The Offshore Grid: The Future of America’s Offshore Wind Energy Potential
Benjamin Fox*
As the United States moves toward the increasing integration of renewable energy sources, an examination and analysis of the country‘s failure to develop its offshore wind resources is essential. Such a failure is incongruous with the United States‘ world-leading status in renewable energy innovation and is particularly troubling given the abundance of offshore wind resources along densely populated U.S. coastal states that lack other renewable energy alternatives. First, this Note will establish the importance of offshore wind as a renewable energy resource and examine major barriers to its development. Second, an examination of the Atlantic Wind Connection transmission project will demonstrate the important role offshore transmission may play in jumpstarting the U.S. offshore wind industry. Third, this Note will survey approaches adopted by other states and regions to develop transmission infrastructure to deliver disparate sources of renewable energy. Last, this Note will identify best practices from previous transmission approaches to identify where future offshore transmission projects would be most effective and identify the types of policies necessary to spur offshore wind energy development.
Introduction ...... 652 I. Why is Offshore Wind Power Important? ...... 655 A. Advantages of Offshore Wind Power ...... 655 B. Challenges to the Development of Offshore Wind Power ...... 657 1. Financial Challenges ...... 657 2. Regulatory Challenges ...... 660 C. Future Significance ...... 663 II. The Atlantic Wind Connection ...... 663 A. AWC Background Information ...... 664 B. Is the AWC an Important Project? ...... 666 1. AWC and RPS ...... 666 2. Economic Benefits offered by the AWC ...... 670
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III. The ―Chicken-and-Egg‖ Problem: Additional Approaches to Foster Transmission and Renewable Energy Development ...... 673 A. Texas‘s Competitive Renewable Energy Zones ...... 674 B. California‘s Renewable Energy Transmission Initiative ...... 675 C. Hawaii‘s Inter-Island Undersea Cable ...... 677 D. Regional and Federal Approaches ...... 679 1. Western Renewable Energy Zone Process ...... 679 2. Energy Policy Act of 2005 and FERC Order 1000 ...... 681 E. Summary ...... 682 IV. The Path Forward ...... 683 A. The Northeast Coast ...... 685 B. Great Lakes Region ...... 690 C. Future Areas of Interest ...... 693 1. Southeast Coast ...... 693 2. West Coast ...... 694 Conclusion ...... 697
INTRODUCTION As the effects of global climate change have become more pronounced, the international focus on investment and deployment of renewable energy has grown rapidly. Global investment in clean energy technologies reached $310 billion in 2014, a more than four hundred percent increase from the total investment of the preceding decade.1 Domestically, despite the increasingly politically charged dialogue surrounding clean energy development and low- carbon energy sources,2 the United States remains a world leader in clean energy technology investment and the installation of renewable energy capacity. In 2013 the United States invested $36.7 billion in clean energy technology and its 138.2 gigawatts (GWs) of renewable energy installed capacity is second only to China.3
Copyright © 2015 Regents of the University of California. * Winner of the Harmon Prize 1. LUKE MILLS, BLOOMBERG NEW ENERGY FINANCE, GLOBAL TRENDS IN CLEAN ENERGY INVESTMENT 4 (2015), http://about.bnef.com/content/uploads/sites/4/2015/04/BNEF_clean_energy _factpack_q1_2015.pdf; Louise Downing, Clean Energy Investment Jumps 16%, Shaking Off Oil‘s Drop, BLOOMBERG BUS. (Jan. 9, 2015, 3:00 AM), http://www.bloomberg.com/news/articles/2015-01- 09/clean-energy-investment-jumps-16-on-china-s-support-for-solar. 2. A November 2011 Pew Research poll found that support for federal funding of alternative energy research had declined nearly thirty points for Republicans since April 2009 while increasing one point for Democrats over the same period. Partisan Divide over Alternative Energy Widens, PEW RESEARCH CTR. (Nov. 10, 2011), http://www.people-press.org/2011/11/10/partisan-divide-over- alternative-energy-widens/?src=prc-headline. 3. PEW CHARITABLE TRUSTS, WHO‘S WINNING THE CLEAN ENERGY RACE? 2013 EDITION 17, 50 (2014). The United States‘ renewable energy installed capacity figure for purposes of the Pew Report excludes hydropower projects over fifty megawatts in size. Id. at 32.
2015] THE OFFSHORE GRID 653
Onshore wind energy has been one of the most successful renewable energy technologies in the United States to date, both in terms of investment and deployment. The U.S. wind industry has grown at an explosive rate since the construction of the world‘s first wind farm in New Hampshire in 1980.4 Fueled by falling capital costs, favorable tax incentives, and state renewable energy mandates, wind energy has quickly spread across geographically diverse regions—the upper Midwest, Texas, and California have emerged as domestic leaders in wind energy deployment. Domestic wind energy installed capacity increased nearly tenfold from 2004 to 2014.5 As of 2015 the United States boasts a total installed wind energy capacity of 65.88 GW, enough electricity to power eighteen million homes.6 Onshore wind energy has even emerged as a viable alternative to fossil fuels when constructing electricity generation facilities. In 2012 despite the boom in domestic natural gas production, wind energy was the largest source of new electric generating capacity for the first time in history.7 In stark contrast to the success of the onshore wind industry, the United States lags far behind the rest of the world in its development of offshore wind power. Instead Europe has taken the lead in this sector—Denmark constructed the world‘s first offshore wind project in 1991, and eight other European nations have since developed operational offshore wind farms.8 The United Kingdom boasts as much offshore wind installed capacity as the rest of the world combined, and it projects that 10 GW of offshore wind energy will supply up to 10 percent of its electricity needs by 2020.9 In contrast, as of 2015 the United States still does not have a single operational offshore wind farm.10
4. Historic Wind Development in New England The Age of PURPA Spawns the ―Wind Farm‖, U.S. DEP‘T OF ENERGY, https://web.archive.org/web/20130820234508/http://www.windpowering america.gov/newengland/history_windfarms.asp (last visited Aug. 28, 2015). 5. AM. WIND ENERGY ASS‘N, U.S. WIND INDUSTRY FOURTH QUARTER 2014 MARKET REPORT 4 (2015), http://awea.files.cms-plus.com/4Q2014%20AWEA%20Market%20Report%20Public%20 Version.pdf. 6. Wind Energy Facts at a Glance, AM. WIND ENERGY ASS‘N, http://www.awea.org/ Resources/Content.aspx?ItemNumber=5059 (last visited Apr. 18, 2015). As of 2015, an additional 12.7 GW of wind energy installed capacity remained under construction. AM. WIND ENERGY ASS‘N, supra note 5, at 3. 7. AM. WIND ENERGY ASS‘N, AWEA U.S. WIND INDUSTRY ANNUAL MARKET REPORT, YEAR ENDING 2012: EXECUTIVE SUMMARY 13 (2013). Wind energy comprised 41.6 percent of total new installed capacity in 2012 while all renewable energy technologies combined accounted for 56 percent. Id. 8. See MICHAEL CONATHAN & RICHARD CAPERTON, CTR. FOR AM. PROGRESS, CLEAN ENERGY FROM AMERICA‘S OCEANS: PERMITTING AND FINANCING CHALLENGES TO THE U.S. OFFSHORE WIND INDUSTRY (2011), http://www.americanprogress.org/issues/green/report/2011/06/01/9720/clean-energy- from-americas-oceans/. China has also built or begun construction on offshore wind farms with an additional 2300 megawatts (MW) of offshore wind energy capacity under construction. See id. 9. See Offshore Wind, RENEWABLEUK, (last visited Aug. 28, 2015), http://www.renewableuk. com/en/renewable-energy/wind-energy/offshore-wind/; see also David Toke, The UK Offshore Wind Power Programme A Sea-Change in UK Energy Policy?, 39 ENERGY POL‘Y 526, 527 (2011). 10. At times it appeared that the Cape Wind project, a proposed 454 MW wind farm off the coast of Cape Cod, Massachusetts, would become the first large-scale offshore wind farm operating in the
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Failure to keep pace in the development of offshore wind power has profound implications for domestic energy use and thus climate change. In particular, the densely populated East Coast accounts for 37 percent of the country‘s total population and 35 percent of its carbon dioxide (CO2) emissions.11 Any meaningful attempt to reduce the United States‘ carbon footprint must include these states. However, there is a dearth of options for regional reduction of dependence on fossil fuels for electricity production—the Northeast, mid-Atlantic, and Southeast lack the diversity of utility-scale renewable energy choices found in the Midwest and West.12 However, the shallow waters off the lengthy Atlantic Ocean coastline offer these regions excellent and accessible offshore wind resources.13 Developing the offshore wind potential of the East Coast will help these states meet their renewable energy goals, spur economic growth, and push the United States toward deeper cuts in greenhouse gas (GHG) emissions. Three interrelated barriers have thus far worked in concert to deter offshore wind developers: (1) regulatory uncertainty; (2) cost; and (3) transmission constraints. While this Note will briefly address the former two concerns, the focus will be on the difficult transmission challenges implicated by offshore wind development. Part I establishes the critical importance of offshore wind power to the United States‘ energy future. It will include a discussion of offshore wind‘s benefits, both as a renewable energy resource generally and its particular advantages over other renewable energy sources. Part I also highlights the
U.S. However, Cape Wind has faced over a decade of litigation challenges and regulatory hurdles. See Hanna Conger, Comment, A Lesson from Cape Wind Implementation of Offshore Wind Energy in the Great Lakes Should Occur Through Multi-State Cooperation, 42 LOY. U. CHI. L.J. 741, 753–58 (detailing the not-in-my-backyard litigation against the Cape Wind Project); Erin Ailworth, Cape Wind Fight Isn‘t Over for Staunch Opponent, BOS. GLOBE (Sept. 2, 2012), http://www.bostonglobe. com/business/2012/09/01/hot-seat-cape-wind-opponent-audra-parker/1Cz0fuiWCmWrjkfkVicGlM/ story.html. In its most recent setback in 2015, two utilities terminated power purchase agreements with the project, leading supporters to concede that the project may no longer be viable. Jim O‘Sullivan, Two Utilities Opt out of Cape Wind, BOS. GLOBE (Jan. 7, 2015), http://www.bostonglobe.com/metro/2015/01 /06/major-setback-for-cape-wind-project/kggnYeAXRj03PyfIUn2iIM/story.html#. Instead, it now seems that smaller, demonstrational offshore wind projects in Virginia and Rhode Island may be the first to begin operation. Maria Gallucci, US Offshore Wind Energy Industry Inches Forward with Virginia Research Project, INT‘L BUS. TIMES (Mar. 25, 2015), http://www.ibtimes.com/us-offshore-wind-energy- industry-inches-forward-virginia-research-project-1859212; see infra Part IV.A. 11. Michael J. Dvorak et al., US East Coast Offshore Wind Energy Resources and Their Relationship to Peak-Time Electricity Demand, 16 WIND ENERGY 977, 977 (2013). Here, the ―East Coast‖ includes most, if not all, of each of the sixteen states nearest to the Atlantic coast from Maine to Florida, as well as the District of Columbia. Id. at 978. 12. See JOHN FARRELL & DAVID MORRIS, INST. FOR LOCAL SELF-RELIANCE, ENERGY SELF- RELIANT STATES: SECOND AND EXPANDED EDITION 20 (2010), http://www.ilsr.org/wp- content/uploads/files/ESRS.pdf. 13. See WALTER MUSIAL & BONNIE RAM, NAT‘L RENEWABLE ENERGY LAB., LARGE-SCALE OFFSHORE WIND POWER IN THE UNITED STATES: EXECUTIVE SUMMARY 3 (2010), http://www.nrel. gov/docs/fy10osti/49229.pdf.
2015] THE OFFSHORE GRID 655 aforementioned regulatory and financial challenges currently inhibiting offshore wind development. To translate the advantages of offshore wind energy into a real-world context, Part II provides a case study of the Atlantic Wind Connection (AWC) project. The AWC is an innovative offshore transmission grid proposal designed to facilitate and streamline development of offshore wind projects in the mid-Atlantic region. This Part will demonstrate the economic value of building offshore transmission grids to project developers. Part II provides further proof of how offshore transmission projects, when utilized to their full capacity, hold tremendous potential to help states meet their renewable energy goals. This analysis will show how the AWC may provide economic stimulus to regional economies while simultaneously improving the operating efficiency of the existing onshore grid. Part III centers on the transmission constraints facing many remotely- located renewable energy projects generally. Renewable energy sources located far from existing transmission infrastructure implicate a fundamental ―chicken- and-egg‖ problem—developers do not want to construct renewable energy facilities absent existing transmission infrastructure while transmission providers hesitate to build infrastructure before the development of power plants. Part III surveys several state, regional, and national attempts to resolve this stalemate. Finally, Part IV applies these approaches to offshore wind transmission in America‘s coastal regions. By identifying each region‘s current renewable energy goals and policies, available offshore wind resources, and current level of developer activity, Part IV concludes by providing region-specific policy recommendations for stimulating the development of offshore wind energy.
I. WHY IS OFFSHORE WIND POWER IMPORTANT?
A. Advantages of Offshore Wind Power With its lengthy coastline, the United States has tremendous potential for the development of its offshore wind energy resources. The nation boasts over 4000 GW of potential gross offshore wind resources, approximately four times the current generating capacity of the electrical grid.14 Like other renewable energy sources, developing offshore wind will reduce GHG emissions, improve public health, preserve natural resources, create green jobs, and enhance energy and national security by reducing the need for imported fossil fuels.15
14. See id. at 4. 15. See CATHERINE BOWES & JUSTIN ALLEGRO, NAT‘L WILDLIFE FED‘N, THE TURNING POINT FOR ATLANTIC OFFSHORE WIND ENERGY: TIME FOR ACTION TO CREATE JOBS, REDUCE POLLUTION, PROTECT WILDLIFE, AND SECURE AMERICA‘S ENERGY FUTURE 7–11 (2012), http://www.nwf.org /pdf/Reports/NWF_2012OffshoreWind_Final.pdf.
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However, offshore wind also presents unique benefits, especially when compared to onshore wind, which other renewable energy sources lack. One major advantage of offshore wind energy is its location. Many areas of high renewable energy potential are located far from major population centers and necessitate difficult transmission solutions to deliver power to areas of higher demand.16 While transmitting offshore wind energy from its ocean- based generation sites to the onshore grid also presents a unique challenge— one that this Note will consider further by evaluating the AWC—the best offshore wind sites in the United States are close to the regions with the highest electricity demand.17 This accessibility advantage is particularly pronounced along the Eastern Seaboard. While Pacific wind resources are typically greatest at a depth of sixty meters or more, over two-thirds of the offshore wind potential along the New England, mid-Atlantic, and Southeast coasts lies in waters zero to sixty meters deep.18 Of particular relevance for Part II‘s examination of the AWC, the mid-Atlantic is especially promising for offshore wind projects, with nearly 300 GW of potential in shallow waters thirty meters deep or less.19 Augmenting its locational advantages, offshore wind also offers higher potential efficacy than onshore wind. While both forms of wind power are inherently intermittent, offshore wind tends to blow more strongly and consistently than onshore wind. This gives offshore wind turbines a higher average capacity factor20 that may translate into significant gains in electricity
16. See Erica Schroeder, Comment, Turning Offshore Wind On, 98 CALIF. L. REV. 1631, 1640 (2010). 17. See id. The twenty-eight states in the continental United States that have a coastal boundary consume 78 percent of the nation‘s electricity. See id; U.S. DEP‘T OF ENERGY, 20% WIND ENERGY BY 2030: INCREASING WIND ENERGY‘S CONTRIBUTION TO U.S. ELECTRICITY SUPPLY 48 (2008), http://www.nrel.gov/docs/fy08osti/41869.pdf. 18. See MUSIAL & RAM, supra note 13, at 3. While the technology exists to harness offshore wind in depths of sixty meters or greater, forty-two out of forty-four offshore wind projects worldwide stand in waters thirty meters deep or less. See id. at 5–6. 19. See supra note 18 and accompanying text. 20. See JACQUES BEAUDRY-LOSIQUE ET AL., U.S. DEP‘T OF ENERGY & U.S. DEP‘T OF THE INTERIOR, A NATIONAL OFFSHORE WIND STRATEGY: CREATING AN OFFSHORE WIND ENERGY INDUSTRY IN THE UNITED STATES 6 (2011), http://www1.eere.energy.gov/wind/pdfs/national _offshore_wind_strategy.pdf. Capacity factor for a wind turbine is defined as ―the annual energy output divided by the theoretical maximum output, if the wind turbine were running at its rated (maximum) power during all hours of the year.‖ INDEP. SYS. OPERATOR NEW ENGLAND & LEVITAN & ASSOCS., TECHNICAL ASSESSMENT OF ONSHORE AND OFFSHORE WIND GENERATION POTENTIAL IN NEW ENGLAND 23 (2007), http://www.iso-ne.com/committees/comm_wkgrps/othr/sas/mtrls/may212007/ levitan_wind_study.pdf. Average capacity factors vary widely across different energy sources. For example, in 2014, U.S. nuclear plants had a 91.7 percent average capacity factor, compared to 68.8 percent for geothermal energy, 33.9 percent for wind energy, and 27.8 percent for solar energy. NUCLEAR ENERGY INST., U.S. CAPACITY FACTORS BY FUEL TYPE (2014), http://www.nei.org/ Knowledge-Center/Nuclear-Statistics/US-Nuclear-Power-Plants/US-Capacity-Factors-by-Fuel-Type. It is also important to note that as wind turbines become larger and turbine technology advances, average capacity factors reaching and surpassing 50 percent may be feasible. See Zachary Shahan, Wind Turbine Net Capacity Factor—50% the New Normal?, CLEAN TECHNICA (July 27, 2012), http://clean technica.com/2012/07/27/wind-turbine-net-capacity-factor-50-the-new-normal/.
