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Regulation: Government pushes ahead with offshore-boost plans

Offshore development in the Atlantic region is being assisted by an administration ready to take bold steps.

By identifying four priority areas off the mid-Atlantic Coast and pouring $50.5 million into research and development, US President Barack Obama's administration took its latest step towards transforming the nascent US offshore industry into a job-creating low-carbon energy bonanza.

The national offshore wind strategy, released on February 7, represents the first such partnership between the interior and energy ministries. It follows a push begun in November when the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement published "Smart from the Start"

- guidelines intended to shave significant time off site permitting processes and set robust project design standards that require offshore wind turbines to withstand hurricane extremes.

Priority target areas

The new priority areas target waters off the coasts of New Jersey, Delaware and Maryland. Zones off New England shores are expected this month, with southern-Atlantic zones due before the summer. The money - spread over five years and aimed at technology development, next-generation drive trains and removing market barriers - exists beyond any additional funding Congress might allocate in its upcoming fiscal 2011 budget.

"From the president to the secretaries of Interior and Energy, the United States administration is really pursuing an aggressive strategy to get wind turbines in the water," says Jim Lanard, president of the Offshore Wind Development Coalition, founded last summer by seven offshore wind developers and the American Wind Energy Association. "It could put a lot of highly skilled but unemployed workers back to work and keep dollars in the US."

But establishing a thriving market will not happen overnight in the US, which is unlikely to install its first offshore turbines before late next year. For all the positive news, considerable work remains to be done before ambitious federal goals - 54GW of offshore wind selling for $0.07/kWh by 2030 - can be pursued.

"It's an aggressive target and I think they realise that," says Walt Musial, manager of offshore wind and ocean power systems for the Department of Energy's National Renewable Energy Laboratory. "But they want to challenge the industry to achieve high goals and make sure it becomes part of the US economy," he adds. "Big parts of the industry right now have got a huge head start in Europe."

ITC extension

Plenty must go right for the US to catch up. The federal investment tax credit (ITC) that reimburses roughly 30% of project construction costs was recently given a one-year extension through 2013 - providing little stability to an offshore industry where four-year permitting timelines remain a pipedream and turbine manufacturers need surety to invest in factories.

"The solar ITC is already extended out to 2016 for similar reasons," Lanard says. "We think offshore wind should be treated the same as solar. That's our highest legislative priority in this Congress."

Hurricanes present an additional US problem - currently under examination by government, developers, financiers and insurance companies alike. "Very harsh weather conditions exist in the Baltic and the North Sea but hurricanes are a force of a different nature," Lanard says. "We are looking at that and we'll understand it better in the near future."

Furthermore, although adequate transmission exists for early offshore developments, much more will be needed before long. "There's plenty of capacity for the first-mover projects and those economics work," Lanard says. "But at some point we'll need to see an offshore backbone come from the proposals we've seen."

Leasing-costs worries

Another pressing issue relates to payments for leasing offshore rights from the federal government. Payments are currently tied to the average price of electricity in the state where power is delivered - and based on fossil fuel.

"It's ironic, because as fossil fuel prices go up, our lease costs go up," Lanard says. "That makes it hard to know exactly what the lease is going to cost and how to write a financial model for a wind farm."

But Lanard believes that federal regulators recognise the issue and intend to resolve it, along with whatever other roadblocks arise.

That includes tackling the lack of suitable oceangoing installation vessels by retrofitting existing oil and gas ships. "The government has acknowledged that we're losing this technology race to the Europeans and to China," Lanard says. "They're basically saying it's time to catch up and get ahead."

Meanwhile, offshore potential for the Great Lakes and the Gulf of Mexico is largely unaffected by federal regulations and programmes largely intended for Atlantic Coast development. The five Great Lakes fall under state jurisdiction, as do ocean waters off the Texas coast, due to 19th-century laws.

But supply-chain efforts and economies of scale in all regions depend on the health of an at-large US industry. "The overall attention being paid to offshore is what's important," says Fara Courtney, executive director of the non-profit US Offshore Wind Collaborative. "It's happening in concert and the agencies are working together - and that's something we've been pushing for a long time."

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