extent. In addition, shorter transmission lines are less expensive transmission lines. But that leaves that intermittency elephant standing smack in the middle of the room.

This brings us to the holy grail of renewable energy: energy storage. If the benefit of offshore wind energy (for the Atlantic Seaboard) is demand center proximity, there is no economic benefit to extending transmission lines beyond the nearest shore-based substation. Notwithstanding that a viable accumulator technology has not yet been developed, I would be willing to bet that energy reservoirs would be at least as effective (if not more effective) at managing intermittency than a backbone subsea cable.

In sum, the backbone cable offers some solutions, but may create some difficult economic hurdles without significant policy and regulatory attention. Alternatively, local transmission options avoid some of the economic issues, but will not be able to truly resolve intermittency issues (which are themselves economic issues) until energy storage technology radically improves. In my humble view, neither option presents an ideal approach. What do you think?

Wednesday, October 6, 2010

Secretary Salazar and Cape Wind Sign First Commercial Lease

Following his keynote speech this morning at the third annual American Wind Energy Association ("AWEA") Offshore Wind Conference in Atlantic City, New Jersey, DOI Secretary Salazar was joined onstage by Cape Wind President Jim Gordon and AWEA President Denise Bode to sign a commercial lease for submerged federal lands.

The lease, which grants Cape Wind the right to develop submerged lands in the Outer Continental Shelf off the coast of Nantucket, MA, is the first of its kind, and has been over 8 years in the making. Cape Wind expects to install 140 turbines in Nantucket Sound. The maximum capacity of the Cape Wind installation is 462 mW, with a expected output of 180mW. Cape Wind will generate enough electricity to power about 200,000 homes.

As a large crowd of AWEA conference attendees looked on, Salazar and Gordon prepared to sign the lease. Gordon, who has been the President and primary financial stakeholder in Cape Wind since its inception in 2002, was clearly eager to sign the lease. Salazar asked Gordon to offer a few remarks before signing the document, joking that Gordon's eagerness was comparable to "waiting 8 years to marry someone." Gordon then thanked the Secretary and the administration for personally engaging with him and Cape Wind to see the project towards fruition. Gordon noted that Salazar was a particular champion of offshore wind projects and that due to his personal commitment and determination, necessary deadlines and clear regulatory processes were finally being issued and implemented at state and federal levels. Gordon highlighted that the effect of this lease and of the leases to come for other offshore wind projects will have the effect of ensuring a boundless supply of clean, efficient, and cost effective energy for our future.

Salazar and Gordon recieved a standing ovation from the conference attendees after the lease was signed.

Secretary Salazar's keynote speech was a paean to the Obama administration's efforts to invest time, money, and sweat equity in the success of the United States' renewable energy industry-- with an especial focus on offshore wind development. The Secretary noted that he had just issued an approval for two large scale solar installations (also the first of their kind) on federal lands located in California.

With regard to the nascent offshore wind industry, Secretary Salazar stated that it is important for developers and industry stakeholders to be "smart from the start." Secretary Salazar identified five areas where smart development is essential:

(1) Governmental coordination: Secretary Salazar commended the support of DOE's Secretary Chu as well as the success of interstate cooperative initiatives such as the Atlantic Governor's Consortium as well as state specific initiatives.

(2) Site Identification: The Secretary stated that BOEMRE will have completed its analysis and identification of high priority sites for offshore wind development by the end of 2010.

(3) Streamlining the Permitting Process: The Secretary acknowledged that the present BOEMRE permitting and leasing scheme is not a final polished process and that developers and stakeholders should view the regulations issued in May 2009 as a baseline framework. The Secretary encouraged the audience members to recommend concrete suggestions to streamline the regulatory process in order to speed project development and encourage financial investment in offshore wind. Specifically, Secretary Salazar noted that he expects the regulatory process to become significantly less cumbersome as more and more information about topics such as metocean planning, bathymetry, and ornithological and ichthyological studies are completed. The Secretary recognized that many of the studies and submissions require applicants to perform tasks duplicatively-- even just at the federal level. Accordingly, the next iteration of the regulatory process needs to be more efficient.

(4) Transmission: The Secretary indicated that DOI is seriously reviewing the construction of a transmission "backbone" that would connect offshore projects up and down the eastern seaboard to one another and to the existing grid. Notably, the "backbone" transmission proposal is one of the most promising solutions for intermittency issues inherent in offshore wind power generation.

(5) Investment: The Secretary acknowledged that without investor support, there will be no industry-- and that without a clear, predictable, and coordinated permitting process, investors are unable to ensure a return on their investment within any reasonable period of time. Accordingly, the Secretary recognized that the current estimated timeline to proceed through the regulatory process -- 7-9 years-- is simply unacceptable.

Thursday, August 26, 2010

Hydropower: FERC enters MOU with Colorado to Facilitate Small Hydropower Projects

On August 24, Chairman Jon Wellinghoff of the Federal Energy Regulatory Commission (FERC) signed a Memorandum of Understanding (MOU) with the State of Colorado to establish a pilot program to facilitate the development of small-scale hydropower projects in Colorado.