2015] THE OFFSHORE GRID 657 generation.21 Offshore wind also has increased utility because the highest offshore wind speeds generally correlate with the periods of highest electricity demand in coastal cities.22 Coastal regions‘ high electricity demands reflect their population density. This is especially true in the Northeast, where nearly 20 percent of the U.S. population lives on only 2 percent of the country‘s land.23 The Northeast also faces some of the highest electricity costs in the country due to a confluence of factors including a lack of existing renewable energy capacity and natural gas pipeline constraints.24 Although policies to stimulate renewable energy development in densely populated coastal regions exist, many coastal states lack the renewable energy generation potential necessary to eliminate heavy dependence on fossil fuels without developing offshore wind resources.25 Given these restraints, offshore wind energy is an ideal candidate to supply power to America‘s densely populated coastal regions. Offshore wind power circumvents the dual issues of limited land availability and poor onshore wind resources in these regions by allowing for large-scale projects in areas of high wind energy potential unconstrained by dense urban development.26 The higher cost of offshore wind power may be at least partially offset by the generally more expensive electricity costs faced by coastal regions.
B. Challenges to the Development of Offshore Wind Power
1. Financial Challenges Although offshore wind energy exhibits great promise, a number of challenges have limited its development. Chief among these is cost. Offshore wind turbines must be engineered to withstand the dual environmental stresses of high winds and waves.27 As such, increased financial resources must be invested in the foundations that anchor offshore wind turbines to the seabed.28
21. Martin Junginger et al., Cost Reduction Prospects for Offshore Wind Farms, 28 WIND ENG‘G 97–98 (2004) (―offshore wind farms may yield up to 50 [percent] more annual electricity than onshore wind farms of equal capacity and type.‖). 22. See JACQUES BEAUDRY-LOSIQUE ET AL., supra note 20, at 6. 23. OFFSHORE WIND COLLABORATIVE ORG. GRP., A FRAMEWORK FOR OFFSHORE WIND ENERGY DEVELOPMENT IN THE UNITED STATES 10 (2005), http://www.usowc.org/pdfs/final_09_20.pdf. 24. Katharine Q. Seelye, Even Before Long Winter Begins, Energy Bills Send Shivers in New England, N.Y. TIMES (Dec. 13, 2014), http://www.nytimes.com/2014/12/14/us/even-before-long-winter- begins-energy-bills-send-shivers-in-new-england.html. The average retail price of electricity in New England is 17.67 cents per kilowatt-hour, far above the national average of 12.94 cents. Id. By comparison, Washington State enjoys the lowest U.S. retail price of 8.95 cents due in large part to its bountiful hydropower resources. Id. 25. U.S. DEP‘T OF ENERGY, supra note 17, at 48. 26. See Schroeder, supra note 16, at 1640. 27. See STEVEN CLARKE ET AL., U.S. OFFSHORE WIND COLLABORATIVE, U.S. OFFSHORE WIND ENERGY: A PATH FORWARD 30 (2009), http://usoffshorewind.org/wp-content/uploads/2012/06 /PathForward.pdf. 28. See id.
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Operation and management costs also exceed those of onshore wind projects due to the relative inaccessibility of offshore wind farms located several miles out at sea.29 As a result, the estimated levelized cost of electricity for developing offshore wind power remains 2.5 times more expensive than the cost of onshore wind.30 The federal government has created some financial incentives to allay these economic disadvantages, in particular the production tax credit (PTC) and investment tax credit (ITC). First created by the Energy Policy Act of 1992, the PTC was designed to stimulate the deployment of renewable energy technologies by offering a ten year federal tax credit for certain renewable energy projects based upon their grid-connected electrical output.31 The PTC currently provides tax-paying wind electricity generators 2.3 cents per kilowatt hour on all projects commencing construction before January 1, 2015.32 While the PTC provides strong economic incentives to stimulate onshore wind development, it has less importance for offshore wind developers.33 Offshore wind turbines rely on newer technology in areas where energy has not been previously harnessed.34 This creates greater uncertainty and unpredictability around offshore wind projects‘ electricity generation output and thus the size of their production tax credit.35 Offshore wind projects also have longer timeframes than onshore wind projects for permitting and construction, rendering a credit that predicates eligibility upon near term grid- connectivity suboptimal. Instead, the extended timeframe and energy production uncertainty of offshore wind makes the ITC a more attractive financial incentive for developers. Although the ITC previously only applied to small-scale wind projects (100 kilowatts or less), the American Recovery and Reinvestment Act of 2009 expanded it to include wind projects of all sizes.36 Currently, the ITC provides a 30 percent upfront capital expenditure investment
29. See MUSIAL & RAM, supra note 13, at 7. 30. See U.S. Energy Info. Admin., Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2015 (June 3, 2015), http://www.eia.gov/forecasts/aeo/ electricity_generation.cfm. Levelized cost of electricity ―represents the per-kilowatt hour cost (in real dollars) of building and operating a generating plant over an assumed financial life and duty cycle.‖ Id. 31. See Ryan Wiser et al., Using the Federal Production Tax Credit to Build a Durable Market for Wind Power in the United States, 20 ELECTRICITY J. 77, 78 (2007). 32. Renewable Electricity Production Tax Credit (PTC), DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://programs.dsireusa.org/system/program/detail/734 (last updated April 13, 2015). 33. See Richard W. Caperton et al., Encouraging Investment Is Key to U.S. Offshore Wind Development, CTR. FOR AM. PROGRESS (Jan. 12, 2012), http://www.americanprogress.org/issues/green /news/2012/01/12/10951/encouraging-investment-is-key-to-u-s-offshore-wind-development/. 34. See id. 35. See id. 36. See Business Energy Investment Tax Credit (ITC), U.S. DEP‘T OF ENERGY, http://energy.gov/ savings/business-energy-investment-tax-credit-itc (last visited Aug. 5, 2015).
2015] THE OFFSHORE GRID 659 tax credit for wind projects commencing construction prior to January 1, 2015.37 Extensions of the PTC and ITC have generated substantial controversy. Tax subsidies for renewable energy sources remain a politically divisive issue and the looming expiration of the PTC figured prominently in the 2012 presidential election.38 Urged by President Obama, Congress passed short-term extensions of both credits in 2009 and again in 2013.39 Congress also amended the credits‘ language, extending them to wind projects that had ―commence[d] construction,‖ as opposed to those ―placed in service.‖40 This is a crucial distinction for offshore wind projects; due to a five to seven year timeframe between inception and operation, the previous ―placed in service‖ standard essentially eliminated use of the credits by offshore wind developers.41 Though helpful, these short-term extensions symbolize the tax credits‘ perpetually precarious status. The PTC has lapsed several times over the past two decades, causing a boom-and-bust development cycle.42 For instance, in 2012 installed capacity of onshore wind energy surged to record levels in anticipation of the PTC‘s expiration.43 The following year, wind energy installation sank by 92 percent.44 In response to the 2013 one-year extension of the PTC, wind energy construction has again ramped up to record levels—12.7 GW of installed wind capacity was under construction by the end of 2014.45 Wind developers crave long-term certainty for their projects and have called upon political leaders to set longer-term extensions for the credits even if that includes a final expiration date.46 Unfortunately, Congress appears unable
37. IRS Extends Safe Harbor for Completion of PTC-Qualifying Facilities to Jan. 1, 2017, MCGUIREWOODS (Mar. 12, 2015), https://www.mcguirewoods.com/Client-Resources/Alerts/2015/3/ IRS-Extends-Safe-Harbor-Completion-PTC-Qualifying-Facilities.aspx. 38. See Amy Gardner & Rosalind S. Helderman, Obama, Romney Campaigns Shift to Debate over Energy, WASH. POST (Aug. 14, 2012), http://www.washingtonpost.com/politics/wind-energy-will- be-obama-focus-today-in-iowa/2012/08/14/11026ea4-e615-11e1-936a-b801f1abab19_story.html. 39. Economic Stimulus Act Extends Renewable Energy Tax Credits, OFFICE OF ENERGY EFFICIENCY & RENEWABLE ENERGY (Feb. 18, 2009), http://apps1.eere.energy.gov/news/news_ detail.cfm/news_id%3D12247. 40. See Jon Hurdle, Senate Panel Boosts Offshore Wind with Tax Credit Vote, BREAKING ENERGY (Aug. 9, 2012), http://breakingenergy.com/2012/08/09/senate-panel-boosts-offshore-wind- with-tax-credit-vote/. The Internal Revenue Service allows qualification for tax incentives for beginning construction in two ways: (1) that ―physical work of a significant nature‖ has begun at the project site or (2) the developer ―‗incurred‘ at least 5 percent of the total project cost.‖ Keith Martin & John Marciano, IRS Defines Start of Construction for the Production Tax Credit, RENEWABLE ENERGY WORLD (Apr. 16, 2013), http://www.renewableenergyworld.com/rea/news/article/2013/04/irs-defines-start-of- construction-for-the-production-tax-credit. 41. See Hurdle, supra note 40. 42. Wiser, supra note 31, at 80–81. 43. See Patrick Smith, US Wind Installations Fall by 92%, WIND POWER MONTHLY (Feb. 3, 2014), http://www.windpowermonthly.com/article/1229595/us-wind-installations-fall-92. 44. Id. 45. See AM. WIND ENERGY ASS‘N, supra note 5, at 3. 46. See Diane Cardwell, Renewed Tax Credit Buoys Wind-Power Projects, N.Y. TIMES (Mar. 21, 2013), http://www.nytimes.com/2013/03/22/business/energy-environment/a-tax-credits-renewal-lifts-
660 ECOLOGY LAW QUARTERLY [Vol. 42:651 to deliver such long-term certainty and the future of the tax credits remains unclear. In December 2014 Congress passed a retroactive extension for the tax credits, allowing qualification for all projects that commenced construction in 2014.47 However, as of 2015, a long-term solution has yet to emerge and industry leaders have begun to refocus resources on international projects in the face of domestic uncertainty.48
2. Regulatory Challenges Another barrier inhibiting offshore wind development is the challenging regulatory process that developers must navigate. A threshold concern that developers must consider is the impact of their project‘s location. Where an offshore wind project is sited determines whether state, federal, or both state and federal regulatory jurisdiction applies. Waters within three nautical miles of the shore are generally under state sovereignty while waters over the outer continental shelf (OCS), ranging from three to two hundred nautical miles offshore, are typically under federal control.49 While most planned offshore wind farms tend to be located in the OCS area and thus subject to federal oversight, transmission lines must also traverse state waters to connection points with the onshore grid.50 Proposed offshore wind projects face a difficult and circuitous federal regulatory process. Current oversight responsibility resides with the Bureau of Ocean Energy Management (BOEM), an agency housed within the Department of the Interior51 that retains ―exclusive authority to issue leases, easements, and rights-of-way for renewable energy projects on the OCS.‖52 BOEM must issue
wind-projects.html?_r=0 (noting the American Wind Energy Association stated the wind ―industry could survive if the credit were phased out by the end of 2018.‖). 47. Andrew Lee, Update US Senate Approves One-Year Wind PTC Extension, RECHARGE NEWS (Dec. 17, 2014), http://www.rechargenews.com/wind/1386834/Update-US-Senate-approves-one-year- wind-PTC-extension. 48. Karl-Erik Stromsta, US Developers Hedging PTC Bets, RECHARGE NEWS (Oct. 22, 2014), http://www.rechargenews.com/wind/1380992/US-developers-hedging-PTC-bets. 49. See Todd J. Griset, Harnessing the Ocean‘s Power Opportunities in Renewable Ocean Energy Resources, 16 OCEAN & COASTAL L.J. 395, 407–08 (2011). 50. See Schroeder, supra note 16, at 1642–43. 51. Frequently Asked Questions, BUREAU OF OCEAN ENERGY MGMT., http://www.boem.gov/ BOEM-Newsroom/Frequently-Asked-Questions/Frequently-Asked-Questions.aspx (last visited Aug. 5, 2015). The Bureau of Ocean Energy Management (BOEM) emerged from what was formerly known as the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) from June 2010 until January 2011. BUREAU OF OCEAN ENERGY MGMT., FACT SHEET: THE BSEE AND BOEM SEPARATION (Jan. 19, 2011), http://www.boem.gov/uploadedFiles/BOEMRE%20Reorganization %20Fact%20Sheet.pdf. BOEMRE, in turn, emerged from a reorganization of the former Minerals Management Service in 2010. Id. 52. Renewable Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf, 74 Fed. Reg. 19,638, 198,653 (Apr. 29, 2009) (codified at C.F.R. pts. 250, 285, 290); see also The Reorganization of the Former MMS, BUREAU OF OCEAN ENERGY MGMT., http://www.boem.gov/ Reorganization/ (last visited Aug. 28, 2015) (describing BOEM‘s regulatory missions and its successor relationship with BOEMRE). BOEM‘s authority does not eliminate the regulatory role played by other
2015] THE OFFSHORE GRID 661 a commercial wind energy lease to a prospective wind developer before construction on any OCS offshore wind project can begin.53 A lease alone does not confer the ability to construct a project; instead, it provides site access for a developer to draft a site assessment plan54 and construction and operations plan.55 The BOEM retains the authority to approve, modify, or disapprove either plan after it is submitted.56 BOEM must also comply with additional federal regulations and laws that are unspecific to offshore renewable energy projects. Pursuant to the National Environmental Policy Act (NEPA), BOEM must conduct an environmental assessment and, in certain instances, also produce an environmental impact statement during its approval process.57 The former determines whether a proposed project‘s effect necessitates a thorough environmental impact statement or is small enough to warrant a ―finding of no significant impact.‖58 BOEM must conduct an environmental assessment or environmental impact statement prior to issuing a lease on the OCS, although this stage of NEPA review may also be conducted simultaneously with review of the developer‘s site assessment plan.59 The time required for BOEM to approve a site assessment plan or construction and operations plan is considerable and lengthened by the fact that BOEM must coordinate with nearly a dozen federal agencies responsible for various environmental roles.60 The convoluted federal approval mechanism, created as an improvement over an even more disjointed regulatory framework, underscores the burden the approval process places on developers.61 federal agencies with regards to renewable energy projects on the OCS. Pursuant to a memorandum of understanding between the Federal Energy Regulatory Commission (FERC) and the U.S. Department of the Interior, FERC maintains the exclusive right to issue licenses for hydrokinetic (i.e. wave and tidal) projects on the OCS. See U.S. DEP‘T OF INTERIOR & FED. ENERGY REGULATORY COMM‘N, MEMORANDUM OF UNDERSTANDING BETWEEN THE U.S. DEPARTMENT OF THE INTERIOR AND FEDERAL ENERGY REGULATORY COMMISSION (2009). 53. See 30 C.F.R. § 285.200. 54. 30 C.F.R. §§ 285.605–285.618. A site assessment plan primarily consists of a developer‘s plan to construct meteorological towers or buoys on the leased area. See BUREAU OF OCEAN ENERGY MGMT., WIND ENERGY COMMERCIAL LEASING PROCESS 2, http://www.boem.gov/RE-Commercial- Leasing-Process-Fact-Sheet/. 55. 30 C.F.R. §§ 285.620–285.638. 56. See BUREAU OF OCEAN ENERGY MGMT., supra note 54, at 1. 57. 42 U.S.C. § 4332(C). 58. 40 C.F.R. § 1508.9. 59. Renewable Energy and Alternate Uses of Existing Facilities on the Outer Continental Shelf, 74 Fed. Reg. 19,638, 19,647, 19,689 (Apr. 29, 2009) (codified at 30 C.F.R. pts. 250, 285, 290). 60. See id. at 19,648–51. 61. By granting permitting authority of offshore renewable energy projects to the Minerals Management Service, the Energy Policy Act of 2005 is generally thought to have lessened regulatory inconsistency and confusion regarding permitting of offshore wind projects. See Griset, supra note 49, at 409–10. Prior to 2005, the Army Corps of Engineers asserted authority over permitting offshore wind projects pursuant to the Rivers and Harbors Appropriations Act of 1899. See id. at 409. However, even post-reform, ―the complexity of the regulatory regimes applicable to renewable energy projects may not prove optimal for the cost-effective development of such resources.‖ Id. at 406. For additional
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In addition to the protracted federal regulatory process, state regulatory barriers to offshore wind development also exist, primarily in siting and permitting transmission lines from offshore wind farms.62 A key statute that governs the state‘s ability to oversee the development of offshore wind power is the Coastal Zone Management Act (CZMA).63 Under the CZMA, each state creates its own Coastal Zone Management Plan in accordance with the CZMA‘s stated policy goals of preservation, protection, and development of coastal resources.64 However, once the Secretary of Commerce approves a state‘s Coastal Zone Management Plan, the state has tremendous autonomy over the management of its coastal zone.65 This may prove problematic for developers facing states‘ potentially hostile attitudes toward particular offshore wind farms due to local concerns.66 As a result of the complex federal and state regulatory approval framework, offshore wind developers face a timeframe of seven to ten years for project approval.67 In order to streamline this process the Department of the Interior launched its ―Smart from the Start‖ initiative in 2010.68 The initiative seeks to promote offshore wind development through three channels: (1) removing a redundant permitting step for projects where there is no competitive interest in a designated lease area; (2) identifying ―wind energy areas‖ (WEAs) off the Atlantic coast; and (3) ―aggressively‖ processing applications for the development of offshore transmission lines.69 Smart from the Start was modeled after a similar program focused on promoting the development of solar energy in the West that designated specific solar energy study areas and
information on the pre-BOEM regulatory process for offshore wind development, see Suzanne C. Breselor, Renewable Energy Permitting on the Outer Continental Shelf You Call This a Process? Present Considerations and Recommendations for More Precise Ocean Management, 38 SUFFOLK U. L. REV. 193 (2004). 62. See Schroeder, supra note 16, at 1644. 63. 16 U.S.C. § 1452. 64. § 1452(2). 65. See Schroeder, supra note 16, at 1645–46. Schroeder notes that state authority over offshore wind development can be extended through ―federal consistency review,‖ a process that, although infrequently used, ―allows a state to review a federal agency activity or permit within or outside of the coastal zone for compatibility with the state‘s CZMP when the activity or permit affects the state‘s coastal zone.‖ See id. at 1646–47. 66. See id. at 1644–45. Local concerns over offshore wind development may include marine safety implications (to both humans and marine wildlife populations) and coastal communities‘ objection to offshore wind projects visible from onshore locations due to subsequent reduced tourism revenues and property values. See MUSIAL & RAM, supra note 13, at 8. 67. See ―Smart From the Start‖ Atlantic OCS Offshore Wind Initiative Frequently Asked Questions, U.S. DEP‘T OF INTERIOR (Nov. 23, 2010), http://penbay.org/wind/ocean/boemre/ atlwind_112310_qa_6pgs.html. 68. Press Release, U.S. Dep‘t of Interior, Salazar Launches ‗Smart from the Start‘ Initiative to Speed Offshore Wind Energy Development off the Atlantic Coast (Nov. 23, 2010), http://www.doi.gov/news/pressreleases/Salazar-Launches-Smart-from-the-Start-Initiative-to-Speed- Offshore-Wind-Energy-Development-off-the-Atlantic-Coast.cfm. 69. See U.S. DEP‘T OF INTERIOR, supra note 68, at 2.
