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Analysis of the Offshore Wind Energy Industry Ccrreeaattiinngg Tthhee Cclleeaann Eenneerrggyy Eeccoonnoommyy Analysis of the Offshore Wind Energy Industry

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Analysis of the Offshore Wind Energy Industry Ccrreeaattiinngg Tthhee Cclleeaann Eenneerrggyy Eeccoonnoommyy Analysis of the Offshore Wind Energy Industry CREATING THE CLEAN ENERGY ECONOMY Analysis of the Offshore Wind Energy Industry CCrreeaattiinngg tthhee CClleeaann EEnneerrggyy EEccoonnoommyy Analysis of the Offshore Wind Energy Industry Primary Authors Jennifer Todd is an Economic Development Associate at IEDC. Jess Chen is a Research Fellow and a PhD candidate at American University. Frankie Clogston is an IEDC Consultant and a PhD candidate at Johns Hopkins University. Primary Editors Liz Thorstensen, Vice President of Knowledge Management & Economic Development Practice, Tye Libby, Associate, Knowledge Management and Development Acknowledgements IEDC is grateful to the Rockefeller Brothers Fund for its generous support of this research project. Special thanks Lauren Avioli, Emily Brown, and Patrick McHugh for research support, and Mishka Parkins, who provided technical assistance for the creative design of the report. © Copyright 2013 International Economic Development Council This report was made possible by a grant from the Rockefeller Brothers Fund. International Economic Development Council IEDC is the world's largest membership organization serving the economic development profession, with over 4,500 members, and a network of over 25,000 economic development professionals and allies. From public to private, rural to urban, and local to international, our members represent the entire range of economic development experience. IEDC is dedicated to helping economic developers do their job more effectively and raising the profile of the profession. When we succeed, our members create more high-quality jobs, develop more vibrant communities, and generally improve the quality of life in their regions. The issue of sustainability has been designated a strategic priority by the IEDC Board of Directors. Further, sustainability and policy responses to climate change are growing issues for our members. Through a range of services, including: conferences, training courses, webinars, publications, research and technical assistance efforts, we are striving to be on the cutting edge of understanding the opportunities and challenges stemming from sustainability, climate change and economic transformation. For more information about IEDC visit www.iedconline.org Paul Krutko, FM President and Chief Executive Officer, Ann Arbor SPARK Chairman of the IEDC Board Jay C. Moon, CEcD, FM President and CEO, Mississippi Manufacturers Association Immediate Past Chairman of the IEDC Board Jeffrey A. Finkle, CEcD President & CEO International Economic Development Council International Economic Development Council 734 15th Street NW / Suite 900 Washington, DC 20005 www.iedconline.org | Phone: (202) 223-7800 | Fax: (202) 223-4745 TABLE OF CONTENTS Introduction to Offshore Wind Energy ....................................................................................................... 4 Job Creation Potential of Offshore Wind Energy ............................................................................... 7 The State of the U.S. Offshore Wind Market .................................................................................... 15 Hurdles and Solutions: Offshore Wind Energy Market ........................................................................ 55 Supply Side Issues – How to Overcome High Costs .......................................................................... 56 Demand Side Issues – Finding or “Making” the Market ................................................................... 71 The Regulatory and Policy Environment .............................................................................................. 74 Political Hurdles ........................................................................................................................................ 78 Hydroelectricity: Parallels to the Offshore Wind Industry ............................................................... 83 Appendix ......................................................................................................................................................... 