This MOU was crafted in the wake of growing interest in the development of small, low-impact hydropower projects in Colorado. Earlier, the federal government conducted surveys to identify hundreds of potential hydropower projects (less than 5MW per project) in Colorado with a combined capacity of more than 1400 MW.

Under the MOU, Colorado and FERC have agreed to take the following steps:

(1) Colorado will develop a pilot program to test options for simplifying and streamlining procedures for authorizing conduit exemptions and small 5MW or less exemption projects while ensuring environmental safeguards;

(2) Colorado and FERC will identify a single point of contact for implementation of the pilot program;

(3) Both parties will hold quarterly teleconferences to discuss the development and implementation of the pilot program;

(4) Both parties will share and make publicly available all relevant economic, environmental, and technical data.

(5) FERC will waive certain consultation requirements when all relevant resources agencies agree to do so.

FERC's MOU with Colorado is the most recent of a number of FERC MOUs with other states to encourage and facilitate the development of hydrokinetic projects. The other MOUs are as follows:

FERC and California (wave and tidal projects): May 18, 2010

FERC and Maine (tidal energy projects): August 18, 2009

FERC and Washington (experimental hydrokinetic projects): June 4, 2009

FERC and Oregon (wave energy projects): March 26, 2008

Friday, August 20, 2010

Offshore Wind: State Update (NJ, NC, NY and the Great Lakes)

The agency formerly known as MMS (and now known as the Bureau of Ocean Energy Management, Regulation and Enforcement) has certainly had its hands full this summer -- what with the renaming and internal reorganization in the wake of the BP Gulf Oil spill. Consequently, while the feds juggle other balls, a number of states have been moving to adopt (or reject) a variety of business and legislative initiatives that impact offshore wind project development.

New Jersey:

On Thursday August 19, 2010, New Jersey Governor Chris Christie signed into law the Offshore Wind Economic Development Act ("OWEDA"). The OWEDA directs the New Jersey Board of Public Utilities (BPU) to develop and establish an offshore wind renewable energy certificate program (OREC) that calls for a percentage of electricity sold in the state to be from offshore wind energy. This percentage would be developed to support at least 1,100 megawatts of generation from qualified offshore wind projects. The OWEDA also offers financial incentives to business that build manufacturing, assemblage, and water access facilities for qualified offshore wind projects. These incentives include tax credits and funding from the New Jersey Economic Development Authority (NJEDA).

The OWEDA is the most comprehensive-- and the most conducive -- state legislation that has been passed by a state to support the development of offshore wind energy. New Jersey project developers including the Deepwater Wind/PG&E Global joint project, and Fisherman's Energy will surely laud Governor Christie's commitment to offshore wind.

North Carolina:

On Friday August 20, 2010, Charlotte, North Carolina's Duke Energy announced that it has cancelled its plans to develop a three-turbine offshore wind demonstration project in a lagoon in North Carolina's Pamlico Sound. Duke noted that its analysis of the proposals signified that permitting, design and construction are “no longer economically viable”. Duke estimated that costs to get the first turbine operating at the Pamlico Sound location would cost $88 million, although costs for the second turbine would drop to $14 million. Duke further reported that its decision was made in part due to the greater than expected environmental impacts that would result from the construction of the project at the Pamlico Sound location.

Although the Pamlico Sound project will not move forward, Duke continues to work with the University of North Carolina at Chapel Hill, to develop a much larger, utility scale offshore wind farm in the ocean off of North Carolina’s coastline. In support of this effort, Duke will continue to fund a bird study conducted through UNC as well as studies of North Carolina's coastal wind resources.

Finally, Duke Energy is now calling on state lawmakers to consider legislation that could help the development of large-scale offshore wind capacity off the North Carolina coast. Now that New Jersey has passed qualified legislation in support of offshore wind development, we should expect that North Carolina lawmakers will be considering whether New Jersey's legislation can provide a model for North Carolina.

New York and the Great Lakes

The New York Power Authority is currently reviewing five proposals from private-sector wind developers to build offshore wind turbines somewhere in lakes Ontario or Erie. The Great Lakes Offshore Wind Project(hilariously shortened to "GLOW"-- which I suppose is better than "GLOP") originally issued a Request For Proposals in December 2009. The agency has urged public officials and citizens to be patient until a developer is chosen and a location revealed, likely in late 2010 or early 2011.

Lawmakers in Wayne, Oswego, Jefferson and Chautauqua counties have voted by wide margins to oppose the plan by the New York Power Authority to locate one or more wind farms in the near-shore waters of lakes Ontario or Erie. The Niagara County Legislature endorsed the authority proposal last year, but recently named a panel to revisit that decision. On August 19, 2010, 29 Monroe County lawmakers considered a resolution opposing the development of wind farms in Lake Ontario. Only 12 of the 29signed the resolution, thus falling short of a majority.