2015] THE OFFSHORE GRID 663 streamlined the permitting process for utility-scale solar projects.70 Smart from the Start has already demonstrated some success in identifying WEAs in an attempt to facilitate their streamlined development.71 It is possible that the initiative will play an important future role in improving the development of offshore wind energy.
C. Future Significance Despite the serious financial and regulatory challenges faced by offshore wind, its benefits are substantial and have already warranted serious consideration in projections of the future U.S. energy mix. In a scenario calling for wind energy to provide 20 percent of U.S. electricity by 2030, the Department of Energy estimated the need for the development of 54 GW of offshore wind power, mainly along the Eastern Seaboard.72 This would have a major impact on U.S. energy consumption and CO2 emissions. Fifty-four GW of offshore power could generate 183.6 million megawatt hours of electricity annually, replacing consumption of 91.8 million tons of coal and preventing 73 145.8 million tons of CO2 equivalent from entering the atmosphere. However, to accomplish this, the United States must first find a way to simultaneously reduce developer costs and streamline the complex regulatory process. As discussed below, the AWC project may achieve this goal, injecting much-needed momentum into the offshore wind industry.
II. THE ATLANTIC WIND CONNECTION In order to contextualize the challenges and opportunities presented by offshore wind energy development, Part II examines one proposed offshore
70. See U.S. DEP‘T OF INTERIOR, supra note 68. 71. In February 2011 the DOI identified its first WEAs on the OCS off the coasts of Delaware, Maryland, Virginia, and New Jersey. Commercial Wind Lease Issuance and Site Characterization Activities; Atlantic Outer Continental Shelf Offshore NJ, DE, MD, and VA, 76 Fed. Reg. 7226 (Feb. 9, 2011). The four mid-Atlantic state WEAs encompass 798 nautical square miles. See BUREAU OF OCEAN ENERGY MGMT, COMMERCIAL WIND LEASE ISSUANCE AND SITE ASSESSMENT ACTIVITIES ON THE ATLANTIC OUTER CONTINENTAL SHELF OFFSHORE NEW JERSEY, DELAWARE, MARYLAND, AND VIRGINIA, FINAL ENVIRONMENTAL ASSESSMENT iv–v (2012), http://www.boem.gov/uploadedFiles/ BOEM/Renewable_Energy_Program/Smart_from_the_Start/Mid-Atlantic_Final_EA_012012.pdf. After conducting an environmental assessment (EA) pursuant to NEPA, BOEM issued a Finding of No Significant Impact in January 2012, making a further environmental impact statement (EIS) for the four WEAs unnecessary. See Commercial Lease Issuance and Site Assessment Activities on the Atlantic Outer Continental Shelf (OCS) Offshore New Jersey, Delaware, Maryland, and Virginia, 77 Fed. Reg. 5560 (Feb. 3, 2012). 72. U.S. DEP‘T OF ENERGY, supra note 17, at 10. 73. Calculations based on figures provided by the U.S. Department of Energy, Office of Energy Efficiency & Renewable Energy. See JACQUES BEAUDRY-LOSIQUE ET AL., supra note 20, at 6 (citing DOLAN & HEATH, NAT‘L RENEWABLE ENERGY LAB., UNPUBLISHED ANALYSIS OF OFFSHORE WIND EMISSIONS SAVINGS (2010)). The Department of Energy estimates that achieving a 20 percent wind energy scenario by 2030 would reduce CO2 emissions by 7.6 billion metric tons. See U.S. DEP‘T OF ENERGY, supra note 17, at 15.
664 ECOLOGY LAW QUARTERLY [Vol. 42:651 transmission project, the AWC. Exploring the AWC‘s experience with the complex offshore regulatory framework, as well as the interplay between the project and the adjacent Mid-Atlantic region, provides insight into the impact that such transmission projects may have on offshore wind developers and state-level renewable energy policy.
A. AWC Background Information The AWC is an offshore transmission line that seeks to achieve the interconnected goals of helping mid-Atlantic states meet their renewable portfolio standard (RPS) targets, improve grid reliability, and provide grid congestion relief.74 The first offshore transmission backbone of its kind in the United States, the AWC will consist of two 300-mile, parallel high-voltage direct current circuits of undersea cable that stretch approximately 250 miles from northern New Jersey to southern Virginia.75 The AWC‘s cables will be buried in the OCS seabed approximately fifteen miles off the mid-Atlantic coast76 and electricity will be transmitted via twelve offshore converter platforms that will deliver power to seven interconnection points with the onshore grid in Maryland, New Jersey, Delaware, and Virginia.77 Upon its full completion, the AWC will be able to convey at least 6000 megawatts (MW) of offshore wind energy into the PJM78 Interconnection (PJM) onshore grid, a Regional Transmission Operator (RTO) serving sixty million residents across thirteen states and the District of Columbia.79 Although originally conceived of as a means to spur offshore wind energy development, the AWC also retains significant utility even if it is not connected to any offshore wind farms. The AWC may serve as a reinforcing transmission line, aiding the congested PJM onshore grid with additional capacity to transmit up to 2000 MW of electricity between the AWC‘s onshore landing points.80
74. See JOHANNES PFEIFENBERGER & SAMUEL NEWELL, BRATTLE GROUP, AN ASSESSMENT OF THE PUBLIC POLICY, RELIABILITY, CONGESTION RELIEF, AND ECONOMIC BENEFITS OF THE ATLANTIC WIND CONNECTION PROJECT: EXECUTIVE SUMMARY 1 (2010), http://www.offshorewindhub.org/sites/ default/files/resources/awc_12-21-2010_costbenefitassessment_0.pdf. 75. See Direct Testimony of Paul McCoy on Behalf of the AWC Companies, Petition for a Declaratory Order Requesting Incentive Rate Treatment and Acceptance of Rate of Return for the Atlantic Wind Connection Companies Pursuant to Sections 205 and 219 of the Federal Power Act and Order No. 679, Exhibit AWC 100, at 5. 76. See Press Release, Atl. Wind Connection, Offshore Wind Transmission Project (AWC) Reaches Major Milestone with Department of Interior Action (May 14, 2012), http://www. atlanticwindconnection.com/ferc/May2012/Another%20Step%20with%20Interior%20Action%20- %20FINAL.pdf. 77. See Direct Testimony of Paul McCoy on Behalf of the AWC Companies, supra note 75, at 5. 78. PJM refers to ―Pennsylvania-New Jersey-Maryland,‖ though the company has since expanded well beyond that area. David B. Spence, Can Law Manage Competitive Energy Markets?, 93 CORNELL L. REV. 765, 776 n.62 (2008). 79. See PFEIFENBERGER & NEWELL, supra note 74, at 1; PJM INTERCONNECTION, DYNAMIC PERFORMANCES: PJM 2012 ANNUAL REPORT 28 (2012), http://www.pjm.com/~/media/about-pjm /newsroom/annual-reports/2012-annual-report.ashx. 80. See PFEIFENBERGER & NEWELL, supra note 74, at 1.
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Construction of the AWC is currently envisioned in three phases over a ten year period.81 Phase one, the New Jersey Energy Link (NJEL), is planned to stretch from northern to southern New Jersey.82 Phase two, the Delmarva Energy Link, will be built off the coast of Delaware, Maryland, and Virginia.83 Phase three, the Bay Link, will connect the transmission infrastructure built in the first two phases and create a contiguous transmission line that connects all four states.84 With high-profile initial investors such as Google,85 the AWC drew substantial attention and was touted as an important and unique transmission project.86 However, it faces numerous challenges moving forward, including a political climate that is less favorable to offshore wind development than when the project was first conceived. In a move to focus on a state where support for offshore wind energy development appeared strong, in 2013 the AWC shifted its resources to focus solely on the development of the NJEL.87 This reduced the price tag of the AWC project, initially estimated at between $5 and $6 billion, to $1.8 billion.88 However, New Jersey Governor Chris Christie, once a supporter of offshore wind development, appears to have cooled on the AWC‘s renewable energy focus.89 To garner Governor Christie‘s continued support, the CEO of the AWC stressed that the project is ―essentially divorced from offshore wind‖ and is ―agnostic‖ as to what sort of power is conveyed by the transmission line.90 Instead, the transmission project is being framed purely as an upgrade and supplement to New Jersey‘s existing onshore grid infrastructure and a potential ―staging‖ ground for future offshore wind development when a
81. Atlantic Wind Connection Projects, ATL. WIND CONNECTION, http://atlanticwindconnection. com/awc-projects/atlantic-wind-connection (last visited Apr. 19, 2015). 82. New Jersey Energy Link, ATL. WIND CONNECTION, http://atlanticwindconnection.com/awc- projects/project-phases/New-jersey-energy-link (last visited Apr. 19, 2015). 83. Delmarva Energy Link, ATL. WIND CONNECTION, http://atlanticwindconnection.com/awc- projects/project-phases/delmarva-energy-link (last visited Apr. 19, 2015). 84. Bay Link, ATL. WIND CONNECTION, http://atlanticwindconnection.com/awc-projects/project- phases/bay-link (last visited Apr. 19, 2015). 85. See Matthew L. Wald, Offshore Wind Power Line Wins Backing, N.Y. TIMES (Oct. 12, 2010), http://www.nytimes.com/2010/10/12/science/earth/12wind.html?pagewanted=all&_r=0. 86. FERC Chairman Jon Wellinghoff described the AWC as ―[c]onceptually . . . one of the most interesting transmission projects that I‘ve ever seen walk through the door.‖ Id. 87. Tom Johnson, Developer Scales Back Plans for Offshore Wind Transmission System, NJ SPOTLIGHT (May 22, 2013), http://www.njspotlight.com/stories/13/05/21/developer-scales-back-plans- for-offshore-wind-transmission-system/. 88. Id. Specifically the Brattle Group estimated the AWC would cost approximately $5 billion, while IHS Global Insight projected a price tag of $6.31 billion. See PFEIFENBERGER & NEWELL, supra note 74, at 1; IHS Inc., Assessment of the Economic Benefits of Offshore Wind in the Mid-Atlantic 3 (Feb. 2012), http://www.atlanticwindconnection.com/ferc/Oct2012/IHS_Study_AWC_EI_Review _MidAtlantic.pdf (PowerPoint presentation). 89. Elizabeth Harball, ―Backbone‖ Designed to Carry Offshore Wind Power Gets Rebranded for N.J., GOVERNORS‘ WIND ENERGY COAL. (Apr. 18, 2014), http://www.governorswindenergycoalition. org/?p=8620. 90. Id.
666 ECOLOGY LAW QUARTERLY [Vol. 42:651 more favorable political climate emerges.91 Thus far, the shift in rhetoric appears to have worked—the New Jersey legislature approved a resolution in support of the NJEL project with strong bipartisan backing.92 In addition to political obstacles, the AWC must also navigate many of the same regulatory hurdles as proposed offshore wind projects on the OCS, but thus far the project has cleared these barriers without incident. The Federal Energy Regulatory Commission (FERC) granted the AWC incentive rate treatment in May 2011 conditional on the AWC‘s inclusion in PJM‘s regional expansion plan.93 FERC also awarded the AWC an above-market return on equity of 12.59 percent, which may assist the AWC in securing future financing.94 The AWC also cleared a preliminary regulatory hurdle in May 2012 when BOEM issued a determination of no competitive interest for the project.95 This important step increases the chances that BOEM will grant the AWC‘s right-of-way application once its environmental impact is reviewed pursuant to NEPA.96
B. Is the AWC an Important Project? Although the AWC is an interesting transmission proposal, its lengthy construction period and hefty cost warrant a more detailed analysis of its potential benefits. For the purposes of this study, the benefits of the AWC will be primarily considered through two inquiries. First, what role can the AWC perform in assisting mid-Atlantic states to meet their RPS targets? Second, what net economic benefits will the AWC generate? For the purposes of this Note, the AWC‘s potential impact is evaluated on the basis of its full completion.
1. AWC and RPS One of the AWC‘s major benefits is its ability to help Virginia, Delaware, Maryland, and New Jersey meet their respective RPSs, which are requirements enacted by various state legislatures mandating that utilities produce a certain percentage or amount of electricity from renewable energy sources.97 Although
91. Id. 92. Id. 93. Press Release, Fed. Energy Regulatory Comm‘n, FERC Approves Transmission Rate Incentives for Atlantic Wind Connection (May 19, 2011), http://www.ferc.gov/media/news- releases/2011/2011-2/05-19-11-E-1.asp. 94. See CONATHAN & CAPERTON, supra note 8, at 6. 95. Matthew L. Wald, Offshore Transmission Line Takes a Step Forward, N.Y. TIMES: GREEN (May 14, 2012, 3:51 PM), http://green.blogs.nytimes.com/2012/05/14/offshore-transmission-line-takes- a-step-forward/?ref=matthewlwald. 96. See id. 97. See Ivan Gold & Nidhi Thakar, A Survey of State Renewable Portfolio Standards Square Pegs for Round Climate Change Holes?, 35 WM. & MARY ENVTL. L. & POL‘Y REV. 183, 185 (2010).
2015] THE OFFSHORE GRID 667 each state RPS is unique, all share a similar fundamental structure.98 All RPS schemes identify a list of resources considered ―renewable‖ for purposes of the RPS99 and, after a compliance period, require utilities to report the amount of renewable energy generation as a proportion of their total electrical generation.100 If a utility fails to meet its RPS requirements, it may face financial or other penalties.101 As of 2015, twenty-nine states and the District of Columbia have some sort of mandatory RPS, and eight additional states maintain voluntary goals for reaching specific amounts of renewable energy generation by various target dates.102 Given the lack of a federal RPS policy or other unified national renewable energy or climate change legislation, state RPS policies have been one of the most important mechanisms in the United States for promoting the development of renewable energy. All four mid-Atlantic states that would benefit from the AWC have either mandatory or voluntary RPS targets. New Jersey has pledged to obtain 20.38 percent of its electricity from renewable sources by 2021;103 Delaware, 25 percent by 2025;104 Maryland, 20 percent by 2022;105 and Virginia, 15 percent by 2025.106 While these goals are in line with many of the RPS targets in the United States, there remains a large gap between the renewable energy needed to meet each state‘s standards and the amount of renewable energy each state has currently installed, begun constructing, or permitted. On behalf of the AWC, principals for the consulting firm The Brattle Group testified to FERC that the four mid-Atlantic states would need to develop 16.6 GW of renewable energy installed capacity and produce 54,000 gigawatt-hours (GWh) annually
98. See id. at 192. 99. All states consider biomass, biofuels, landfill gas, hydro, wind, and solar photovoltaic energy as ―renewable‖ for RPS purposes. Id. However, this list is not exhaustive and states consider many other energy sources to be ―renewable.‖ See id. at 193. 100. See id. at 192. Beyond this basic structure, state RPS regimes may vary by exempting particular utilities or maintaining different allowances for importing out-of-state renewable energy to meet the RPS. See RICHARD W. CAPERTON, CTR. FOR AM. PROGRESS, RENEWABLE ENERGY STANDARDS DELIVER AFFORDABLE, CLEAN POWER, (2012), http://www.americanprogress.org /issues/green/report/2012/04/11/11397/renewable-energy-standards-deliver-affordable-clean-power/. 101. See Gold & Thakar, supra note 97, at 195. 102. Renewable Portfolio Standard Policies, DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://ncsolarcen-prod.s3.amazonaws.com/wp-content/uploads/2014/11/Renewable- Portfolio-Standards.pdf (last visited Aug. 28, 2015). 103. New Jersey Incentives/Policies for Renewables & Efficiency, DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://programs.dsireusa.org/system/program/detail/564 (last updated May 20, 2015). 104. Delaware Incentives/Policies for Renewables & Efficiency, DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://programs.dsireusa.org/system/program/detail/1231 (last updated Feb. 11, 2015). 105. Maryland Incentives/Policies for Renewables & Efficiency, DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://programs.dsireusa.org/system/program/detail/1085 (last updated Feb. 10, 2015). 106. Virginia Incentives/Policies for Renewables & Efficiency, DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://programs.dsireusa.org/system/program/detail/2528 (last updated Feb. 8, 2015). Virginia‘s 15 percent standard is voluntary. See id.