91 INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL 3 INTRODUCTION TO OFFSHORE WIND ENERGY Offshore wind power offers an inexhaustible energy source and, in the U.S., is located close to major population centers where demand for energy is highest. To date, this market has been insufficiently tapped. The U.S. has yet to produce a single megawatt (MW) of energy from an offshore wind source. The success of the domestic onshore wind industry foreshadows some of the potential of offshore wind. This chapter hopes to spur action that will unlock this potential. The first section discusses the benefits of offshore wind energy in detail as well as hurdles to market development. The final section proposes tactics that can help overcome these hurdles. The Importance of Offshore Wind Energy to Economic Development There is evidence that offshore wind energy will create new jobs and economic investment. Offshore wind generates more jobs per megawatt than onshore wind and other fossil fuels due to the labor associated with manufacturing, operating, and servicing the wind farms. As the European Wind Energy Association (EWEA) states, the offshore wind industry has an “additional employment effect” due to the higher cost of installing, operating, and maintaining offshore wind turbines than land-based ones.1 It is also likely that offshore wind job creation will come at a time and to those places where it is particularly needed. As the U.S. Department of Energy (DOE) indicates, many of the jobs for the new offshore industry will potentially be located in economically depressed ports and shipyards. These locations will serve as fabrication and staging areas for manufacture, installation, and 1 European Wind Energy Association. (2009, January). Wind at Work: Wind energy and job creation in the EU, p. 22. Retrieved from: http://www.ewea.org/fileadmin/ewea_documents/documents/publications/Wind_at_work_FINAL.pdf INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL 4 maintenance of offshore wind turbines.2 These areas can particularly stand to gain jobs in a new offshore wind industry, since they have experienced a double blow from the downturn in manufacturing and the recent recession. Summary of Hurdles and Solutions The development of offshore wind energy is not without significant hurdles. Hurdles can be grouped under four categories. Supply-side hurdles are related to the high capital, operating, and financing costs of offshore wind projects. This creates a demand-side hurdle in which high costs are passed on to the purchaser of the offshore wind energy, thereby reducing demand. In addition, there are regulatory and policy hurdles due to the lengthy and complicated permitting process for offshore wind projects. Larger political hurdles surround the future of energy policy and government subsidies in the midst of economic recovery. Yet, these hurdles can be tackled over time through a coordinated strategy and action by multiple stakeholders. Section 3 of this report discusses in detail the strategies that economic developers can pursue to engage these stakeholders and kick start the offshore wind energy market. The table below presents a brief summary of the primary hurdles to offshore wind energy and their potential solutions. 2 U.S. Department of Energy. (2011, February). A National Offshore Wind Strategy: Creating an Offshore Wind Energy Industry in the United States, Retrieved from http://www1.eere.energy.gov/windandhydro/pdfs/national_offshore_wind_strategy.pdf. INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL 5 Hurdles to Development and Solutions Regulatory and Supply-side Demand-side Political policy 1) Invest in turbine 1) Support “carve- 1) Streamline the 1) Align R&D (such as outs” for offshore approval process communication incubator) wind 2) Improve strategies 2) Assist in regional 2) Structure incentives coordinated 2) Use proactive grid planning in RPS review growth strategies 3) Identify synergies 3) Provide production 3) Support tax credit in a recession with existing incentives (i.e. ITC) programs 3) Engage and industries (i.e. oil 4) Establish respond to and marine- government opposition based) procurement stakeholders 4) Create stimulus program 4) Public education for ship-building to garner 5) Support financing understanding streams for and support for investors offshore wind 6) Identify/retool existing businesses in supply chain 7) Provide workforce training with local partners 8) Attract FDI and forge foreign partnerships INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL 6 JOB CREATION POTENTIAL OF OFFSHORE WIND ENERGY Table 1 summarizes some of the most widely referenced projections for job growth in the offshore wind industry in Europe and the United States through 2020 and/or through 2030. No doubt, job projection numbers vary and are always being updated. Therefore a primary purpose of Table 1 is to show the range of projections by industry expert, thereby establishing a barometer for the employment potential of the industry and a benchmark for analysis. INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL 7 Table 1: Economic Development and Job Creation Projections in Europe and the United States Jobs/ By Place Source # of Jobs Capacity MW Year Europe EWEA 2009 215,637 300GW 7 2030 Europe EWEA 2011 169,500 40GW 42 2020 Europe EWEA 2011 300,000 150GW 20 2030 Institute for Public Policy Research United Kingdom 2009 70,000 32GW 22 2020 United Kingdom renewableUK 2011 45,000 18GW 25 2020 United Kingdom Carbon Trust 2008 40,000-70,000 29GW 14-24 2020
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