Tuesday, June 8, 2010

DOI and Thirteen East Coast States Create Offshore Wind Energy Consortium

The Department of the Interior has entered into a Memorandum of Understanding ("MOU") with Thirteen Atlantic Coast States to promote the development of offshore wind resources. The full title of the MOU is:

Memorandum of Understanding Between the United States Department of the Interior and The States of Maine, New Hampshire, Massachusetts, Rhode Island, New York, New Jersey, Delaware, Maryland, Virginia, North Carolina, South Carolina, Georgia, Florida To Create An Atlantic Offshore Wind Energy Consortium to Coordinate Issues of Regional Applicability for the Purpose of Promoting the Efficient, Expeditious, Orderly and Responsible Development of the Wind Resources of the Atlantic Outer Continental Shelf

Notably, the MOU highlights findings by the Department of Energy ("DOE") that state that in order to achieve a goal of obtaining 20% of national energy from wind resources, US developers will need to build offshore wind farms generating at least 54 gigawatts of offshore wind energy. The MOU also recognizes the enormous impact that an offshore wind industry could have on the economies of the participating Atlantic States through the creation of hundreds of thousands of jobs.

The participating States and the DOI therefore agree pursuant to the MOU to cooperate with one another to clarify and simplify the regulatory process including smoothing the path to compliance for developers who must comply with multiple state regulatory processes as well as the federal regulations. The parties also agreed to share scientific data and cooperate in the design, method, and performance of scientific studies and data acquisition.

Importantly, the MOU also provides that the parties will address the difficult issue of financing offshore wind farms. This is the first time that any collaboration of state and federal government bodies have joined together to consider and address the question of how to finance offshore wind farms-- which are among the most capital intensive energy projects many of the state participants have ever encountered.

Notably, this MOU is strictly between government entities. No private developers, utilities, or investment entities are parties to the agreement.

Wednesday, April 28, 2010

Cape Wind Receives Approval from DOI!

Folks, this is a momentous day for offshore renewable energy. After nine long years, countless regulatory hurdles, and more silly squabbles than the stars, Jim Gordon will finally be able to make his Cape Wind Offshore Wind Energy Farm a reality!

Over the next weeks, I will be posting more about the impact this decision may have on other offshore wind projects. For now, take a look at the press release from the DOI website:

Secretary Salazar Announces Approval of Cape Wind Energy Project on Outer Continental Shelf off Massachusetts


Contact: Kendra Barkoff, DOI (202) 208-6416
Leann Bullin, MMS (703) 787-1755

BOSTON, Mass – Secretary of the Interior Ken Salazar today approved the Cape Wind renewable energy project on federal submerged lands in Nantucket Sound, but will require the developer of the $1 billion wind farm to agree to additional binding measures to minimize the potential adverse impacts of construction and operation of the facility.

“After careful consideration of all the concerns expressed during the lengthy review and consultation process and thorough analyses of the many factors involved, I find that the public benefits weigh in favor of approving the Cape Wind project at the Horseshoe Shoal location,” Salazar said in an announcement at the State House in Boston. “With this decision we are beginning a new direction in our Nation’s energy future, ushering in America’s first offshore wind energy facility and opening a new chapter in the history of this region.”

The Cape Wind project would be the first wind farm on the U.S. Outer Continental Shelf, generating enough power to meet 75 percent of the electricity demand for Cape Cod, Martha's Vineyard and Nantucket Island combined. The project would create several hundred construction jobs and be one of the largest greenhouse gas reduction initiatives in the nation, cutting carbon dioxide emissions from conventional power plants by 700,000 tons annually. That is equivalent to removing 175,000 cars from the road for a year.

A number of similar projects have been proposed for other northeast coastal states, positioning the region to tap 1 million megawatts of offshore Atlantic wind energy potential, which could create thousands of manufacturing, construction and operations jobs and displace older, inefficient fossil-fueled generating plants, helping significantly to combat climate change.

Salazar emphasized that the Department has taken extraordinary steps to fully evaluate Cape Wind’s potential impacts on traditional cultural resources and historic properties, including government-to-government consultations with the Wampanoag Tribe of Gay Head (Aquinnah) and the Mashpee Wampanoag Tribe and that he was “mindful of our unique relationship with the Tribes and carefully considered their views and concerns.”

Because of concerns expressed during the consultations, Interior has required the developer to change the design and configuration of the wind turbine farm to diminish the visual effects of the project and to conduct additional seabed surveys to ensure that any submerged archaeological resources are protected prior to bottom disturbing activities.

Under these revisions, the number of turbines has been reduced from 170 to 130, eliminating turbines to reduce the visual impacts from the Kennedy Compound National Historic Landmark; reconfiguring the array to move it farther away from Nantucket Island; and reducing its breadth to mitigate visibility from the Nantucket Historic District. Regarding possible seabed cultural and historic resources, a Chance Finds Clause in the lease requires the developer to halt operations and notify Interior of any unanticipated archaeological find.

Salazar said he understood and respected the views of the Tribes and the Advisory Council on Historic Preservation, but noted that as Secretary of the Interior, he must balance broad, national public interest priorities in his decisions. “The need to preserve the environmental resources and rich cultural heritage of Nantucket Sound must be weighed in the balance with the importance of developing new renewable energy sources and strengthening our Nation’s energy security while battling climate change and creating jobs,” Salazar said.

“After almost a decade of exhaustive study and analyses, I believe that this undertaking can be developed responsibly and with consideration to the historic and cultural resources in the project area,” Salazar said. “Impacts to the historic properties can and will be minimized and mitigated and we will ensure that cultural resources will not be harmed or destroyed during the construction, maintenance, and decommissioning of the project.”

