Offshore Wind A European Perspective August, 2019 Offshore Wind—A European Perspective | 2 Executive Summary The offshore wind market is playing an increasingly closely examined transmission and interconnection important role in the United States’ energy strategies, as well as other factors that enabled discussions. The first US offshore wind project, the each country to lower its costs over time. Block Island Wind Farm, launched operations off the coast of Rhode Island in 2016. Soon thereafter, While there are an array of successful approaches States along the Northeast coast began proposing to developing an offshore wind system, the offshore wind goals of their own. It is now expected following key takeaways should guide the that they will generate a total of 19GW of offshore development of the offshore wind industry in this wind by 2035. country: • The most effective path to low-cost wind power In contrast, European nations have already installed is through scale and healthy competition. 18GW of offshore wind capacity over the past 20 years and are expected to reach a total of 70GW • The offshore transmission model used is by 2028. For example, Denmark, the Netherlands, dependent on a variety of physical and non-physical factors including geography. Germany and the United Kingdom are major Regardless of model chosen, the coordination players in offshore wind, with more than 16GW of and incentive alignment between all parties offshore wind connected to their onshore grids. is critical and needs to match their levels of Each country, with its own unique geography and respective capabilities. circumstances, followed its own particular path • Visible, long-term grid planning on and offshore, of development. There are, however, important removes barriers to entry, improves coordination lessons that should guide the continuing evolution and lowers costs. of the US’s offshore marketplace. • Cross-border coordination helps countries This study of offshore wind development in Europe leverage planned transmission infrastructure, was commissioned to review closely the more than achieve resource flexibility and gain economies two decades of experiences with this critically of scale. important source of renewable energy. This study Offshore Wind—A European Perspective | 3 A Note from the President & CEO of The New York Power Authority New York State (NYS) is making a bold commitment OSW goal. This Plan is now moving ahead with the to building a clean, resilient and affordable energy issuance of an initial request for proposal for OSW system for all its residents and communities. projects. Awards were recently announced for two Through the recently passed Climate Leadership offshore wind projects for a total of 1,700MW of and Community Protection Act (CLCPA), the state OSW, representing the single largest renewable mandated ambitious Green New Deal goals to energy procurement by any state. decarbonize the energy sector and increase the share of renewable energy in the power generation As we set out to meet this ambitious goal, NYPA, mix: consulting with NYSERDA, New York Independent System Operator (NYISO), Long Island Power CLCPA targets: Authority (LIPA) and Con Edison, with additional input from National Grid, studied 20 years of • Reduce energy-related greenhouse gas emissions by 85% relative to 1990 levels by 2050 European OSW transmission and interconnection project experience. Additionally, NYPA • Increase the share of renewable energy in the commissioned McKinsey to research the evolution electricity generation mix to 70% by 2030 of transmission and interconnection of OSW in Offshore wind (OSW), an essential part of this Europe. landmark initiative, is an important renewable We thank our collaborators for their insightful source of energy that will help NYS achieve both thoughts and input during this process of of these goals. The waters off New York City and investigation and analysis. This task cannot be done Long Island offer some of the best available wind in a silo. We all must play a major part in supporting resources in the world, putting New York in a prime the State’s clean energy goals, and each of our position to support OSW development in the US. perspectives and roles will be crucial in addressing In his 2017 State of the State Address, Governor the various needs required to make OSW a success. Andrew M. Cuomo set a bold goal for NYS: to This is an exciting period for New York, its energy develop 2.4GW of OSW by 2030, enough to power agencies, its private utilities, its offshore wind 1.2 million homes. This target was expanded in the developers and its energy consumers. This report Governor’s 2019 State of the State Address and was designed to support Governor Cuomo’s mandated through the CLCPA to the installation of bold long-term clean energy vision and explicitly 9GW offshore wind by 2035. recognizes that offshore wind will play an integral Since 2016, the New York State Energy Research & role in achieving a new, renewable energy mix for Development Authority (NYSERDA), working closely the future. with communities, environmental advocates and other government agencies, has conducted 20 in-depth studies. They served as the basis for the Offshore Wind Master Plan, issued in January 2018, — Gil C. Quiniones and established the strategy for meeting this new President and CEO of the New York Power Authority Offshore Wind—A European Perspective | 4 1. Offshore Wind and Transmission: the US Context Northeastern states, home to the most resource- contemplates how it will reach its goals, additional rich waters for offshore wind, are actively proposing important questions will also include: OSW goals. New Jersey and Massachusetts have • How should transmission and interconnections be both set ambitious goals of 3.5GW and 3.2GW of planned? Texas proactively planned transmission offshore wind by 2035, respectively. Connecticut to accommodate renewables by designating a and Rhode Island are also vying for OSW projects, Competitive Renewable Energy Zone (CREZ). and states further south, like Maryland and Is this proactive approach feasible for such a Virginia, are active in their pursuit of OSW projects, nascent and decentralized industry? Or would it with California not too far behind. Collectively, be more prudent to plan as we go? Northeastern states have committed to over 19GW • What are the barriers in the US market to lower of installed capacity by 2035. costs for the consumer? The region faces many important questions and • What type of offshore and onshore transmission challenges, as it strives to support the timely configurations are best to accommodate rapid OSW growth? and efficient development of OSW. A particularly important issue is how to ensure affordability for • How do current transmission planning processes consumers while spurring long-term economic and regulations allow for more rapid planning of development in each respective state. The answer potentially large OSW injections onto the onshore will require mobilizing private investments and systems? attracting the best OSW partners. As each state Exhibit 1: Contrasting NYS OSW target to neighboring states Offshore Wind—A European Perspective | 5 Offshore wind has been developing in Europe development, operation and maintenance of the for the past 20 years. With 18GW of installed infrastructure that transports electricity from the OSW capacity and an expected total of 70GW by generator to the distribution system operators. 2028, the experience of relevant countries will TSOs can be and, in a few countries, are owned provide important insights as the US ramps up by the government. The public sector’s main its OSW efforts. priority is maintaining a secure and reliable grid. Regulation of TSOs differ, with each country This study was conducted to gain lessons from having its own regulatory body. It should also be the European experience with a focus on the noted that the European Union (EU) has an overall transmission and interconnection of OSW. From regulatory body that sets the guidelines for all the this research, primary takeaways were summarized TSOs. to serve as insights as further development is pursued in the US. Since the study took a deep In the US, there is no direct equivalent of a TSO, dive into the four most active countries with OSW, as the transmission systems are planned, built, it is important to understand some key differences owned, operated and regulated by multiple between the European and US energy markets. entities at local, state and federal levels. These While both markets provide similar services and entities can include, but are not limited to, the share similar objectives, there are structural following entities: the Independent System differences in how these markets operate. Operator or Regional Transmission Operator, transmission owners, utilities, state public In Europe, the Transmission System Operator commissions and the Federal Energy Regulatory (TSO) is an entity that is responsible for the Commission. 2. Understanding Offshore Wind Development Support This study conducted an in-depth assessment These five dimensions provide a simplified—yet of offshore wind developments in four leading holistic—way to categorize and understand different European countries: Denmark, Germany, the OSW support design choices, and provide us with Netherlands, and the United Kingdom. The key takeaways. analysis is based on extensive market research and interviews with leading developers and 2.1. Site Development Transmission System Operators