668 ECOLOGY LAW QUARTERLY [Vol. 42:651 by 2025 in order to meet their respective RPS targets.107 Yet, as of 2010, only 1.2 GW of renewable energy—projected to generate 7163 GWh—was operational, being constructed, or at least partially permitted.108 After accounting for the 6600 GWh of renewable energy mandated to come from solar ―set-asides,‖109 nearly 40,000 GWh must be created by 2025.110 If all 40,000 GWh of remaining renewable energy came from offshore wind, the four states would have to collectively build roughly 9.2 GW of offshore wind installed capacity to meet their cumulative RPS target.111 Furthermore, due to preferential counting of offshore wind toward RPS goals in both Virginia and Delaware, less installed capacity of offshore wind would have to be built to meet RPS goals in comparison to other renewable energy sources.112 While it is highly unlikely that the mid-Atlantic states will turn exclusively to offshore wind power to meet their RPS goals, all four states have expressed clear legislative intent to develop their offshore wind resources. In 2010 Governor Christie signed the Offshore Wind Economic Development Act into law.113 This legislation created an offshore wind renewable energy certificate program to mandate that a percentage of the state‘s electricity generation must come specifically from offshore wind energy, corresponding to the development of at least 1.1 GW of offshore wind installed capacity.114 As an additional financial incentive, New Jersey also offers a 100 percent tax credit on capital investments of $50 million or more for offshore wind projects.115
107. Direct Testimony of Johannes Pfeifenberger and Samuel Newell at 22, Petition for a Declaratory Order Requesting Incentive Rate Treatment and Acceptance of Rate of Return for the Atlantic Wind Connection Companies Pursuant to Sections 205 and 219 of the Federal Power Act and Order No. 679, Exhibit AWC-400. See About, THE BRATTLE GROUP, http://www.brattle.com/about (last visited Aug. 24, 2015). 108. Id. at 23–24. 109. Set asides are specific mandates for particular types of renewable energy and often include ―varying penalty levels to further encourage compliance.‖ RYAN WISER ET AL., SUPPORTING SOLAR POWER IN RENEWABLES PORTFOLIO STANDARDS: EXPERIENCE FROM THE UNITED STATES ii (2010), http://www.scstatehouse.gov/committeeinfo/EnergyAdvisoryCouncil/AdditionalComments/SolarRPSB NL.102510.AndrewStreit.pdf. 110. See Direct Testimony of Johannes Pfeifenberger and Samuel Newell, supra note 107, at 24. 111. See id. at 26. 112. See id. 113. Press Release, Office of the Governor, Governor Christie Signs Offshore Wind Economic Development Act to Spur Economic Growth, Encourage Energy as Industry (Aug. 19, 2010), http://www.state.nj.us/governor/news/news/552010/approved/20100819a.html. 114. Id.; see also Kimberly E. Diamond, New Jersey‘s Offshore Wind Economic Development Act Language of Forward-Looking Legislation Presents Opportunities for Potential Challenges and Claims, 22 ENVTL. CLAIMS J. 302, 306–07 (2010) (providing additional background information on New Jersey‘s offshore wind renewable energy certificate program and its future implications). 115. BOWES & ALLEGRO, supra note 15, at 35. The tax credit is initially capped at $100 million but may be extended as far as $1.5 billion under discretion of the New Jersey Economic Development Authority. Diamond, supra note 114, at 308.
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In 2013 Maryland also passed legislation to stimulate the state‘s offshore wind energy industry called the Maryland Offshore Wind Energy Act.116 The legislation created an offshore wind renewable energy certificate program similar to New Jersey‘s and amended Maryland‘s RPS to create a set-aside for offshore wind installed capacity targeting an amount of up to 500 MW.117 The Maryland Energy Administration has found that offshore wind is essential to meeting Maryland‘s RPS target and estimates that offshore wind may account for over 50 percent of Maryland‘s renewable energy generation by 2022.118 While Virginia and Delaware have not yet passed legislation specifically promoting offshore wind development, both states have ―RPS multipliers‖ for offshore wind energy of 300 percent and 350 percent respectively.119 RPS multipliers encourage the development of specific types of renewable energy by awarding more renewable energy credits (RECs) to utilities that generate electricity from particular renewable energy sources.120 The Virginia General Assembly also has passed a non-binding resolution for 3 GW of offshore wind installed capacity by 2025.121 Given the need for a large build-out of renewable energy capacity in the next fifteen years and burgeoning legislative support for offshore wind energy, the AWC is well positioned to assist Maryland, Delaware, Virginia, and New Jersey in meeting their RPS targets. As previously established, there is a clear need for renewable energy installed capacity well in excess of the amount of offshore wind power the AWC could potentially integrate into the four states.122 Importantly, the AWC will deliver renewable energy generated in the mid-Atlantic region, as the area‘s states are likely to seek development of their own renewable energy resources rather than rely on imports from other states. Admittedly there is some potential for other regions to export electricity generated from renewable sources into the mid-Atlantic—mainly from the onshore wind-rich states of the Midwest.123 However, transmission constraints complicate reliance on the Midwest for supplying renewable energy to the mid-
116. Maryland Offshore Wind Energy Act of 2013—Creating a Market, BUS. NETWORK FOR OFFSHORE WIND, http://www.bizmdosw.org/maryland-wind-energy-act-2013-legislative-history/ (last visited Aug. 28, 2015). 117. Id. 118. See MD. ENERGY ADMIN., MARYLAND ENERGY OUTLOOK 53 (2010), energy.maryland.gov /documents/MEOFINALREPORTJAN2010.pdf. 119. Delaware Incentives/Policies for Renewables & Efficiency, supra note 104; Virginia Incentives/Policies for Renewables & Efficiency, supra note 106. Delaware also provides additional 110 percent multiplier credits for projects where 50 percent of the equipment is manufactured in state or are installed with a 75 percent in-state workforce. See Delaware Incentives/Policies for Renewables & Efficiency, supra note 104. 120. See WISER ET AL., supra note 109, at 6; see discussion infra Part IV. 121. H.R.J. Res. 605, 2011 Leg., Reg. Sess. (Va. 2011). 122. See Direct Testimony of Johannes Pfeifenberger and Samuel Newell, supra note 107, at 26. 123. See id.; see also ELEC. POWER RESEARCH INST., DOE: INTEGRATING MIDWEST WIND ENERGY INTO SOUTHEAST ELECTRICITY MARKETS 1-1 (2011) (evaluating the benefits of transferring electricity generated from Midwest onshore wind to low renewable energy supply regions in the Southeast).
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Atlantic.124 More importantly, mid-Atlantic political leaders have been overtly hostile to the idea of integrating imported renewable energy from the Midwest. Governors from the four states abutting the AWC have lobbied Congress against transmission projects that would increase the export of Midwest wind energy due to fears that such imports would reduce local development of renewable energy.125 Given this preference for indigenously-produced renewable energy, offshore wind must play a large role in the mid-Atlantic‘s future energy mix due to the region‘s available renewable energy potential. A 2010 study on state self-reliance in renewable energy production found that New Jersey‘s, Delaware‘s, and Virginia‘s most abundant renewable energy source was offshore wind.126 None of the four mid-Atlantic states were found to be able to generate more than 7 percent of their total electricity sales through the development of onshore wind energy, and their solar energy potential registered among the lowest in the nation.127 Thus, while a need for offshore wind energy in the mid-Atlantic region is clear, the next subpart will explore whether the AWC creates a positive economic climate for the large-scale development of the region‘s offshore wind resources.
2. Economic Benefits offered by the AWC While the AWC is a costly infrastructure investment, multiple studies have indicated that it provides a substantial net economic benefit if there is significant offshore wind build-out.128 One crucial benefit is the reduction of the number of radial transmission lines needed to connect offshore wind farms to the onshore grid. Absent a transmission backbone such as the AWC, the cost of building individual radial lines sufficient to deliver 6000 MW of installed wind capacity to the onshore grid is estimated at between $3.4 and $5.3
124. See Direct Testimony of Johannes Pfeifenberger and Samuel Newell, supra note 107, at 26. 125. See John Farrell, East Coast Governors Say National Transmission Grid Limits Local Energy, INST. FOR LOCAL SELF-RELIANCE (June 25, 2009), http://www.ilsr.org/east-coast-governors-say- national-transmission-grid-limits-local-energy/. Ten East Coast governors opposed proposed interstate transmission projects on the grounds that it would ―hinder our efforts to meet regional renewable energy goals with regional resources and would establish financial conditions in our electricity markets that would impede development of the vast wind resources onshore and just off our shores for decades to come.‖ Id. 126. See FARRELL & MORRIS, supra note 12, at 11. It is important to note that while the study identified rooftop solar as Maryland‘s largest source of renewable energy, it is likely that Maryland‘s offshore wind energy potential was not included nor analyzed due to a lack of data. See id. at 31. 127. See id. at 10, 12–14. Solar energy potential was measured as the percent of each state‘s 2007 electricity sales that could be met by rooftop solar or, alternatively, by the percentage of a state‘s land area covered with solar photovoltaic needed to generate all of that state‘s electricity. See id. at 12–14. 128. See PFEIFENBERGER & NEWELL, supra note 74, at 1; Press Release, Atl. Wind Connection, Mid-Atlantic to Benefit from Offshore Wind and the Atlantic Wind Connection Backbone According to New Economic Impact Study (Oct. 2012), http://www.atlanticwindconnection.com/ferc/Oct2012 /AWC_Project_IHS_Study_Release.html.
2015] THE OFFSHORE GRID 671 billion.129 Thus, the cost of building radial lines alone may eclipse the projected $5 billion construction cost of the entire AWC project.130 Apart from mitigating the cost and environmental impacts of the construction of unnecessary radial lines, the AWC‘s limited number of interconnections to the onshore grid also provides positive externalities via reduced grid congestion. Unlike the development of individual radial lines that may seek connection simply at the closest onshore point, the AWC‘s seven onshore connections are planned to alleviate congestion by interconnecting at areas of highest locational marginal prices along the PJM.131 This feature of the AWC is estimated to cut system-wide congestion costs by $196 million annually.132 Perhaps most importantly, the existence of a transmission backbone offers the potential to dramatically improve investment certainty and reduce costs for offshore wind developers. A 2012 study evaluating the cost reduction potential for offshore wind energy in the United Kingdom found that electricity transmission infrastructure typically accounts for 15 to 20 percent of an offshore wind farm‘s capital costs.133 In its analysis of the AWC‘s expected cost reduction potential, the Brattle Group found that: Increased scale and predictability of offshore wind development facilitated by the AWC Project offers the prospect of significant cost savings for almost every aspect of offshore wind development. It will facilitate investments in local manufacturing of wind turbines and related components and the development of more cost-effective construction and logistical infrastructure. We estimate that streamlined permitting and increased scale that allows local manufacturing and sourcing will reduce total offshore costs by approximately 20 percent. Based on $30 billion of offshore wind generation investment supported by the AWC Project, this results in total cost reductions of approximately $6.0 billion.134 The Brattle Group‘s finding that the AWC may lead to a 20 percent reduction in cost for developers is significant and is in line with U.K. and other
129. See PFEIFENBERGER & NEWELL, supra note 74, at 2–4. The estimated cost of building 6600 MW of offshore wind installed capacity independent of the AWC is $30 billion. See id. at 3. An IHS study of the AWC‘s impact estimated that 7700 MW of offshore wind would necessitate a total investment of $28 billion, excluding transmission costs. IHS INC., supra note 88, at 3. 130. See CONATHAN & CAPERTON, supra note 8, at 10. 131. See PFEIFENBERGER & NEWELL, supra note 74, at 5. Locational marginal price reflects the ―value of energy at a specific location at the time that it is delivered.‖ Locational Marginal Pricing, PJM INTERCONNECTION LLC, http://www.pjm.com/~/media/about-pjm/newsroom/fact-sheets/locational- marginal-pricing-fact-sheet.ashx (last updated Apr. 21, 2015). Energy is less readily able to flow to areas of significant grid congestion and consequently locational marginal prices will be higher in those areas. Id. Thus, by specifically locating the AWC‘s interconnection at areas with the highest locational marginal prices, the project provides congestion relief. 132. Memorandum from Elias G. Farrah, Sonia C. Mendonca & Shamai Elstein, Counsel to the Atl. Wind Connection Cos., to Kimberly D. Bose, Sec‘y, Fed. Elec. Regulatory Comm‘n 44 (Dec. 20, 2010), http://www.eenews.net/assets/2010/12/21/document_cw_01.pdf. 133. CROWN ESTATE, OFFSHORE WIND COST REDUCTION: PATHWAYS STUDY 34 (2012), http://www.thecrownestate.co.uk/media/5493/ei-offshore-wind-cost-reduction-pathways-study.pdf. 134. PFEIFENBERGER & NEWELL, supra note 74, at 4.
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European estimates that offshore transmission spines can reduce project development costs by as much as 25 percent.135 The AWC not only offers an improved investment climate for offshore wind developers, but may also serve as a stimulus for the mid-Atlantic economy. Over the ten-year life of the project, the Brattle Group estimated that the AWC and associated build-out of 6600 MW of offshore wind would create approximately 130,000 to 260,000 jobs and inject $16 to $51 billion into the economies of the mid-Atlantic states.136 A 2012 survey conducted by IHS Global Insight found that construction of 7700 MW of offshore wind in conjunction with the AWC would create over 170,000 jobs and increase regional GDP by $19 billion.137 Although the economic and job figures in both studies vary based on the level of in-region manufacturing and sourcing, the high transportation costs of large offshore wind turbine components favor higher levels of local and regional manufacturing.138 Overall, the Brattle Group found the AWC to have a total economic benefit of $9 to $15 billion.139 This may be an understatement. It is important to note that the Brattle Group‘s economic analysis of the AWC did not include the cost savings associated with grid reliability benefits such as the reduced need for onshore grid improvements.140 The study also did not quantify the environmental costs or benefits of reduced construction of transmission lines and the estimated sixteen million tons of CO2 emissions prevented annually from the integration of 6600 MW of offshore wind into the energy mix.141 In sum, the AWC is a highly promising vehicle to achieve the development of offshore wind energy resources and reduction of GHG emissions from mid-Atlantic states. But given its cost and lengthy development process, important questions regarding offshore transmission projects remain. Is the AWC a uniquely situated project for the mid-Atlantic states or are other similar projects equally desirable and necessary to spur the development of
135. See Direct Testimony of Johannes Pfeifenberger and Samuel Newell, supra note 107, at 58 (citing to Selina Williams, UK Offshore Wind-Grid Coordination Would Save Billions-National Grid, EPC ENG‘R (Nov. 2, 2010), http://www.epcengineer.com/news/post/849/uk-offshore-wind-grid- coordination-would-save-billions-national-grid (―A lack of coordination in building grid links to connect offshore wind farms to onshore networks in the U.K. could push overall investment up by a quarter.‖)). In a similar cost comparison of an offshore transmission spine vs. individual radial transmission lines, an OffshoreGrid study of 321 offshore wind projects in Europe‘s North and Baltic Seas found that investment would be reduced from €83 billion to €69 billion, an approximately 17 percent cost savings. See JAN DE DECKER & PAUL KREUTZKAMP, OFFSHOREGRID, OFFSHOREGRID: OFFSHORE ELECTRICITY INFRASTRUCTURE IN EUROPE 8 (2011), https://ec.europa.eu/energy/intelligent/projects/sites/ieeprojects/ files/projects/documents/offshoregrid_executive_summary_en.pdf. 136. PFEIFENBERGER & NEWELL, supra note 74, at 3. 137. See Atl. Wind Connection, supra note 128. Note that the job creation estimates in both the IHS Global Insight and Brattle Group reports are measured in Full-Time-Equivalent job-years (FTE- Years). A full-time worker who works for one year equals one job per the FTE-Year metric. See id. 138. See id. 139. PFEIFENBERGER & NEWELL, supra note 74, at 1. 140. See id. at 7. 141. See id. at 6–7.
2015] THE OFFSHORE GRID 673 offshore wind resources? If so, what types of incentives and mechanisms at a state and regional level will best facilitate their construction? Part III analyzes the approaches of several other states and regions in using transmission line construction to facilitate the development of renewable energy sources.
III. THE ―CHICKEN-AND-EGG‖ PROBLEM: ADDITIONAL APPROACHES TO FOSTER TRANSMISSION AND RENEWABLE ENERGY DEVELOPMENT Having established that the AWC is an important stimulus to the development of the mid-Atlantic‘s offshore wind energy potential, a survey of similar proposed or completed transmission projects in other states will help determine whether AWC-like projects are needed to support offshore wind development in other regions. It is important to situate the AWC‘s development in context with the pace of offshore wind development in the mid-Atlantic. While developer interest in the mid-Atlantic remains high and several offshore wind projects have been proposed, the construction of the AWC appears likely to precede, or perhaps coincide with, substantial development of the region‘s offshore wind resources. Thus, by first building a transmission spine with the expectation of offshore wind development to follow, the AWC is one solution to offshore wind development‘s perpetual ―chicken-and-egg‖ problem. As former Department of Energy official Susan Tierney notes: [I]n the current framework for transmission investment, wind development and transmission expansion suffers from a classic chicken-and-egg problem . . . transmission companies typically have little interest in building transmission infrastructure in areas where there are no power plants or little power demand because of concerns about who will pay for their transmission investment. Similarly, there tends to be little interest in building renewable generating capacity in remote areas with little power demand and no transmission infrastructure to move power to load centers . . . Each piece of potentially costly infrastructure—the wind project developments themselves, and the transmission projects to service them— wants the other to be developed first.142 Several states have acknowledged the transmission development stalemate in the broader renewable energy context and have enacted legislative mechanisms to stimulate renewable energy development. The following subparts examine these approaches with the ultimate goal of identifying future avenues of development for offshore wind.
142. SUSAN F. TIERNEY ET AL., ANALYSIS GRP., INC. STRATEGIC OPTIONS FOR INVESTMENT IN TRANSMISSION IN SUPPORT OF OFFSHORE WIND DEVELOPMENT IN MASSACHUSETTS 16–17 (2010), http://www.analysisgroup.com/uploadedfiles/content/insights/publishing/final_offshore_transmission_rp t_1-8-2010.pdf.