He pointed out that Nantucket Sound and its environs are a working landscape with many historical and modern uses and changing technologies. These include significant commercial, recreational and other resource-intensive activities, such as fishing, aviation, marine transport and boating, which have daily visual and physical impacts, and have long coexisted with the cultural and historic attributes of the area and its people.

A number of tall structures, including broadcast towers, cellular base station towers, local public safety communications towers and towers for industrial and business uses are located around the area. Three submarine transmission cable systems already traverse the seabed to connect mainland energy sources to Martha’s Vineyard and Nantucket Island. Visual and physical impacts associated with Nantucket Sound and its associated shorelines abound; it is not an untouched landscape.

Salazar disagreed with the Advisory Council’s conclusion that visual impacts from the proposed wind farm, which will be situated between and at substantial distance from Cape Cod, Nantucket Island and Martha’s Vineyard, provide a rationale for rejecting the siting of the project. The viewshed effects are not direct or destructive to onshore traditional cultural properties. In no case does the turbine array dominate the viewshed. The project site is about 5.2 miles from the mainland shoreline, 13.8 miles from Nantucket Island and 9 miles from Martha’s Vineyard.

Nevertheless, Interior has required the developer to reduce the number of turbines and reconfigure the array to diminish its visual effects. Moreover, the developer will be required to paint the turbines off-white to reduce contrast with the sea and sky yet remain visible to birds.

No daytime Federal Aviation Administration lighting will be on the turbines, unless the U.S. Coast Guard requires some “day beacons” to ensure navigation safety. FAA nighttime lighting requirements have been reduced, lessening potential nighttime visual impacts. The upland cable transmission route was located entirely below ground within paved roads and existing utility rights of way to avoid visual impacts and potential impacts to unidentified archeological or historic resources.

These mitigation measures, coupled with the overall distance from which the turbine array will be viewed at any location, will reduce the visual impacts of the project. Lease terms also require the developer to decommission the facility when the project has completed its useful service life, deconstructing the turbines and towers and removing them from the site.

The Secretary also disagreed that it is not possible to mitigate the impacts associated with installation of piers for wind turbines in the seabed, noting that piers for bridges, transmission lines and other purposes are routinely built in relatively shallow waters consistent with those found in Horseshoe Shoals. A number of marine archaeological studies have indicated that there is low probability that the project area contains submerged archaeological resources. Most of the area has been extensively reworked and disturbed by marine activities and geological processes.

Nonetheless, Interior will require additional and detailed marine archaeological surveys and other protective measures in the project area. A full suite of remote sensing tools will be used to ensure seafloor coverage out to 1000 feet beyond the Area of Potential Effect. More predictive modeling and settlement pattern analyses also will be conducted as well as geotechnical coring and analyses to aid in the identification of intact landforms that could contain archaeological materials. Moreover, the Chance Finds Clause in the lease will not only halt operations if cultural resources or indicators suggesting the possibility of cultural habitation are found but also allow the Tribes to participate in reviewing and analyzing such potential finds.

The Advisory Council’s regulations provide that the Interior Department must take into account the Council’s comments on particular projects. The Department, as the decision-making authority, is required to consider the Council’s comments but is not legally bound to follow its recommendations or conclusions.

The Cape Wind Associates, LLC facility would occupy a 25-square-mile section of Nantucket Sound and generate a maximum electric output of 468 megawatts with an average anticipated output of 182 megawatts. At average expected production, Cape Wind could produce enough energy to power more than 200,000 homes in Massachusetts. Horseshoe Shoals lies outside shipping channels, ferry routes and flight paths but is adjacent to power-consuming coastal communities. One-fifth of the offshore wind energy potential of the East Coast is located off the New England coast and Nantucket Sound receives strong, steady Atlantic winds year round. The project includes a 66.5-mile buried submarine transmission cable system, an electric service platform and two 115-kilovolt lines connecting to the mainland power grid.

The Cape Wind Fact Sheet, Project Site Map and the Secretary’s Response to the Advisory Council on Historic Preservation are available at
http://www.DOI.gov/news/doinews/Secretary-Salazar-Announces-Approval-of-Cape-Wind-Energy-Project-on-Outer-Continental-Shelf-off-Massachusetts.cfm or at http://go.usa.gov/iE2. More information on the project can be found at http://www.mms.gov.

Thursday, April 8, 2010

Transmission: Why East Coast Offshore Renewable Energy Will Provide More Renewable Energy Than Onshore Wind Imported from the Midwest

It`s no secret that the costs of transmission associated with offshore renewable energy generation are greater than the costs associated with onshore renewable energy generation. You don`t need an expert to explain why laying cable along the ocean floor might be more expensive than traditional above-ground power lines. Thus, it is not surprising that proponents of midwest onshore wind farms have latched onto this simple economic argument to support a plan wherein east coast electricity would be imported across thousands of miles from midwest wind farms in places like the Dakotas.

