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.
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.