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A. Texas‘s Competitive Renewable Energy Zones Texas‘s combination of tremendous onshore wind resources, early adoption of RPS goals, and favorable transmission incentives has led to an explosion of wind energy development.143 With over 15.6 GW of wind energy capacity, Texas accounts for over 23 percent of total U.S. installed wind capacity and has emerged as a clear leader in domestic wind energy development.144 However, as is the case for many high potential areas of renewable energy resources, Texas‘s most promising regions for wind energy do not conveniently align with areas of highest demand. While Texas‘s largest urban areas and load centers are in the east and southeast, much of its wind energy potential lies in the more rural West Texas and Texas Panhandle.145 Given this geographic disparity, the major barrier to further wind development in Texas is a lack of transmission capacity.146 Wind developers in Texas have rushed to build wind farms near existing transmission infrastructure, but these areas have been heavily developed and have saturated existing grid capabilities.147 At the same time, developers have hesitated to commit investment to high wind potential areas that lack secure transmission prospects.148 Thus to harness the full potential of Texas‘s abundant wind resources, upgrades and new construction of transmission infrastructure are necessary to carry wind energy from the state‘s rural west to its developed east. To solve the transmission development deadlock, in 2005 the Texas legislature passed Senate Bill 20 which set forth the concept of designated Competitive Renewable Energy Zones (CREZs).149 By evaluating ―areas in which renewable energy resources and suitable land areas are sufficient to develop generating capacity from renewable energy technologies,‖ the purpose of CREZs is to identify areas where high wind energy potential and financial interest coincide.150 Moreover, the legislature instructed the Texas Public Utilities Commission (PUC) to develop a plan to construct transmission capacity to deliver power from those zones after considering the benefit and
143. See Becky Diffen, Competitive Renewable Energy Zones How the Texas Wind Industry Is Cracking the Chicken & Egg Problem, 46 ROCKY MOUTAIN MIN. L. FOUND. J., 47, 57–59 (2009). 144. See AM. WIND ENERGY ASS‘N., U.S. WIND INDUSTRY SECOND QUARTER 2015 MARKET REPORT 5, 7 (2015), http://awea.files.cms-plus.com/FileDownloads/pdfs/3Q2012%20Market%20Report _Public%20Version.pdf. 145. See Diffen, supra note 143, at 62. Texas also has excellent wind resources along the southeastern Gulf Coast, but development in this area is constrained by environmental concerns over wetlands and migratory bird protections. See id. at 63. 146. See id. at 64. 147. See id. at 64–66. 148. See id. at 66. For example, development in the high wind potential Texas Panhandle region lagged due to the fact that it is on the Southwest Power Pool grid rather than the Electric Reliability Council of Texas operated grid that includes Texas‘s major urban centers. Without construction of a new transmission line connecting the Panhandle to eastern load centers, the region‘s wind power cannot reach areas of high demand. See id. at 64. 149. TEX. UTIL. CODE ANN. § 39.904(g) (West 2013). 150. § 39.904(g)(1); see Diffen, supra note 143, at 71.
2015] THE OFFSHORE GRID 675 cost-effectiveness to electricity customers, the electric output from renewable energy generation in each CREZ, and the ―level of financial commitment by generators‖ from each CREZ.151 Based on these factors, the PUC ultimately identified five areas in West Texas and the Texas Panhandle as CREZs.152 CREZs have maintained the focus not only on identifying areas of renewable energy potential, but also on ensuring that the transmission capacity to those areas is built in a planned fashion. After issuing an interim order outlining four transmission scenarios in 2007, the PUC issued a final order calling for the fast-tracked development of some 2334 miles of transmission in March 2009.153 Upon completion, CREZ transmission projects were expected to facilitate the transmission of 18.5 GW of wind energy to Texas‘s metropolitan centers.154 The project reached completion in January 2014 at a total cost of $6.8 billion.155 While concerns remain about CREZs‘ high cost, Texas has sent clear signals to wind developers that it is committed to developing its wind resources and is willing to incentivize development with favorable legislation.156
B. California‘s Renewable Energy Transmission Initiative Another state initiative that demonstrates strong offshore wind transmission potential is the California Renewable Energy Transmission Initiative (RETI). California has been a national leader in the installation of renewable energy capacity and has set forth some of the world‘s most ambitious renewable energy and climate change goals.157 The state‘s RPS requires utilities to produce 33 percent of their electricity from renewable sources by 2020, and its cap-and-trade program seeks to reduce California‘s GHG emissions to 1990 levels by 2020.158 This goal will require an estimated
151. § 39.904(g)(2)–(3). 152. Commission Staff‘s Petition for Designation of Competitive Renewable Energy Zones at 27, Docket No. 33,672 (Tex. Pub. Utils. Comm‘n Aug. 15, 2008), http://www.lrl.state.tx.us/scanned/archive /2008/6999.pdf. 153. See CLEAR VIEW ALLIANCE, INTRODUCTION TO CREZ—COMPETITIVE RENEWABLE ENERGY ZONE 2 (2009), http://www.clearviewalliance.org/docs/CREZ_Timeline_June30_KNK.pdf. 154. RS & H, CREZ PROGRESS REPORT NO. 8 (JULY UPDATE) 2 (2012), http://www.texas crezprojects.com/page2960039.aspx. It is important to note that the transmission development plan adopted by the Texas PUC represented a ―middle path‖ scenario between lower and higher amounts of transmission infrastructure build-out. See Kathryn B. Daniel, Comment, Winds of Change Competitive Renewable Energy Zones and the Emerging Regulatory Structure of Texas Wind Energy, 42 TEX. TECH. L. REV. 157, 179 (2009–10). If more transmission infrastructure is needed in the future, as is likely, the CREZ projects have capacity for expansion. See id. 155. Eric Wolff, Last Line Energized, $6.8B Texas CREZ Project Is Complete, SNL FINANCIAL (Feb. 3, 2014), https://www.snl.com/Interactivex/article.aspx?CdId=A-26708514-11569. 156. See Daniel, supra note 154, at 179–80. 157. California had 25.6 GW of cumulative renewable energy installed capacity by the end of 2013. AM. COUNCIL ON RENEWABLE ENERGY, RENEWABLE ENERGY IN THE 50 STATES: WESTERN REGION 11 (2014), http://acore.org/images/documents/Western_Region_Report_2014.pdf. 158. See Brian Scaccia, California‘s Renewable Energy Transmission Initiative as a Model for State Renewable Resource Development and Transmission Planning, 3 CLIMATE L. 25, 27–28 (2012).
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15 GW of additional renewable energy capacity.159 However, as in Texas, many of California‘s areas of highest renewable energy potential are geographically distant from the state‘s load centers and existing transmission infrastructure.160 Thus, in order to meet its stated goals, California has also chosen to adopt a policy of identifying high potential zones to enhance the developmental efficiency of its renewable resources.161 Launched in September 2007, RETI was initially divided into three phases: Phase I was to broadly identify potential CREZ sites in California and neighboring states; Phase II was to refine the analysis of highest priority CREZs and begin the development of a statewide conceptual transmission plan; and Phase III was to solidify transmission plans for each priority CREZ and initiate the permitting process for building transmission infrastructure.162 California‘s process for selecting each CREZ was similar to the Texas PUC‘s. Each potential CREZ was considered based on its total economic value, necessitating a weighing of renewable energy generation capital costs, the cost of transmission lines to the CREZ, and the hourly value of the energy generated to the grid.163 California also screened for the environmental impacts of each CREZ before allowing identified areas to move forward in the planning process.164 In addition to providing high-quality data about potential CREZs, RETI also prioritized consensus building and actively engaging with diverse stakeholders. This approach involved consulting with some thirty representative stakeholder groups and utilizing a highly collaborative decision- making structure.165 After the completion of Phase II, RETI identified thirty-one in-state CREZs with a total potential capacity estimate of over 80 GW.166 While Phase
159. DAVID OLSEN ET AL., INST. OF ELECTRICAL & ELECTRONICS ENG‘RS, COLLABORATIVE TRANSMISSION PLANNING: CALIFORNIA‘S RENEWABLE ENERGY TRANSMISSION INITIATIVE 2 (2012), http://www.westerngrid.net/wp-content/uploads/2012/07/tste-olsen-2200111-x.pdf. 160. See Scaccia, supra note 158, at 26. 161. OLSEN ET AL., supra note 159, at 2. 162. See CAL. RENEWABLE ENERGY TRANSMISSION INITIATIVE, CALIFORNIA RENEWABLE ENERGY TRANSMISSION INITIATIVE MISSION STATEMENT 3–5 (2008), http://www.energy.ca.gov/reti /Mission_Statement.pdf. 163. NAT‘L WIND COORDINATING COLLABORATIVE, TRANSMISSION UPDATE 4 (2008), https:// nationalwind.org/wp-content/uploads/assets/publications/NWCCTransmissionUpdateAug08.pdf. 164. Id. 165. See Scaccia, supra note 158, at 30. RETI was run by a coordinating committee consisting of the California PUC, California Energy Commission, California Independent Service Operator, and representatives from three of California‘s publicly-owned utilities. See CAL. RENEWABLE ENERGY TRANSMISSION INITIATIVE, supra note 162, at 6. In turn, the Coordinating Committee oversaw the Stakeholder Steering Committee, a diverse group including transmission owners from several western states, environmental groups, Native American tribal governments, several state and federal agencies, renewable energy generators, and many others. See id. at 8. 166. CAL. RENEWABLE ENERGY TRANSMISSION INITIATIVE, RETI PHASE 2B 1–3 (2010), http://www.energy.ca.gov/reti/documents/index.html. RETI also conducted analysis on several out-of- state CREZ sites in the western United States and Canada totaling an additional 109 GW of potential generating capacity. Id. at 1–5.
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III was initially intended to facilitate the development of transmission plans to the highest priority CREZs, its goal became somewhat redundant as other entities involved in California‘s transmission planning began utilizing RETI data.167 Consequently, after Phase II was completed in 2010, the decision was made to wind down RETI as its results were already influencing the transmission planning decisions of the California Independent Service Operator (ISO) and other state public utilities.168 Thus, unlike the direct financing of specific transmission projects in Texas, California‘s RETI served more as a repository for data and analysis than as a direct mechanism for constructing transmission lines. This is likely to reduce the rapidity with which transmission lines conveying renewable energy will be built. Yet RETI‘s evaluation of CREZs and broad stakeholder engagement fostered a ―successful consensus- building process that is now the foundation for many of the state‘s renewable energy and transmission plans.‖169
C. Hawaii‘s Inter-Island Undersea Cable Hawaii has also recognized the importance of facilitating transmission development to support an ambitious renewable energy agenda. Admittedly, Hawaii does not have a recent history of leadership in renewable energy development—as of 2013 the state still met 90 percent of its primary energy needs with oil.170 However, in order to wean itself off its heavy reliance on fossil fuels, Hawaii has responded decisively with legislation promoting renewable energy development and has set forth the most ambitious U.S. RPS goal to date: on June 8, 2015, Hawaii became the first state to enact a 100 percent RPS policy.171 To meet this goal, Hawaii needs transmission infrastructure capable of delivering its disparate sources of renewable energy potential to its load centers. With over 75 percent of the state‘s residents, Oahu is both Hawaii‘s most populous island and the one most dependent on fossil fuel.172 Although estimated renewable energy potential on Oahu remains far below demand, the reverse holds true on Hawaii‘s more sparsely populated islands such as Lanai,
167. See Scaccia, supra note 158, at 33. 168. See id. 169. Id. at 47. 170. AM. COUNCIL ON RENEWABLE ENERGY, supra note 157, at 15. 171. See Press Release, Office of the Governor, Governor Ige Signs Bill Setting 100 Percent Renewable Energy Goal in Power Sector (June 8, 2015), http://governor.hawaii.gov/newsroom/press- release-governor-ige-signs-bill-setting-100-percent-renewable-energy-goal-in-power-sector/. The legislation calls for interim RPS goals of 30 percent by 2020, 40 percent by 2030, and 70 percent by 2040. H.B. 623, 28th Leg. (Haw. 2015). In 2014, 21 percent of the electricity the Hawaiian Electric Company generated came from renewable energy sources. See About Our Fuel Mix, HAW. ELEC. CO., http://www.hawaiianelectric.com/heco/Clean-Energy/Latest-Clean-Energy-News/About-Our-Fuel-Mix (last visited July 12, 2015). 172. As of 2014, coal and oil still account for over 90 percent of Oahu‘s electricity generation. About Our Fuel Mix, supra note 171.
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Maui, Molokai, and the Big Island.173 Hawaii currently operates on six separate electrical grids without additional support from adjoining states as is typically found in the continental United States.174 As with the rationale for the AWC, the Hawaiian government has proposed construction of an interisland, undersea cable system to alleviate Hawaii‘s grid reliability issues and encourage the integration of renewable energy. These efforts culminated in June 2012 when Governor Neil Abercrombie signed Senate Bill 2785 into law. The legislation mandates the establishment of a regulatory system for installing a network of interisland high voltage electric transmission cables.175 The proposed interisland transmission plan would involve one hundred miles of undersea high-voltage direct current cable and would have a goal of operational capacity by 2017.176 Importantly, the bill does not include a public proposal to construct the cable, but instead endeavors to attract private bids by increasing regulatory certainty and ostensibly lowering financing costs.177 Thus, like the AWC, private investors will assume the project‘s risks and capital costs.178 The cable owners will only receive payment for electricity delivered once the cable is operational and subsequently deemed ―used or useful‖ by the Hawaiian Public Utilities Commission.179 While Hawaii‘s interisland cable system is primarily designed to increase grid reliability and the integration of onshore renewables into the energy mix, it also has the potential to integrate future offshore wind resources. Although Hawaii has yet to advance any major offshore wind projects, it boasts the highest potential offshore wind resource of any state.180 At the state‘s request, BOEM led an intergovernmental task force meeting in 2012 to discuss OCS
173. See HAWAII STATE ENERGY OFFICE, CABLE FREQUENTLY ASKED QUESTIONS 6 (2012), http://energy.hawaii.gov/wp-content/uploads/2012/02/Cable-FAQ-for-web.pdf. 174. See id. at 1. 175. See S.B. 2785, 27th Leg. (Haw. 2012) https://legiscan.com/HI/text/SB2785/2012; New Hawaii law sets up regulations for undersea power cable, PACIFIC BUS. NEWS, (June 27, 2012), http://www.bizjournals.com/pacific/news/2012/06/27/new-hawaii-law-sets-up-regulations-for.html. As of 2015, continued support for construction of the cable remains unclear in the wake of Governor Abercrombie‘s defeat to David Ige, the current Governor of Hawaii. See Duane Shimogawa, Hawaii Undersea Cable Unlikely to Get Support if Ige or Hanneman Elected Governor, PACIFIC BUS. NEWS, (Aug. 15, 2014), http://www.bizjournals.com/pacific/news/2014/08/15/hawaii-undersea-cable-unlikely- to-get-support-if.html. Hawaiian Electric Co. has also expressed concern over the project‘s cost and believes that the islands‘ renewable energy goals can be achieved without the cable. See Duane Shimogawa, Undersea Power Cable Project Not a Part of Hawaiian Electric‘s New Plan, PACIFIC BUS. NEWS, (Aug. 27, 2014), http://www.bizjournals.com/pacific/news/2014/08/27/undersea-power-cable- project-not-part-of-hawaiian.html. 176. See Jon Hurdle, Hawaiian Cable Project May Boost Hopes‘ for US Offshore Wind, AOL ENERGY, (June 25, 2012), http://energy.aol.com/2012/06/25/hawaiian-cable-project-may-boost-hopes- for-us-offshore-wind/. 177. See HAWAII STATE ENERGY OFFICE, supra note 173, at 2. 178. See id. 179. See id. 180. Erin Gill, Hawaii Home to USA‘s Largest Offshore Wind Resource, WIND POWER OFFSHORE (July 27, 2012), http://www.windpoweroffshore.com/article/1191502/hawaii-home-usas-largest-offshore -wind-resource.
2015] THE OFFSHORE GRID 679 development of Hawaii‘s offshore wind resources.181 This task force may be an important precedent for the development of Hawaii‘s offshore wind energy, as BOEM has already set up similar task forces with the four AWC states.182 The interisland cable‘s ability to integrate a large percentage of renewable energy into the existing grid may also prove instructive for projects like the AWC.183 It may lead to nearly 33 percent renewable energy integration on Oahu, a much higher figure than the estimated 20 percent maximum renewable integration projected by PJM.184 If Hawaii‘s cable successfully injects one third or more of its electricity from intermittent sources into its largest load center, the perceived value of offshore transmission projects may increase and the environment for investment in projects similar to the AWC may improve.
D. Regional and Federal Approaches While Texas, California, and Hawaii have all adopted different approaches to promoting investment in transmission infrastructure designed to foster renewable energy development, regional and national approaches also warrant examination.
1. Western Renewable Energy Zone Process In May 2008 the Western Governors Association and the Department of Energy launched the Western Renewable Energy Zones (WREZ) initiative.185 Encompassing eleven states, two Canadian provinces, and a portion of northern Mexico, the area included in the WREZ initiative is expansive.186 The WREZ initiative functions as a regional analog to California‘s RETI, as it aims to ―develop areas with abundant, high quality renewable resources in the Western Interconnection . . . and establish an efficient network of interstate transmission lines to deliver the energy to load centers.‖187 In addition, like California, Texas, and Hawaii, states in the WREZ initiative promote policies that incentivize the development of renewable energy sources and accompanying transmission infrastructure. Such efforts are needed: one industry report
181. See BOEM Discussing Offshore Wind Power Development With State Of Hawaii, N. AM. WINDPOWER (Mar. 8, 2012), http://www.nawindpower.com/e107_plugins/content/content.php?content. 9504. 182. See id. BOEM has also set up task forces with Maine, Massachusetts, Rhode Island, New York, North Carolina, South Carolina, and Oregon. Id. 183. See Hurdle, supra note 176. 184. See id. 185. W. GOVERNORS‘ ASSOC. & U.S. DEP‘T OF ENERGY, WESTERN RENEWABLE ENERGY ZONES, PHASE I REPORT 3 (2009), http://www.csg.org/programs/policyprograms/ncic/documents/WREZ091 .pdf. 186. See id. The eleven states are Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming. Id. at i. 187. LISA SCHWARTZ, RENEWABLE RESOURCES AND TRANSMISSION IN THE WEST: INTERVIEWS ON THE WESTERN RENEWABLE ENERGY ZONES INITIATIVE, WREZ PHASE III REPORT TO THE WESTERN GOVERNORS: EXECUTIVE SUMMARY 1, vi (2012).