However, the hidden costs of importing midwestern wind are more than just financial. Importing wind energy from the midwest would require construction of thousands of miles of cross-country transmission lines and associated relay stations. The new transmission lines would potentially pass through a number of states such as Kentucky, Illinois, West Virginia, Indiana and Pennsylvania that host some of the most productive coal mines and some of the dirtiest coal fired power plants in the nation; and, there is no legal basis by which anyone could prevent those coal fired power plants from tapping into the new electricity superhighway. In short, a cross country transmission line would provide greater opportunity for the distribution of dirty electricity, thus defeating the entire purpose of importing clean, wind energy all that way.

So what`s the alternative? The alternative is to build offshore renewable energy off of the Atlantic Seaboard.

Those who support importing midwestern wind energy may argue that while traditional power plants ability to tap into transcontinental transmission lines may tarnish some of the environmental benefit, there are also advantages to be had-- most especially with regard to the intermittency issue.

As I have mentioned here before, one of the big concerns with all true renewable energy resources is intermittency-- i.e., the wind doesn`t blow all the time and the sun only shines for abut half of any given 24 hour period. However, if traditional power plants could take over at night and when the wind is calm, wouldn`t that split the baby and solve the problem? Well, yeah, but that means we still have to keep those stinky old power plants online, right?

There may be a better solution.

A recent study, published on April 5 in the Proceedings of the National Academy of Sciences and spearheaded by marine-policy expert Willett Kempton of the University of Delaware in Newark, proposes a 1,550-mile-long network of offshore wind stations that could provide power from Massachusetts to North Carolina with minimal threat of outages.

Kempton's study directly addresses the intermittency problem by addressing the issue from a meteorological standpoint. Basically, the study shows that at any given time, the wind is gusting strongly enough to provide a significant amount of energy somewhere, but probably not everywhere, along the eastern seaboard of the United States. To combat intermittency, we therefore need to build a series of wind farms strategically along the coastline from Maine to North Carolina, and connect them through a single network.

Kempton's study used data from 11 meteorological stations located off of the eastern seaboard-- from Maine to Florida-- with data tracked over five years. The study also employed a simulated underwater transmission cable to predict the effect of interconnecting power theoretically derived from the 11 stations. Although each site's data showed a predictably erratic capacity for electricity production, the energy production of all of the sites in aggregate did not dramatically fluctuate.

Moreover, there are no fossil fuel burning power plants between eastern coastal waters and land. So, there you have it-- a solution to intermittency that does not require default reliance on traditional power plants.

Thursday, April 1, 2010

Is the President's New Oil and Gas Drilling Plan a Death Knell for Offshore Renewable Energy? Think Again.

Yesterday, President Obama announced a plan to expand oil and gas drilling on the continental shelf. The plan was designed with close assistance from the Department of the Interior-- the same Department that oversees offshore renewable energy development and leasing. President Obama's plan authorizes drilling in areas of the Atlantic Seaboard, the Gulf of Mexico, and Alaska. No drilling is authorized for the west coast or for areas on the Atlantic seaboard north of Delaware. Certain carve-outs have also been implemented to preclude drilling off of Florida's Gulf Coast and part of its eastern shorelines.

Here are two maps from the DOI website showing where the new plan authorizes drilling:

It is not surprising that environmentalists have already roundly condemned Obama's new plan. See, e.g. Oceana, Southern Env't, and Greenpeace. Moreover, although President Obama said that what he wanted to emphasize is that "this announcement is part of a broader strategy that will move us from an economy that runs on fossil fuels and foreign oil to one that relies more on homegrown fuels and clean energy", it is not at all clear that the plan will truly benefit the oil and gas industry or decrease reliance on foreign oil. See, e.g, NY Times 4/1/10.

So what gives? Two thoughts come to mind.

First, the timing of this announcement-- so soon after the health care bill passed-- is suspicious. Drafting legislation authorizing offshore drilling for oil and gas has long been a key piece of the Republican energy agenda. This new plan may be a bone to appease republican frustrations.

Second, and perhaps more intriguing, is how this new plan might affect the development of proposed offshore renewable projects. One of the most commonly made arguments against developing offshore windfarms has been that these developments will compromise the environment and/or stain an otherwise pristine seascape. Moreover, these arguments-- which one might assume would be coming from the liberal environmentalists--have often been propounded by otherwise conservative organizations whose real motivation has been to prevent allocations of state and federal funding to non-traditional energy projects.

However, those who have been arguing against offshore renewables on the basis of aesthetics or environmental concern will have a pretty hard time towing that line if they are in favor of the offshore drilling projects. Additionally, since at least some of the proposed offshore renewables projects (including proposed offshore windfarms in the coastal waters adjacent to Delaware, Maryland, Virginia and North Carolina) are in areas that have been opened up for oil and gas drilling, opposition parties will find that they will have no choice but to oppose both oil and gas AND the offshore wind facilities if they have any hope of appearing sincere.

Personally, I am not a fan of offshore drilling. I tend to agree with the NGO Oceana. I believe that the potential for damage arising from spills and other catastrophes far outweighs the benefit of obtaining access to what are relatively minor oil and gas resources. Nevertheless, I think Obama's new plan may actually help the offshore renewable industry move forward.

What do you think?

Friday, March 19, 2010

Upcoming ABA Quick Teleconference!

