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.

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.

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?

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.

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

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.