680 ECOLOGY LAW QUARTERLY [Vol. 42:651 estimates that western states must develop 116,000 GWh of renewable energy per year in order to meet their cumulative 2020 RPS targets.188 Moreover, some of the West‘s most promising areas for renewable energy development, such as Wyoming‘s wind resources, are located far from urban centers and necessitate transmission investment.189 In a process similar to that of RETI and CREZ, the WREZ initiative consists of four phases. Phase I will define each WREZ using economic and environmental criteria similar to those employed by RETI; Phase II will examine economic and environmental factors to facilitate transmission planning; Phase III will coordinate power purchasing agreements amongst various state stakeholders; and Phase IV will facilitate streamlined interstate permitting for transmission projects.190 Also in parallel with California‘s RETI, the interstate nature of the WREZ initiative encourages broad stakeholder engagement.191 However, straddling state lines has downsides—the WREZ initiative implicates difficult jurisdictional issues in transmission planning. In interviews conducted by the Western Governors Association with over twenty- five utilities, although there was general agreement that cost allocation of cross- jurisdictional transmission lines is a difficult issue, there was no consensus on how it should be addressed.192 Furthermore, there was ―no interest in cost allocation on an interconnection wide basis among government officials interviewed.‖193 Government officials from the WREZ initiative states were equally adamant that regional cost allocation was not an option, with a majority preference for working out interstate agreements on an individual project basis.194 Thus, like RETI, the WREZ initiative may have to confine itself to a hands-off advisory role to achieve its ultimate goal of transmission connectivity to WREZs. As a result, the WREZ initiative may not be as effective at solving
188. NATIONAL GRID, THE WEST‘S RENEWABLE ENERGY FUTURE 3, 13 (2008), https://www.nationalgridus.com/non_html/transmission-westrenewablefuture.pdf; see also JEFF HEIN, NATIONAL RENEWABLE ENERGY LABORATORY, WESTERN RENEWABLE ENERGY ZONES: MEETING TRANSMISSION CHALLENGES IN THE ROCKY MOUNTAIN REGION, slide 4 (June 21, 2011), http://www.nrel.gov/docs/fy11osti/52000.pdf. The study references the Western Electricity Coordinating Council region, which includes all of the states, Canadian provinces, and portions of Mexico encompassed by the WREZ initiative. See WESTERN ELECTRICITY COORDINATING COUNCIL, 2015 STATE OF THE INTERCONNECTION (2015), https://www.wecc.biz/Reliability/2015%20SOTI%20 Final.pdf. 189. See NATIONAL GRID, supra note 188, at 4. 190. See W. GOVERNORS‘ ASSOC. & U.S. DEP‘T OF ENERGY, supra note 185, at 18–19. 191. See id. at 4. 192. See SCHWARTZ, supra note 187, at 73. 193. Id. The Phase III WREZ report noted that ―The West has a long history of collaboration on thermal power plants and transmission. But renewable resources are different. They typically can be developed in small increments and short timeframes, so the drivers for joint development in the past— mainly sharing the cost and risk of large, capital-intensive projects—may not be in play.‖ Id. However, the report did highlight potential for ―coordinated resource procurement‖ to leverage utilities‘ ability to development transmission infrastructure. See id. 194. Id.
2015] THE OFFSHORE GRID 681 the chicken-and-egg problem as the Texas CREZ model, which is better suited to directly facilitate transmission construction.195
2. Energy Policy Act of 2005 and FERC Order 1000 In addition to state and regional efforts designed to solve the transmission development stalemate, Congress and FERC have implemented policies to stimulate transmission build-out. While comprehensive national legislation directed at creating a framework similar to the WREZ initiative has failed to pass in Congress,196 measures designed to empower FERC and stimulate regional transmission development have gained momentum. Section 1221 of the Energy Policy Act of 2005 (EPAct) granted the Department of Energy the ability to designate National Interest Electric Transmission Corridors—areas of insufficient electricity transmission capacity.197 Where states‘ transmission siting decisions do not properly account for regional grid stability and congestion, the legislation grants FERC broader powers of preemption over state authorities to site transmission projects in such designated corridors.198 Proponents of EPAct noted the positive effect of increased federal authority over transmission siting on renewable energy integration, grid congestion relief, and development of competitive wholesale electricity markets.199 However, the provision authorizing the exercise of federal preemption has yet to be used.200 Perhaps most importantly, in 2011 FERC promulgated Order 1000 which mandated improved inter-regional transmission planning and cost allocation by
195. Id. at 6. 196. In September 2007 Senate Majority Leader Harry Reid introduced the ―Clean Renewable Energy and Economic Development Act.‖ S. 2076, 110th Cong. (2007), http://beta.congress.gov/bill /110th-congress/senate-bill/2076/text. The bill called for the President to amend the Federal Power Act to ―designate certain geographical areas as national renewable energy zones.‖ Id. Similar to the aforementioned state and regional approaches, the bill defined Renewable Energy Zones as each area that ‗has the potential to generate in excess of 1 gigawatt of electricity from renewable energy . . . and has an insufficient level of electric transmission capacity‘ to achieve their renewable energy generation potential.‖ Id. Senator Reid‘s legislation mandated that at least 75 percent of the electricity carried by new transmission crossing federal lands would be used for renewable energy and limited federal financing for transmission that does not meet the 75 percent threshold. Id. The bill also allowed for the President to consider renewable energy zones previously identified by processes such as RETI and WREZ. See Press Release, Office of Senator Harry Reid, Reid Announces Major Transmission Legislation, (Mar. 5, 2009), http://www.reid.senate.gov/newsroom/pr_030509_transmissionbill.cfm. Senator Reid‘s bill failed to clear the 110th Congress, and an updated version of the legislation reintroduced in March 2009 again failed to earn Congressional approval. See id. 197. 16 U.S.C. § 824p (2012). 198. Id.; see Scott Sklar, Bold Moves for Renewables in 110th Congress, RENEWABLE ENERGY WORLD, (Oct. 8, 2007), http://www.renewableenergyworld.com/rea/news/article/2007/10/bold-moves- for-renewables-in-110th-congress-50182; Erich W. Struble, National Interest Electric Transmission Corridors Will State Regulators Remain Relevant?, PENN STATE L. REV. 575, 577–79 (2008). 199. See ADAM VANN & JAMES V. DEBERGH, CONG. RESEARCH SERV., THE FEDERAL GOVERNMENT‘S ROLE IN ELECTRIC TRANSMISSION SITING 11–12 (2011). 200. Peter Behr, DOE Tries a Fundamentally Different‘ Approach to Modernize Nation‘s Power Grid, E&E NEWS, (Jan. 17, 2012), http://www.eenews.net/stories/1059958529.
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ISOs and RTOs.201 The order stipulates that ―[l]ocal and regional transmission planning processes must consider transmission needs driven by public policy requirements established by state or federal laws or regulations.‖202 In addition, FERC requires that ―[e]ach public utility transmission provider must establish procedures to identify transmission needs driven by public policy requirements and evaluate proposed solutions to those transmission needs.‖203 Order 1000‘s new focus on ―public policy benefits‖ provides a crucial link to increasing the integration of renewable energy sources into the energy mix.204 Previously, transmission planners focused solely on reliability benefits (grid stability) and economic benefits (cheaper power).205 However, with the explicit addition of public policy benefits, transmission planners must also consider state public policy goals that include rapid integration of renewable energy sources.206 Thus, Order 1000 provided important federal assistance to the states and helped regional and state actors meet their RPS targets by facilitating an inclusive transmission planning perspective.207
E. Summary The state approaches of Texas, California, and Hawaii, the regional approach of the WREZ initiative, and the federal approaches advocated by EPAct and FERC Order 1000 demonstrate the potential of coordinated transmission planning to foster renewable energy development. These types of policies will increase investor certainty, speed up development timelines, and drive down costs for infrastructure projects such as the AWC. Part IV presents an analysis of where such mechanisms may be deployed to further the development of offshore wind energy.
201. FED. ENERGY REGULATORY COMM‘N, ORDER NO. 1000 - TRANSMISSION PLANNING AND COST ALLOCATION, (June 17, 2010), http://www.ferc.gov/industries/electric/indus-act/trans-plan.asp. 202. FED. ENERGY REGULATORY COMM‘N, ORDER NO. 1000 FACTSHEET (2011), http://www. ferc.gov/media/news-releases/2011/2011-3/07-21-11-E-6-factsheet.pdf. 203. Id. 204. See Richard W. Caperton, FERC Helps Line Up Clean Energy Projects with New Rule, CTR. FOR AM. PROGRESS, (July 28, 2011), http://www.americanprogress.org/issues/green/news/2011/07/ 28/10000/ferc-helps-line-up-clean-energy-projects-with-new-rule/. 205. Id. 206. See id. 207. See e.g., Jay Lindsay, New Rules Could Boost New England Renewable Power, BANGOR DAILY NEWS, (Jan. 23, 2012), http://bangordailynews.com/2012/01/23/business/new-rules-could-boost- new-england-renewable-power-2/ (reporting on optimism amongst grid planners seeking increased renewable energy integration in New England following FERC Order 1000); Bill White, It‘s All Connected–Regional Transmission Planning in the Southeast, AMS. FOR A CLEAN ENERGY GRID, (Nov. 26, 2012), http://cleanenergytransmission.org/its-all-connected-regional-transmission-planning-in-the- southeast/ (highlighting FERC Order 1000‘s importance for southeastern states‘ transition from coal to renewable energy sources).
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IV. THE PATH FORWARD The purpose of Part III was to identify a particular set of tools already used by state and regional policymakers that may be implemented to foster the development of offshore transmission infrastructure and offshore wind energy. These tools include: (1) setting ambitious RPS targets and other supplementary legislation supportive of offshore wind energy; (2) identifying specific areas of highest offshore wind resource and; (3) enacting legislation or other collaborative stakeholder mechanisms laying out a framework for transmission development to deliver offshore wind energy to load centers. After identifying the mechanisms best suited for offshore wind development within these three macro-level policy choices, this Part concludes with an examination of each coastal region (excluding the mid-Atlantic which has already been discussed in- depth in Part II). Regions will be addressed in order of the feasibility and necessity for offshore transmission and wind farm development. By demonstrating which of the available policy tools are best suited to each region, this analysis provides a useful starting point for a closer evaluation of offshore wind‘s region-specific policy drivers, as well as a tailored cost-benefit analysis of its future energy-generation value. First, coastal regions comprised of states with strong RPS policies are superior candidates for developing offshore wind resources.208 Still, while RPS goals provide a baseline incentive to invest in various renewable energy options, the aforementioned barriers to development may stymie offshore build-out even in regions with excellent offshore wind resources.209 Thus, the use of additional offshore-wind forcing ―preference mechanisms‖ embedded within state RPS policies may provide an optimized pathway for development of offshore wind energy.210 Preference mechanisms typically come in two forms: carve-outs and multipliers. Carve-outs, also known as set-asides, identify a particular renewable energy technology and set a distinct target for that energy source within the overall RPS.211 For example, Maryland has enacted a solar carve-out mandating that 2 percent of its RPS target must come from solar energy by 2020.212 In contrast to the direct approach of carve-outs, multipliers incentivize development of a particular renewable energy technology by awarding disproportionate RECs to one type of energy
208. Cf. Gold & Thakar, supra note 97, at 249 (finding that, in the absence of international or federal climate policy, state RPS policies are effective at stimulating renewable energy development and that ―[s]ince 1998, more than sixty percent of new renewable development occurred in RPS states, and the bias toward RPS states is increasing.‖). 209. See WARREN LEON, A GUIDE TO SELECTING GOALS AND PROGRAM OPTIONS FOR A RENEWABLE PORTFOLIO STANDARD 40 (March 2012), http://www.cleanenergystates.org/assets/2012- Files/RPS/CESA-RPS-Goals-and-Program-Design-Report-March-2012.pdf (―Different technologies provide different benefits, but an RPS without a preference mechanism will lead to the development of only the least-cost eligible technologies.‖). 210. See id. 211. See id. at 40. 212. Maryland Incentives/Policies for Renewables & Efficiency, supra note 105.
684 ECOLOGY LAW QUARTERLY [Vol. 42:651 source.213 In nearly every state with an RPS, an REC is created when a renewable energy-generating facility produces one megawatt-hour (MWh) of electricity.214 Delaware has a 350 percent REC multiplier for offshore wind energy.215 Thus a Delaware electric utility that gets just 1 REC per MWh of biomass power instead receives 3.5 RECs per MWh of offshore wind. A utility would thus seek, in theory at least, to build more offshore wind facilities because they generate more RECs per MWh. While either multipliers or carve-outs are preferable to an absence of specific offshore-wind supporting RPS mechanisms, carve-outs may prove the more effective vehicle for stimulating offshore wind energy deployment. A study of the efficacy of solar energy carve-outs by Lawrence Berkeley National Laboratory found that carve-outs are a ―necessary‖ ingredient for advancing solar energy deployment and states have moved toward using carve-outs rather than multipliers to carry out their objectives.216 Multipliers, while more flexible and deferential to market-forces than carve-outs, necessarily reduce the overall amount of renewable energy generated by disproportionately increasing the number of RECs awarded to certain types of energy.217 Moreover, by directly requiring a specific amount of energy generated from a particular technology, carve-outs may force greater action in offshore wind development as the benefit accrued from multipliers may fail to surmount concerns about offshore wind‘s higher costs. States may also bolster investor certainty in both offshore transmission and offshore wind projects through preferential tax treatment. For example, New Jersey has successfully increased investor certainty with its offshore wind renewable energy certificate program and 100 percent tax credit for large-scale offshore wind projects. In the wake of perpetually uncertain and potentially expiring federal tax credits for offshore wind energy, state actors may extend similar tax incentives to mitigate developer risk on the high upfront capital costs of offshore wind farms and transmission infrastructure. Second, coastal states and regions should identify the areas of best offshore wind resources that are feasible for development. The Department of the Interior has already initiated a federal identification process through BOEM-led task forces and the creation of WEAs. However, states and regions can and should take action to map areas of best offshore wind resource by accounting for both economic feasibility and environmental impacts.
213. LEON, supra note 209, at 41. 214. Id. at 10. RECs serve the function of a ―common currency for renewable energy generation,‖ allowing states to track how much renewable energy is being generated and (in certain states) create a market for buying and selling RECs to comply with RPS mandates. See id. 215. Delaware Incentives/Policies for Renewables & Efficiency, supra note 104. 216. VOTE SOLAR INITIATIVE, SOLAR CARVE-OUTS: DEPLOYING SOLAR WITHIN RENEWABLE PORTFOLIO STANDARDS 1 (on file with author). 217. See id. at 1; see also LEON, supra note 209, at 42. But see id. at 41 (noting that carve-outs are potentially anti-competitive and inflexible).
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Third, state and regional actors can create mechanisms to streamline permitting of transmission and spur offshore wind project development. As a 2011 University of Michigan study highlights, ―[p]olicymakers have a role to play in promoting investment in offshore transmission grids. Establishing streamlined mechanisms for inter-jurisdictional permitting is essential, given that offshore grids are likely to cross state, ISO/RTO, and national boundaries.‖218 Here, state and regional actors should consider the benefits and limitations of the three types of mechanisms highlighted in Part III: (1) A CREZ-like, start-to-finish process of identifying optimal offshore wind resources and mandating the construction of transmission lines to deliver offshore wind energy to load centers; (2) a WREZ-like process where broad stakeholder engagement across several states may streamline transmission permitting to areas replete with offshore wind resources but falls short of directly facilitating transmission construction; or (3) legislative action similar to Hawaii‘s undersea cable bill where regulatory certainty and cost reductions incentivize private investment for offshore transmission. The next subpart focuses more closely on the particular factors that will shape regional decisions and suggests policy combinations best suited for facilitating offshore wind development.
A. The Northeast Coast The Northeast‘s coast is one area where a favorable policy environment may stimulate offshore wind transmission and offshore wind energy development in the near future. The region, defined here as New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, and Maine, presents a legislative environment highly favorable to offshore wind. Currently, every coastal state in the Northeast has a mandatory RPS target. New York has set an RPS of 29 percent by 2015; Connecticut, 27 percent by 2020; Rhode Island, 14.5 percent by 2019; Massachusetts, 15 percent by 2020; New Hampshire, 24.8 percent by 2025; and Maine, 40 percent by 2017.219 Maine has set an ambitious target for 5 GW of offshore wind by 2030,220 and Massachusetts has called for 2 GW of wind development (both onshore and offshore) by 2020.221 All six states are also participants in the Regional
218. ARVIND BALACHANDER ET AL., TRANSMISSION RELATED POLICY OPTIONS TO FACILITATE OFFSHORE WIND IN THE GREAT LAKES 11 (2011). 219. Renewable Portfolio Standard Policies, supra note 102. 220. See Press Release, Nat‘l Res. Council of Maine, New Report: A Turning Point for Maine Offshore Wind Energy, (Sept. 13, 2012), http://www.nrcm.org/news/nrcm-news-releases/new-report-a- turning-point-for-maine-offshore-wind-energy/. 221. Carl Levesque, Massachusetts Governor Calls for 2,000 MW of Wind by 2020, RENEWABLE ENERGY WORLD (Jan. 22, 2009), http://www.renewableenergyworld.com/rea/news/article/2009/01/ massachusetts-governor-calls-for-2000-mw-of-wind-by-2020-54550.