American Bar Association | Section of Environment, Energy, and Resources

Offshore Renewable Energy Generation: State and Federal Regulation and the Development Process Quick Teleconference

Jennifer Simon Lento, Obermayer Rebmann Maxwell & Hippell, LLP, Philadelphia, PA

Maureen Bornholdt, Mineral Management Services, Herndon, VA
Fara Courtney, Good Harbor Consulting/US Offshore Wind Collaborative, Gloucester, MA
Megan Higgins, Ecology & Environment, Providence, RI
Markian Melnyk, Dewey & LeBoeuf LLP, Washington, DC

Click Here to Register: ABA QT Registration

If you are in the Philadelphia area, you can participate in the QT free of charge by attending this event at my office. Please email me at jennifer.simon@obermayer.com for more information!!

Organized by Jennifer E. Simon, Programs Vice-Chair for the Environmental Litigation and Toxic Torts Committee

Tuesday, March 30, 2010
3:00 p.m. – 4:30 p.m. Eastern
2:00 p.m. – 3:30 p.m. Central
1:00 p.m. – 2:30 p.m. Mountain
12:00 p.m. – 1:30 p.m. Pacific
(Special Start Time)

For coastal areas of the United States, offshore renewable energy projects including wind, wave and hydro may provide the best opportunity for renewable energy generation. In May 2009, Mineral Management Services issued a new rule governing site leasing for offshore renewable energy projects proposed in federal waters. Because offshore projects typically impact both federal and state waters, states are slowly coming to the table with their own regulatory programs. However, it remains to be seen whether the state and federal regulatory programs will come together cohesively.

This QT invites interested attorneys to peek into the future of offshore renewable energy in the United States. The panel members will discuss the US Offshore Renewable Industry generally, as well as address specific projects, and will identify obstacles to development including regulatory uncertainly and state and federal inconsistencies, as well as transmission and grid issues.

Cosponsored by Energy Infrastructure and Siting and
Renewable and Distributed Energy Resources Committees

This program will not offer CLE credit.

Tuesday, February 23, 2010

Obama and Climate Change Legislation: Call and Response

Yesterday, my colleague Shari Shapiro, posted a blog piece entitled "Getting to Yes". She argued that the current energy/climate change legislation being backed by the Obama administration should be scrapped because it is both weak and toothless. I agree that the proposed bill does not offer anything resembling a comprehensive approach to climate change mitigation. Nevertheless, I believe that congressional dithering has gone on long enough and we must get something-- even a paper tiger-- on the books ASAP.

Check out Shari's position here.

And then see my response.

What do you think?

Monday, February 15, 2010

Nuclear Power and Wind Energy: Why Choose?

Lately, there have been a lot of white papers, scientific papers, and industry documents that argue (exclusively) in favor of either nuclear power or some renewable energy source (wind, solar, biomass). Typically, these articles paint the preferred energy resource as a panacea to all the world’s energy problems while decrying the imminent devastation that will result if another resource is selected.

The pro-nuclear power articles assert that nuclear is the only possible solution because nuclear is the only option for reliable, non-carbon emitting base load power generation. The pro-nuclear folks then denounce renewable generation from wind and solar as too “intermittent” to provide a viable alternative. Likewise, renewable resource advocates disparage nuclear power plants for environmental, political, economic and social reasons including allegations that nuclear power still causes substantial environmental harm as a result of uranium mining, transport and storage. The renewable advocates then gloss over intermittency issues with vague references to (as yet un-built) smart grids and (as of yet undeveloped) energy storage solutions.

See, e.g. Travis Madsen and Tony Dutzik, et al., Generating Failure: How Building Nuclear Power Plants Would Set America Back in the Race Against Global Warming (Env’t New Jersey Research and Policy Center, Nov. 2009) (available here: http://bit.ly/cirRIR); see also, The Future of Nuclear Energy to 2030 and It’s Implications for Safety, Security and Nonproliferation (Centre for International Governance Innovation, 2010) (available here: http://bit.ly/aPAmcb).

The truth is that both the nuclear folks and the renewable energy people are correct. Nuclear power does not emit carbon or other greenhouse gases or dangerous particulates into the atmosphere at the plant. But there is no question that uranium mining presents problems—including (but not limited to) the standard environmental consequences of most mining operations as well as the fact that most uranium reserves are not located on domestic lands. And, it is also true that wind and solar generation is intermittent—the sun does not always shine, and the wind does not always blow (although offshore wind farms suffer less intermittency issues than onshore wind farms)—and we don`t yet have a smart grid or the technological ability to store vast quantities of electricity for use during non-sunny, non-windy times.

Nuclear power is ideal for providing base load energy needs. Remember, base load represents the floor of our energy requirements—basically, what the demand centers require in the middle of the night when the weather does not require lots of people to run air conditioners or heating units at full tilt. Nuclear power plants provide constant, uniform wattage. They cannot easily be powered down or powered up, which means nuclear power plants need to be run more or less constantly—perfect for base load. Alternatively, renewable energy generation is often at its best during the types of weather events that place higher-than-base-load demands on electricity producers. People use more energy during daylight hours (solar!) and during stormy weather (wind!).

So what about having a mixture of both types of energy generation? Both nuclear power and renewable energy generation projects are capital intensive, so the project advocates must compete for funding. Could it be that the advocates, in decrying their alternatives, have simply created a Mexican showdown preventing either type of project from going forward? As I have complained in this blog before, no offshore wind farms have yet been built. Moreover, the ambitious 2002 U.S. Nuclear Power 2010 program has resulted in the start of not a single construction project.

So maybe the renewable energy people and the nuclear people should stop fighting and start talking about how these resources can compliment each other. Or am I totally off the grid here?

Monday, February 8, 2010

Renewable Energy and International Competition

Among the panoply of reasons why the United States must invest in and develop an alternative renewable energy industry is the oft-touted call for energy independence. As we all know, reliance on fossil fuel and oil is environmentally costly. But even for those remaining holdouts who insist that the causes of global climate change are not anthropogenic, there is no denying that the middle eastern oil states have more leverage and power over us than we are comfortable with as a result of our insatiable thirst for oil. In short, whether our reasons are environmental or political, we must find a way to end our foreign energy dependence.

A number of recent studies published by the National Renewable Energy Laboratory and the American Wind Energy Association demonstrate that the United States hosts a wide array of accessible renewable energy resources including solar, biomass, and on and offshore wind. One of the more obvious benefits of using these renewable resources is that the fuel sources are cost free. However, the turbines, photovoltaic films, and other renewable energy infrastructures are not free and the companies that make these things are still profit-seeking businesses who must seek out welcoming regulatory environments in which to develop and flourish.

Right now, we are at a crossroads. The United States can either decide that it wants to encourage a renewable energy industry or it can decide to dither around in the regulatory morass in which we have been stagnating for the last decade and more. But the longer we wait, the more likely it is that once we do decide to get in the game, the industry will have taken root elsewhere, and we will once again find ourselves dependent on foreign nations whose markets and political policies are not in tune with our own. One of the biggest threats to the United States renewable energy industry is China:

"China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world's largest maker of wind turbines, and is poised to expand even further this year."

"China has also leapfrogged the West in the last two years to emerge as the world's largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants."

"These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China."

See, http://blog.algore.com/2010/02/china_in_the_lead.html

The European Wind Energy Association 2009 annual report states:

• 199 offshore wind turbines were installed and grid connected totalling
577 MW during 2009, up 54% from the previous year-- a total of 828 offshore
turbines have now been installed (and interconnected) offshore in nine European
• Turnover in 2009 was approximately €1.5 billion, and is expected
to double in 2010 to
approximately €3 billion;
• 1,000 MW expected to be
installed during 2010, a 75% market growth compared to 2009;
• 17 offshore
wind farms under construction, totaling over 3,500 MW and a further 52 offshore
wind farms have been fully consented, totaling more than 16,000 MW;
• More
than 100 GW of offshore wind farms currently being planned by project
and utilities.

According to Offshore Wind China (www.offshorewindchina.com/english/index.aspx), in addition to a 56% average growth rate per year over the last five years for the wind energy industry generally, China is also making concrete progress with offshore wind projects:

China is regarded as one of the richest countries in offshore wind resources,
whose mainland coastline is about 18,000 kilometers – the fourth longest
coastline in the world. At 10 meters’ height, the offshore wind resource is
estimated to be 750 million KW, among which 100 million KW is in the 10 meter
depth waters. With the nation’s 40% population, the coastal area is the most
developed area in China and also the largest consuming market for
electricity. The first Chinese offshore wind farm in Shanghai went online
in 2009 as a demonstration project, followed by further ambitious plans to build
more offshore wind farms in the costal provinces of Jiangsu, Zhejian, Fujian,
Guangdong and Shandong. It is estimated that Jiangsu province will
establish the offshore wind farm with the total capacity of 7GW and Zhejiang
province of 2.7 GW by the year of 2020. The development of offshore wind power
has a huge potential in China.

As of this post, the United States has not fully permitted-- nevermind installed-- a single offshore wind turbine.

For the domestic Offshore Wind Industry, many are looking to Secretary Salazar's imminent decision on the future of the proposed Cape Wind project as a canary in the coalmine. DOI Secretary Salazar has indicated that he will issue a decision as to whether the Cape Wind project may be sited in Nantucket Sound by the first week of April. Although the project has proven that its benefits will significantly outweigh any environmental detriments (as demonstrated by the final Environmental Impact Statement issued in 2009), several Native American tribal groups, including the Wampanoag, have challenged the project and requested that the National Parks Service identify Nantucket Sound as a protected historic site. Nearly all offshore industrial interests have rejected the NPS's determination that Nantucket Sound is eligible for this status because it would likely impart a "chilling effect" on nearly all offshore development projects. This decision is the final federal regulatory hurdle that Cape Wind must overcome before the project is able to obtain a site lease.

Secretary Salazar has requested comments from the general public to inform his decision. Hopefully, Secretary Salazar will recognize that his decision and the impact that decision will have on the renewable energy industry in the United States generally will resonate far beyond the clean energy and climate change communities. This is a decision with enormous import for the United States position in world politics and in the international economy.

Wednesday, January 20, 2010

When Will the US Have A Fully Functional Offshore Wind Farm Installation?