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Greenhouse Gas Initiative, the first U.S. cap-and-trade program targeting a 10 222 percent reduction in CO2 emissions in the utility sector by 2018. In addition to a favorable legislative framework for offshore wind, the northeastern coastal states have already begun to identify the areas of best offshore wind resources. According to National Renewable Energy Laboratory (NREL) estimates, the six states cumulatively boast 539.6 GW of offshore wind potential within 50 nautical miles of the shore.223 Maine, Massachusetts, Rhode Island, and New York have all established BOEM-led task forces to foster stakeholder collaboration and streamline permitting for offshore wind energy.224 Furthermore, BOEM identified a Massachusetts WEA and a joint Massachusetts-Rhode Island WEA in 2012.225 The two WEAs cover approximately 1250 square miles and offer an estimated 6 GW of offshore wind energy potential.226 Studies have also begun to examine the best sites for offshore transmission spines along the Northeast‘s coast. A 2012 Stanford University paper suggested that an ―ideal‖ grid for offshore wind energy in the Northeast would run from the waters off Long Island out to Georges Bank, approximately 150 kilometers east of Cape Cod.227 The general paucity of renewable energy options in northeastern coastal states increases leverage for developing the region‘s offshore wind resources. With the exception of Maine, the northeastern coastal states do not have much potential for generation from small hydroelectric power or onshore wind energy.228 Moreover, the six states have some of the country‘s lowest potential for self-sufficiency based on rooftop solar photovoltaic generation.229 By contrast, offshore wind energy is Rhode Island‘s most abundant renewable
222. Felicity Barringer & Kate Galbraith, States Aim to Cut Gases by Making Polluters Pay, N.Y. TIMES (Sept. 15, 2008), http://www.nytimes.com/2008/09/16/us/16carbon.html?pagewanted=1&_r=2. According to recent analysis, the Regional Greenhouse Gas Initiative has already succeeded in reducing annual CO2 emissions by 23 percent compared to the 2006–08 period in member states while adding $1.6 billion in value to the economies of member states. See Stephen Lacey, RGGI States Cut CO2 by 23 Percent in First Three Years, RENEWABLE ENERGY WORLD, (June 7, 2012), http://www.renewable energyworld.com/rea/news/article/2012/06/rggi-states-cut-co2-by-23-percent-in-first-three-years. 223. See BOWES & ALLEGRO, supra note 15, at 26–32. 224. See id. at 15. 225. Press Release, Bureau of Ocean Energy Mgmt., BOEM Identifies Wind Energy Area Offshore Massachusetts for Potential Commercial Leasing, (May 30, 2012), http://www.boem.gov /BOEM-Newsroom/Press-Releases/2012/press05302012.aspx; Press Release, Bureau of Ocean Energy Mgmt., BOEM Identifies Wind Energy Area Offshore Rhode Island and Massachusetts, (Feb. 24, 2012), http://www.boem.gov/BOEM-Newsroom/Press-Releases/2012/press02242012.aspx. The identification of the joint Massachusetts-Rhode Island WEA emerged from a 400 square mile area of mutual interest designated through a 2010 MOU signed between the two states. Press Release, Mass. Exec. Office of Energy and Envtl. Affairs, Governors Patrick and Carcieri Sign Agreement on Offshore Wind Energy Development, (July 23, 2010), http://www.riedc.com/files/MA-RI-Wind-MOU-7-10.pdf. 226. See BOWES & ALLEGRO, supra note 15, at 26–32. 227. Michael J. Dvorak et al., Where is the ideal location for a US East Coast offshore grid, 39 GEOPHYSICAL RESEARCH LETTERS 1, 5 (2012). 228. See FARRELL & MORRIS, supra note 12, at 10, 15. 229. See id. at 12.
2015] THE OFFSHORE GRID 687 energy resource.230 Harnessing Maine‘s offshore wind energy potential could supply more than double the state‘s electricity needs.231 Consequently, offshore wind must be part of an all of the above strategy in order for northeastern states to approach self-sufficiency through renewable energy generation.232 Despite excellent offshore wind resource, legislative incentives, and identification of high-potential areas, neither state-specific legislation nor any interstate agreements have emerged to foster offshore transmission build- out.233 But even in the absence of programs akin to CREZ or RETI, private developers have been solving the chicken-and-egg problem by demonstrating strong interest in both simultaneous and independent development of offshore wind projects and offshore transmission spines along the Northeast‘s coast. While the Cape Wind project, a proposed 454 MW offshore wind farm off the coast of Cape Cod, Massachusetts, remains the Northeast‘s highest profile offshore wind project, Deepwater Wind‘s Deepwater ONE project has greater potential to reshape offshore wind development in the Northeast.234 Deepwater ONE is a proposed 900 to 1200 MW offshore wind farm located within the Massachusetts-Rhode Island WEA.235 As both the largest proposed offshore wind project in the United States and the largest proposed renewable energy project in the Northeast, Deepwater Wind plans to site most Deepwater ONE turbines nearly twenty miles offshore.236 In 2015 Deepwater Wind announced financing for a pilot 30 MW Block Island Wind Farm, which is expected to complete construction by 2016.237 The Block Island Wind Farm may become the first operational offshore wind farm in the United States and will serve as a bridge to the larger proposed Deepwater ONE project.238 Deepwater Wind has also proposed construction of a New England–Long Island transmission line that would deliver power from Deepwater ONE to onshore locations in multiple states.239 As currently proposed, the transmission
230. See id. at 21. 231. See id. at 11. 232. See id. 233. It should be noted that FERC Order 1000 may emerge as a regional mechanism to stimulate offshore wind transmission projects. See Caperton, supra note 204. Because the strong public policy benefit of helping northeastern states meet their RPS targets through increased integration of offshore wind resources is now included in transmission planning decisions of RTOs and ISOs, FERC Order 1000 increases the desirability offshore wind transmission projects. See id. 234. For additional information on Cape Wind, see supra note 10. 235. Deepwater Wind Wins Auction to Develop Offshore Wind Energy Sites in Federal Waters, DEEPWATER WIND, http://dwwind.com/press/deepwater-wind-wins-auction-develop-offshore-wind- energy-sites-federal-waters/ (last visited Apr. 25, 2013). 236. Id. 237. Joshua Hill, Deepwater Wind Acquires Financing for US Offshore Wind Farm, CLEAN TECHNICA, (Mar. 5, 2015), http://cleantechnica.com/2015/03/05/deepwater-wind-acquires-financing-us- offshore-wind-farm/. 238. Id. 239. DEEPWATER WIND, DEEPWATER WIND ENERGY CENTER: A LANDMARK RENEWABLE ENERGY & TRANSMISSION PROJECT FOR LONG ISLAND, PROJECT OVERVIEW (2012), http://www.off shorewindhub.org/sites/default/files/resources/deepwater_7-26-2012_windenergycenter.pdf.
688 ECOLOGY LAW QUARTERLY [Vol. 42:651 line would function as the AWC‘s smaller cousin, running from an onshore anchor point in southeast Massachusetts to the Deepwater ONE site some fifteen miles south of Martha‘s Vineyard, and then moving westward into Long Island Sound adjacent to the Rhode Island, Connecticut, and New York coastlines.240 The line would be capable of delivering 600 MW of power, and like the AWC, promises to reduce grid congestion.241 The line is part and parcel of the Deepwater ONE project; simultaneous completion is estimated for 2017–2018.242 Developers in the Northeast have also expressed interest in building out independent offshore transmission infrastructure in anticipation of future offshore wind projects. In 2011 Anbaric Transmission proposed the Bay State Offshore Wind Transmission System, a 2000 MW offshore transmission spine designed to deliver future offshore wind energy from the Massachusetts WEA to onshore points in southern Massachusetts.243 Interestingly, Anbaric does not plan to connect with Cape Wind and acknowledges that other offshore wind project proposals in the region would not be operational for at least seven years.244 Thus, despite a lack of imminent offshore wind projects, Anbaric‘s strategy indicates a bullish position on the area‘s offshore wind development potential. What conclusions ought to be drawn from the offshore wind farm and transmission proposals coming out of the Northeast? It is clear that offshore transmission development along the Northeast‘s coast is trending positively. Private developers are optimistic about the prospects for offshore wind energy in the region and are breaking the transmission development stalemate by either simultaneously pairing wind farms with ambitious multi-state transmission plans or proceeding to build offshore transmission capacity with confidence that more offshore wind farm development will follow. Thus, rather than broad, paradigm-shifting legislation, state policymakers should consider minor tweaks to the current regional policy framework to support existing private interest in offshore wind. First, northeastern states should consider amending their RPS targets to include carve-outs for offshore wind energy. Given the allocation of renewable resources in the region, offshore wind energy will have to play a role in
240. See id. 241. See id. 242. See CLEANTECH CORRIDOR, OFFSHORE WIND & TRANSMISSION: COST EFFECTIVE, SCALABLE, CLEAN ENERGY FOR DOWNSTATE NEW YORK 6 (May 2012), www.cleantechcorridor. org/dev11/images/presentations/dww.pdf. Deepwater Wind has also proposed a 1000 MW wind farm off the coast of southern New Jersey. Garden State Offshore Energy, DEEPWATER WIND, http://dwwind.com/new-jersey/ (last visted on Apr. 19, 2015). 243. See Richard A. Kessler, Anbaric plans grid for Massachusetts offshore wind, RECHARGE NEWS, (Nov. 15, 2011), http://www.rechargenews.com/energy/wind/article288992.ece. 244. See id. In stating its adaptability to the future demands of New England‘s load centers, Anbaric emphasized that it retains capacity to expand its offshore grid presence in the Northeast. See id (noting that an Anbaric Project Director claimed ―[w]e‘ll build up to what the states want‖).
2015] THE OFFSHORE GRID 689 regional electricity generation to meet future RPS goals. Use of carve-outs will serve as an important RPS accountability mechanism, helping states begin investing more aggressively in long-term energy solutions rather than pursuing less expensive half-measures in the near term. Carve-outs could be designed to effectively require one utility-scale offshore wind project within the reasonable timeframe of a decade. If carve-outs are perceived to be too costly, states may also send positive market signals to strengthen development activity through tax incentives (like those offered in New Jersey) or use REC multipliers for electricity generated by offshore wind energy. Both choices represent lower- cost, lower-risk alternatives to using carve-outs; if multipliers and tax- incentives are insufficient to attract developer interest, policymakers do not need to readjust legislation but may simply let the incentives remain unused at no cost to utilities and taxpayers.245 Second, the northeastern states should establish a unified plan to identify areas of best offshore wind resource and facilitate transmission connectivity to those areas. The region already boasts examples of positive engagement in the climate change and renewable energy spheres, such as the Regional Greenhouse Gas Initiative and the Massachusetts and Rhode Island memorandum of understanding (MOU) establishing a joint WEA. Northeastern states do not need to wait for BOEM to identify WEAs, and may jointly or independently research and designate additional areas of high potential wind energy resources.246 A model of interstate cooperation based on identifying areas of best resource and transmission options—analogous to WREZs—may build momentum for future interstate MOUs on development of an offshore transmission infrastructure network that can supplement, support, or enhance private developers‘ transmission plans.247 Given the strong history of interstate cooperation, a cost-sharing mechanism for building cross-jurisdictional offshore transmission lines should be a focus of discussion amongst state actors.248 Thus, a mechanism that fuses the WREZ initiative focus on broad
245. See LEON, supra note 209, at 42 (―Even if the results are significantly different than expected, a state does not necessarily have to make adjustments or revisions to the RPS targets or rules. It can simply accept the unexpected results.‖). 246. For example, in an analysis of Massachusetts‘s potential offshore wind transmission development, Susan Tierney suggests the possibility of (1) identification of offshore wind energy zones in both state and federal waters, (2) creation of a new state agency tasked with developing and financing offshore transmission lines, and (3) coordinating efforts with other New England states to explore potential for a regional offshore transmission network. See TIERNEY, supra note 142, at 53–55. 247. See id. at 31. 248. FERC Order 1000 may also stimulate regional transmission planning and cost-sharing in the ISO New England jurisdiction. New England‘s regional planning process has accounted for renewable energy policy studies in the past. See, e.g., NEW ENGLAND GOVERNORS‘ RENEWABLE ENERGY BLUEPRINT (2009), http://www.isone.com/committees/comm_wkgrps/othr/clg/mtrls/2010/feb22010/ governors_blueprint.pdf. The New England States Committee on Electricity identifies state and federal public policies for initial study, which are subsequently presented to ISO New England for further review. See FED. ENERGY REGULATORY COMM‘N, ORDER NO. 1000 COMPLIANCE FILING OF ISO NEW ENGLAND INC. AND THE PARTICIPATING TRANSMISSION OWNERS ADMINISTRATIVE COMMITTEE pt. 1, at 5 (2012), http://www.ferc.gov/industries/electric/indus-act/trans-plan/filings.asp.
690 ECOLOGY LAW QUARTERLY [Vol. 42:651 stakeholder collaboration and the CREZ start-to-finish approach to transmission development presents an ideal scenario for offshore wind development in the region. While suboptimal when compared with a regionally integrated approach to developing offshore transmission lines, states may also individually follow Hawaii‘s example by employing specific legislation as a tool to leverage private bids for offshore transmission development.249 Such state legislation is a low-risk option to build upon the nascent momentum for attracting private investment in regional offshore transmission.
B. Great Lakes Region Another region that presents a potentially promising environment for offshore transmission development are the Great Lakes states of Minnesota, Wisconsin, Michigan, Ohio, Illinois, Indiana, Pennsylvania, and New York. Similar to the Northeast and mid-Atlantic, the strong winds over the Great Lakes offer excellent and accessible wind energy potential close to areas of high demand. A 2011 University of Michigan study calculated that 26 GW of offshore wind potential lay in waters six miles or closer to the major load centers of the Great Lakes region.250 The study further concluded that the Great Lakes offshore wind resources were on ―the brink of development‖ but ―will be constrained by limited transmission in mid- to high-growth scenarios . . . [forcing] suboptimal offshore wind siting decisions.‖251 Although construction of offshore transmission infrastructure may be necessary to stimulate the latent offshore wind potential of the region, the Great Lakes present a mixed investment climate for both offshore wind and transmission. The Great Lakes states offer a favorable policy environment for renewable energy generally. Seven of eight states have adopted mandatory RPS targets: Minnesota, 26.5 percent by 2025; Wisconsin, 10 percent by 2015; Illinois, 25 percent by 2026; Michigan, 10 percent by 2015; Ohio, 12.5 percent by 2026; Pennsylvania, 18 percent by 2021; and New York, 29 percent by 2015.252 Indiana has also adopted a voluntary RPS goal of 10 percent by 2025.253 However, no Great Lakes state has passed legislation specifically promoting offshore wind development. Multiple states have enacted preliminary measures ordering studies of offshore wind development, but the overall policy
249. Although not set forth as explicitly as Hawaii‘s inter-island undersea cable legislation, Maine has provided some statutory support for offshore transmission development. See An Act To Implement the Recommendations of the Governor‘s Ocean Energy Task Force, L.D. 1810, 124th Leg., Second Reg. Sess. (Me. 2010), http://www.mainelegislature.org/legis/bills/bills_124th/chapters/PUBLIC615.asp (stating that Maine‘s policy is to ―encourage the attraction of appropriately sited development related to wind energy, including any additional transmission and other energy infrastructure needed to transport additional offshore wind energy to market‖). 250. See BALACHANDER ET AL., supra note 218, at 58. 251. Id. at 179–80. 252. Renewable Portfolio Standard Policies, supra note 102. 253. Id.
2015] THE OFFSHORE GRID 691 environment for offshore wind remains uncertain. For example in Michigan, legislation both promoting offshore wind development and expressly prohibiting it has been introduced over the last few years.254 Another challenge to the development of offshore wind energy in the Great Lakes region is the diversity of renewable energy options available to state decision makers. The eight states encompass a broad geographical swath of the United States and, consequently, the prospect for harnessing particular renewable energy sources varies substantially from state to state. In Minnesota, Illinois, Wisconsin, and Indiana, abundant onshore wind energy potential is capable of generating the entirety of each state‘s electricity needs several times over.255 In Michigan, Ohio, and New York, onshore wind retains significant electricity generation potential, albeit substantially less than that found in the upper Midwest.256 Thus in states with lower RPS goals or voluntary targets, onshore wind is likely to be the first option pursued due to its lower cost and relative abundance. The Great Lakes region has also taken steps to identify the areas of greatest offshore wind potential. In 2010 Michigan‘s Great Lakes Wind Council identified five priority ―wind resource areas‖ upon completion of a detailed survey of the state‘s offshore wind resources commissioned by former Governor Jennifer Granholm.257 Illinois also passed legislation forming the Lake Michigan Offshore Wind Energy Advisory Council, a group that offered selection criteria for choosing areas of potential offshore wind development.258 However, identification of specific wind energy areas has lagged and has not equaled the progress made by the Northeast or mid-Atlantic. Moreover, a collaborative intrastate or interstate process designed to foster identification of offshore wind resource potential and site transmission lines similar to the WREZ initiative has not emerged. To foster development of the offshore transmission lines necessary to facilitate the build-out of offshore wind energy, state and regional actors should build upon nascent mechanisms that bode well for offshore wind‘s success. First, the eight states should adopt more stringent RPS targets. While the modest targets in place are a positive baseline, they likely need to be more
254. Jacob Kanclerz, Great Lakes Offshore Wind Development Stalled in Michigan Legislature, GREAT LAKES ECHO, (Oct. 19, 2011), http://greatlakesecho.org/2011/10/19/great-lakes-offshore-wind- development-stalled-in-legislature/. Michigan Governor Rick Snyder stated in March 2012 that he would not pursue offshore wind legislation at that time. See Press Release, Office of the Governor, Michigan Enters Multi-State Agreement Regarding Offshore Wind Energy, (Mar. 30, 2012), http://www.michigan.gov/snyder/0,4668,7-277-57577-274875—,00.html. 255. See FARRELL & MORRIS, supra note 12, at 10. 256. See id. Pennsylvania is only projected to be able to meet 6 percent of its electricity sales through onshore wind energy generation. See id. 257. Welcome!, MICHIGAN GREAT LAKES WIND COUNCIL, http://www.michiganglowcouncil.org/ index.html (last visited Aug. 29, 2015). 258. Lake Michigan Offshore Wind Energy Advisory Council, LAKE MICH. OFFSHORE WIND ENERGY ADVISORY COUNCIL, https://web.archive.org/web/20141004225048/http://www.dnr.illinois. gov/councils/LMOWEAC/Pages/default.aspx.