Recently, a member of an offshore renewables interest group in linkedin.com posted a poll entitled: How long before the USA has a fully functional offshore wind farm installation?

This is an entropic question; in fact, it sums up every other question we face in the United States' burgeoning offshore wind industry. I have heard some project developers such as the New York Power Authority say, "We will be up and running in 3 years." Other project developers scoff at the NYPA prediction thinking it aspirational at best. The NYPA, say the cynics, has no lease for the submerged lands in the Great Lakes where it plans to build. Moreover, NY State has no regulatory policy or provisions in place to guide the project through the approvals that will surely be required. Moreover, say the cynics, NYPA does not even have a power purchase agreement (PPA) in place. And furthermore, say the cynics, have these NYPA people been watching the shenanigans that have thwarted progress on the Cape Wind Project since 2002?

The cynics make a good point. Nevertheless, the problems that have plagued Cape Wind may not plague every project. Still, there are significant obstacles. The primary obstacle is the time and expense involved in obtaining MMS licensure and leasing for siting new offshore projects. Having lenders lend, investors invest, or bond financiers structure financing plans involves the provision of significant amounts of capital to develop offshore facilities-- and those financiers expect repayment or a return on investment within what financial folks consider a reasonable time frame, ie, 5 years or so. But confidence in a five year return on offshore projects is extremely difficult due to the uncertain regulatory framework, not to mention the costs that accrue while siting these projects in relation to capital investment return. We need to create a more stable regulatory environment with reasonable deadlines that comport with investment time frames. Simply put, the investors, lenders and/or debt financiers must have some level of confidence that the project will actually get built if they are going to be willing to put billions of dollars on the line.

Cape Wind is probably not a good example for what future offshore wind projects will have to overcome. Cape Wind started seeking approvals back in 2002, and the regulations governing leases of submerged federal lands (as issued by the Mineral Management Services bureau-- a subsection of the DOI) were not issued until May 2009. Consequently, Cape Wind is not subject to the MMS process. Rather, it is grandfathered in and is following a piece meal approach to obtaining the proper clearances.

Cape Wind (like all offshore wind projects) has also had to wait while the Massachusetts state regulators put together some sort of regulatory process and policy (they have now done so-- the Massachusetts Ocean Management Plan is available here: http://www.mass.gov/Eoeea/docs/czm/v1-complete.pdf.

In contrast, future projects in Massachusetts will not need to wait for the state regulators to figure out how to regulate offshore renewable energy projects. Likewise, other states such as Rhode Island and New Jersey either have already or are in the midst of issuing state ocean management plans that will provide guidance for future projects.

The ongoing offshore wind projects that will be subject to the MMS process are in Rhode Island, New Jersey and Maryland/Delaware/Virginia (the "DelMarVa" project. These are slated for installation 15-20 miles offshore.

The DeepCWind project in Maine is a bit different. The Maine test beds are designed to test out a new technology in offshore wind turbines-- turbines that float. Present technologies require the turbines to be secured to the ocean floor, which means that they can only be installed in relatively shallow waters and increases the installation costs and construction impacts significantly. The test beds will be located within 3 miles of the Maine shoreline and therefore will not be subject to MMS' federal regulatory requirements. These test beds will never be scaled up to full utility sized farms. If the Maine project works, a utility scale wind farm would be built much farther offshore-- in the 15-25 nautical mile range. Floating turbine technology would vastly increase the potential for offshore installations -- especially on the west coast where the sea shelf drops off dramatically.

As for the folks who have retreated from wind because of T. Boone Pickens' reversion to natural gas as a result of the NG price drop, my response is this: any resource that is not renewable is by definition price volatile and comes with externality costs that outweigh short term cost benefits. Natural gas prices dropped this year, but no one really believes that natural gas will not become expensive again-- and sooner rather than later. Moreover, Pickens and his ilk have failed to include the financial hit associated with the climate impact of non-renewable energy resources-- the externalities. Natural gas, nuclear, etc...are all an improvement on coal fired power plants, but they all still emit toxins into the environment. Moreover, fuel costs money. I`m not an economist, but I believe that the increased costs associated with purchasing, transporting, refining, disposing, and mining fuels (never mind the environmental remediation and human health issues that run along side) weigh the scales heavily in favor of renewable energy sources. Wind is affirmatively cost-intensive on the front end-- construction, permitting, etc.. But it costs next to nothing to operate and maintain. Non-renewable resources are just too expensive in the long view.

The problem with Pickens' analysis is that he is looking at the rate of return over a very short time frame. To my mind, the future of our planet and our quality of life deserve an analysis that incorporates more than just a five year return on investment.

That being the case, we do need to find ways to streamline the regulatory process by encouraging MOU's or other types of efficiencies between state and federal regulatory processes. Moreover, we must find a way, without totally compromising public stakeholder participation, to limit the NIMBY challenges.

Engineers in Europe and their US counterparts can and have resolved the mechanical concerns. The big obstacle is regulatory. Make a more efficient and reliable process, and the investors will come. Make a more efficient and reliable regulatory process and we will be able to transform these offshore wind projects into what Europe already has: an offshore wind industry.