692 ECOLOGY LAW QUARTERLY [Vol. 42:651 aggressive to stimulate offshore wind development. Stronger RPS goals should be supplemented with additional offshore wind policies. Here the relative inflexibility of carve-outs, coupled with regional diversity in renewable energy options, may outweigh the benefits of offshore wind carve-out policies. Thus, multipliers and tax credits may be a more palatable choice for policymakers and allay some of the mixed signals to investors that continue to create uncertainty in the region.259 Second, the Great Lakes states can do a better job of identifying particular areas of greatest offshore wind resources, both individually and as a region. On a state level, Great Lakes policy makers may look to Michigan‘s system of onshore wind resource identification as a model. Michigan‘s Clean, Renewable, and Efficient Energy Act created a Wind Energy Resource Zone (WERZ) Board comprised of stakeholders from various government, electric utility, renewable energy, and community entities.260 After identifying areas of best onshore wind energy resources, the Board presented its findings to the Michigan Public Service Commission and called for transmission companies to ―identify the existing or new transmission infrastructure necessary to deliver the ‗maximum and minimum wind energy production potential for each of the regions.‘‖261 Michigan‘s WERZ process will streamline transmission development for such zones via ―expedited permitting for grid improvements.‖262 As for coordinated interstate action, the Great Lakes region stands to benefit greatly from a program like the WREZ initiative. The groundwork for such a program may lie within the establishment of the Great Lakes Offshore Wind Energy Consortium. In 2012 Pennsylvania, Michigan, Illinois, Minnesota, New York, and several federal agencies signed a MOU to form an organization focused on increasing coordination and transparency around the permitting of offshore wind projects in the Great Lakes.263 The Great Lakes Offshore Wind Energy Consortium may expand its membership and broaden its focus to include a start-to-finish collaborative effort, easing identification and permitting of offshore wind projects and corresponding transmission development.
259. For example, in November 2012 Michigan voted down a proposed ballot initiative that would have amended the state‘s Constitution to require a 25 percent RPS by 2025 by a large margin. Michigan Turns Lights Out on Proposed Renewable Energy Mandate, NAT‘L WIND WATCH, (Nov. 6, 2012), https://www.wind-watch.org/news/2012/11/07/michigan-turns-lights-out-on-proposed-renewable- energy-mandate/ 260. MICH. WIND ENERGY RES. BD., FINAL REPORT OF THE MICHIGAN WIND ENERGY RESOURCE BOARD 67 (2009), http://www.dleg.state.mi.us/mpsc/renewables/windboard/werzb_final_report.pdf. 261. Id. at 14. 262. BALACHANDER ET AL., supra note 218, at 11. 263. State-fed agreement announced to enhance coordination of offshore wind projects in the Great Lakes, THE GREAT LAKES COMMISSION, (Mar. 30, 2012), http://www.glc.org/announce /12/03wind.html.
2015] THE OFFSHORE GRID 693
C. Future Areas of Interest While a strong case can be made for immediate state and regional action in the Northeast and Great Lakes regions for offshore transmission development, the other major coastal regions of the United States present less desirable environments for offshore transmission developers.
1. Southeast Coast Offshore wind resources along the southeastern coasts of North Carolina, South Carolina, Georgia, and Florida are excellent and accessible. According to NREL estimates, the four states cumulatively boast 498.1 GW of potential wind energy within fifty nautical miles of shore.264 Moreover, along with the mid-Atlantic, the Southeast has a distinct geographic advantage in that a clear majority of its wind resources reside in shallow waters thirty meters deep or less.265 The value of the Southeast‘s offshore wind resources is augmented by the fact that, excluding offshore wind, the southeastern states retain some of the lowest renewable energy potential in the country.266 None of the four coastal states are projected to be able to meet more than 2 percent of their total electricity sales via onshore wind energy deployment or small hydroelectric power.267 With the exception of Florida, the southeastern states also do not boast significant solar photovoltaic potential akin to that of the western and southwestern states.268 Compounding their lack of renewable energy options, the southern states abutting Georgia, Florida, North Carolina, and South Carolina have some of the poorest renewable energy potential in the country.269 Accordingly, absent long-distance importation of electricity from the wind- wealthy Midwest, offshore wind energy potential comprises the vast majority of North Carolina, South Carolina, and Georgia‘s future ability to generate electricity from renewable energy sources.270 However, state renewable energy incentives are not in line with the Midwest, mid-Atlantic, and Northeast. Out of the four southeastern states, only North Carolina has an RPS standard, which calls for 12.5 percent by 2021 for municipal utilities.271 None of the four states have identified any WEAs, no
264. See BOWES & ALLEGRO, supra note 15, at 42–44. 265. See MUSIAL & RAM, supra note 13, at 3. 266. See FARRELL & MORRIS, supra note 12, at 20. 267. See id. at 10, 15. 268. See id. at 12. 269. See id. at 20. Kentucky, Tennessee, Alabama, Mississippi and Louisiana are all estimated to be able to provide less than 30 percent of their electricity needs based on renewable energy sources. See id. 270. See id. 271. Renewable Portfolio Standard Policies, supra note 102. South Carolina has adopted a voluntary target of 2 percent by 2021. Id. In Florida, there is no statewide RPS but one municipal utility, JEA, has signed an MOU requiring it to obtain 7.5 percent of its electricity from green energy sources by 2015. JEA – Clean Power Program, DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://programs.dsireusa.org/system/program/detail/934 (last updated Sept. 25, 2014).
694 ECOLOGY LAW QUARTERLY [Vol. 42:651 collaborative interstate mechanism promoting renewable energy or climate change goals has emerged, nor has any legislation specifically promoting offshore wind development passed in state government. However, there is reason to believe that an environment more favorable to development of offshore wind transmission and wind farm development may emerge in the near future. Interdisciplinary groups in all four states have conducted case studies on developing southeastern offshore wind resources and BOEM has formed task forces to identify WEAs in North Carolina and South Carolina.272 Former North Carolina Governor Beverly Perdue also signed an executive order establishing an Offshore Wind Economic Development Task Force, though the group never materialized due to budget cuts.273 To increase development of offshore wind in the Southeast, policy makers ought to adopt a conservative approach that will lay the groundwork for broader future success. Since supportive policies for offshore wind have yet to emerge, the southeastern coastal states should first focus on enacting mandatory state RPS targets. Given the paucity of renewable energy choices available to states in the region, even a relatively low RPS may provide enough incentive to focus attention on development of offshore wind energy. Moreover, if the legislatures of each southeastern state were able to pass at least a minimum mandatory RPS, momentum for increased regional collaboration to identify the best wind resources may emerge. The four states could look to the Midwest‘s Great Lakes Offshore Wind Energy Consortium as an example of a low-commitment, stakeholder-engaging mechanism that will begin the conversation of how regional cooperation may facilitate the development of offshore wind energy. Eventually, regional collaboration may take the form of a project like the WREZ initiative. Such regional mapping of best wind resource and transmission options would provide valuable informational benefit to the southeastern states and enable individual state actors to pursue offshore transmission and offshore wind development at their own pace.
2. West Coast In many respects, the states of Washington, California, and Oregon are the inverse of the Southeast. Unlike the southeastern states, California and the Pacific Northwest have emerged as leaders in enacting progressive renewable energy legislation. In addition to California‘s RPS and GHG reduction targets, Washington has committed to a mandatory RPS of 15 percent by 2020, and Oregon to 25 percent by 2025.274
272. See BOWES & ALLEGRO, supra note 15, at 42–44. 273. See id. at 42. 274. Renewable Portfolio Standard Policies, supra note 102. Note that Oregon‘s RPS applies differently to different sized utilities. ―Large utilities‖ responsible for more than 3 percent of Oregon‘s load must meet the 25 percent goal. See Oregon Renewable Portfolio Standard Program Overview, DATABASE OF STATE INCENTIVES FOR RENEWABLES & EFFICIENCY, http://programs.dsireusa.org/ system/program/detail/2594 (last updated Aug. 25, 2014). ―Small utilities‖ responsible for between 1.5
2015] THE OFFSHORE GRID 695
While the West Coast‘s legislative environment may be favorable to renewable energy generally, issues of geography and resource priority may dampen future prospects for offshore wind and transmission development. First, there is a threshold issue of the increased inaccessibility to the West Coast‘s offshore wind resources. Although NREL projects some 929.6 GW of cumulative wind energy potential off the shores of the Pacific Northwest and California, only 51.3 GW resides in waters sixty meters or less and 19.5 GW in waters less than thirty meters deep.275 A 2010 study of California‘s offshore wind resources noted that the state‘s coastal waters deepen to over twenty meters only a few kilometers from shore, in comparison to the Eastern Seaboard where waters remain less than twenty meters deep for tens of kilometers out to sea.276 Although technology capable of harnessing offshore wind resources at greater depths exists, such as floating turbines, only one out of the world‘s forty-four offshore wind projects is sited in waters sixty meters or deeper.277 The increased uncertainty and cost associated with deep-water offshore wind development along the West Coast is worsened by the fact that areas of most promising wind resource are not close to load areas. One study found Southern California had the state‘s worst potential for offshore wind development, with slight improvement for Central California (including the Bay Area), while the best resources were located in Northern California.278 This inversely correlates with California‘s load centers, and the state‘s areas of best resources also have the least existing grid capability.279 Further complicating matters, the West Coast‘s load centers are dispersed over a much larger area compared to the Northeast or mid-Atlantic, lessening the value of a transmission spine that would ideally deliver power to multiple areas of high need. Second, an issue of priority emerges as California, Oregon, and Washington also have other promising renewable energy sources in a way that the nation‘s other coastal regions do not.280 California has the most diversified sources of available renewable energy out of the three West Coast states and has thus far sought to meet its 33 percent RPS standard by focusing on building onshore wind and solar energy. Although California‘s onshore wind energy potential is far less than that of many Midwest states, installed capacity has
and 3 percent of the state‘s load must reach 10 percent by 2025. Id. Finally, the ―[s]mallest utilities‖ responsible for less than 1.5 percent of Oregon‘s load, need only reach 5 percent by 2025. Id. 275. See MUSIAL & RAM, supra note 13, at 3. 276. Michael J. Dvorak et al., California Offshore Wind Energy Potential, 35 RENEWABLE ENERGY 1244, 1245 (2010). 277. See MUSIAL & RAM, supra note 13, at 6. 278. See Dvorak et al., supra note 276, at 1251. 279. See id. at 1253 (―It was found that Northern California (NCA) had the best 80 m wind resource but the least transmission capacity compared to other parts of the state.‖). 280. See FARRELL & MORRIS, supra note 12, at 21.
696 ECOLOGY LAW QUARTERLY [Vol. 42:651 doubled since 2002.281 California installed a nation-leading 921 MW of onshore wind capacity in 2011, and wind energy now accounts for five percent of California‘s electricity needs.282 Despite a current installed capacity of only 5 GW,283 solar is likely to play an outsized role in the mix of renewable energy needed to meet California‘s RPS target. Both utility-scale and local solar energy are expanding rapidly—in 2014 alone two new concentrated solar power facilities added a combined 642 MW of capacity.284 Moreover, Governor Jerry Brown has called for 12 GW of distributed generation by 2020, a plan that will stimulate widespread deployment of rooftop solar installations.285 California also boasts very high geothermal energy potential and the state holds 80 percent of the nation‘s total geothermal installed capacity.286 The Pacific Northwest does not offer the same level of solar and geothermal resources as California. Instead, Washington and Oregon hold abundant hydroelectric energy potential and nearly 30 GW of cumulative hydroelectric installed capacity.287 However, existing large-scale hydropower is generally uncounted toward fulfillment of both states‘ RPS targets.288 While a discussion of whether large-scale hydroelectric power is truly ―renewable‖ is beyond the scope of this paper, the purpose of RPS targets is to encourage development of new renewable energy installed capacity.289 Thus, allowing a state like Washington to count its pre-existing hydroelectric power, which already supplies some 60 percent of the state‘s electricity, toward an RPS standard would disincentivize renewable energy development. Although the ―exclusion‖ of hydroelectric energy toward Washington and Oregon RPS targets presents a window of opportunity for offshore wind, both states have
281. Marla Dickerson, Wind Power Blowing Up in California, L.A. TIMES, (Jan. 31, 2012), http://articles.latimes.com/2012/jan/31/news/la-wind-power-california-20120131. 282. Id. 283. This figure includes electricity from both solar photovoltaic (5183 MW) and solar thermal (393 MW) energy. AM. COUNCIL ON RENEWABLE ENERGY, RENEWABLE ENERGY IN CALIFORNIA 1 (2015), http://www.acore.org/files/pdfs/states/California.pdf. 284. Id. 285. Herman K. Trabish, Getting California to 12,000 MW of Distributed Generation, GREENTECH MEDIA (June 11, 2012), http://www.greentechmedia.com/articles/read/Getting-California-to-12000- Megawatts-of-Distributed-Generation. 286. How Geothermal Energy Works, UNION OF CONCERNED SCIENTISTS, http://www.ucsusa.org/ clean_energy/our-energy-choices/renewable-energy/how-geothermal-energy-works.html #.VeJHpPZViko (last updated Dec. 22, 2014). 287. AM. COUNCIL ON RENEWABLE ENERGY, RENEWABLE ENERGY IN WASHINGTON 1 (2012), http://www.acore.org/files/pdfs/states/Washington.pdf; AM. COUNCIL ON RENEWABLE ENERGY, RENEWABLE ENERGY IN OREGON 1 (2012), http://www.acore.org/files/pdfs/states/Oregon.pdf 288. Susan Kraemer, Washington State Considers Including Hydro as a Renewable Under RPS, CLEAN TECHNICA (Aug. 22, 2011), http://cleantechnica.com/2011/08/22/washington-state-considers- including-hydro-as-a-renewable-under-rps/. 289. See Dan Haugen, Renewable or Not? How States Count Hydropower, MIDWEST ENERGY NEWS (Jan. 13, 2012), http://www.midwestenergynews.com/2012/01/13/renewable-or-not-how-states- count-hydropowe/.
2015] THE OFFSHORE GRID 697 largely focused on onshore wind development to meet their RPS targets. Oregon and Washington have rapidly developed their onshore wind energy resources, nationally ranking seventh and ninth respectively in total installed capacity.290 Given the rather unique circumstances of the West Coast region, none of the available policy tools appear to be particularly useful for advancing offshore wind transmission and offshore wind farm development. The RPS targets for California, Oregon, and Washington are already quite strong and their enactment has not stimulated significant interest in developing offshore wind resources. While each state could amend its RPS targets to include offshore wind carve-outs, this approach does not appear cost-effective given existing renewable energy options and prior development choices. A more conservative and low-risk approach could include the use of multipliers and additional tax incentives for offshore wind energy. If electric utilities and wind developers decide not to pursue offshore wind despite their existence, the states will not have lost money better spent on other renewable resources and will have gained information on the level of local market incentives necessary to foster offshore wind power. Moreover, the identification of best available wind energy resources and transmission planning to deliver offshore wind power are not major impediments to offshore wind development in California, Oregon, and Washington. These states have already participated in comprehensive programs such as RETI and CREZ, neither of which identified renewable energy generated from offshore wind as a development priority. The real issue is that the region‘s offshore wind energy resources are inaccessibly located in deep waters. Thus, until offshore wind turbine technology improves and the lower- hanging fruit of the West Coast‘s other renewable energy choices are exhausted, California, Oregon, and Washington appear unlikely and undesirable candidates for the build-out of offshore transmission infrastructure designed to foster offshore wind development.
CONCLUSION The United States is at an inflection point with domestic offshore wind development. This Note demonstrated the importance of offshore wind energy to America‘s energy future due to its excellent energy potential and proximity to areas of high renewable-energy demand. By profiling the AWC project, this Note cast a clearer picture of the economic and environmental importance of
290. AM. WIND ENERGY ASS‘N., WIND ENERGY FACTS: OREGON 2 (2015), http://awea.files.cms- plus.com/FileDownloads/pdfs/Oregon.pdf; AM. WIND ENERGY ASS‘N., WIND ENERGY FACTS: WASHINGTON 2 (2015), http://awea.files.cms-plus.com/FileDownloads/pdfs/Washington.pdf.
698 ECOLOGY LAW QUARTERLY [Vol. 42:651 offshore transmission while also demonstrating one approach to breaking offshore wind‘s chicken-and-egg dilemma. In examining state, regional, and national approaches to similar stalemates faced by other grid-inaccessible renewable energy sources, this Note identified specific transmission development strategies that may be utilized for offshore transmission development in coastal regions. This Note also presented a series of policy prescriptions for state and regional actors, including passing more aggressive state RPS legislation with carve-outs for offshore wind energy and participating in efforts to identify renewable energy zones to streamline transmission development. By assessing the existing policy environments and potential mechanisms for regional collaboration, this Note will serve as a starting point for those endeavoring to tackle America‘s offshore wind energy challenges.
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