Navigant Research Blog

New Jersey Takes Slow, Steady Approach to Offshore Wind

— May 11, 2012

Europe has been operating huge wind turbines offshore for more than a decade, while here in the U.S., this cutting edge clean technology seems perennially “five years off.”

The infamous project proposed offshore of Cape Cod, Massachusetts has been under deliberation for more than 10 years. During that time, Denmark, Germany, the United Kingdom, and seven other countries have already installed 53 offshore wind farms totaling 3,813 megawatts (MW) of carbon free electricity. That is enough power to keep the lights on for more than 2.8 million American homes, or a city larger than the size of Chicago.

The international wind power industry is watching Washington, DC to see if lawmakers will extend the federal production tax credit (PTC) for wind power. But their eyes are also focused on Trenton, the state capital of New Jersey, to see if state regulators there will help launch America’s long-awaited offshore wind energy industry.

In August of 2010, New Jersey Governor Chris Christie signed into law the Offshore Wind Economic Development Act, which authorizes up $100 million in ratepayer-funded subsidies for offshore wind developments in the Atlantic Ocean that connect to the New Jersey grid.  Special “offshore renewable energy credits” (ORECs) help make projects more economic, but unlike the Solyndra federal government loan guarantees, these subsidies are only awarded after projects meet a cost/benefit criteria and produce renewable energy delivered state consumers. In addition, a “Clean Energy Manufacturing Fund” offers additional grants and loans based on local job creation.  Many experts consider New Jersey’s offshore wind program to be the most well conceived state policy initiative in the nation.

Perhaps the most unusual company pursuing the Garden State’s offshore wind power opportunity is Fishermen’s Energy, based in Cape May, New Jersey.  Several of the East Coast’s largest commercial fishing companies have partnered to create the company, which has been developing a 25 MW project for several years. In contrast to Cape Wind and other ambitious proposals, the New Jersey-based consortium chose a step-by-step approach: a demonstration project. It is siting its five turbine windfarm within the three-mile state-controlled boundary off Atlantic City, a city looking to extend its image – and economy – beyond casino gambling.  If building America’s first offshore windfarm were a race, Fishermen’s Energy might look like the tortoise to Cape Wind’s hare.

Showcasing a savvy approach, Fishermen’s Energy has trimmed pre-development costs and shortened the development cycle to what may be less than half that of the Cape Wind project by doing the following:

  • Sited its first project in state waters, thereby eliminating redundancy in permits/paperwork and limiting federal agency reviews to the Army Corps of Engineers
  • Relied upon shore-based anemometers, radar, and new laser-based technologies to collect data, eliminating the need for site-based meteorological towers in the ocean
  • Engaged environmentalists and recreational fishermen in dialogue about the merits of its pilot project in advance of large-scale developments off the New Jersey coastline
  • Discovered data on avian and sea life studies performed by a credible third-party company – Geo-Marine – that covers almost 127 miles of coastline (including its project site), to help secure its permits from the Department of Environmental Protection
  • Used one of its company’s vessels – an 85-foot former fishing boat – to install a buoy at the installation site to monitor whale activity for two years
  • Recruited financial support from XEMC, a Chinese industrial giant known as “China’s GE,” in planning for a 5MWdirect drive wind turbine

All these innovative steps – and more – add up to project savings, a critical accomplishment in light of the tight fiscal constraints imposed by the state OREC program.

The New Jersey Board of Public Utilities (BPU) is currently reviewing the company’s proposed pilot project.  By modestly committing consumer dollars to the pilot project, New Jersey would lock in its leadership of an entirely new industry: offshore wind power.  If the Fishermen Energy’s pilot project is allowed to move forward, more than 500 MW of additional offshore wind capacity could come online to serve New Jersey within the next five years, creating as many as 11,000 manufacturing, installation and ongoing operation and maintenance jobs for the Garden State.


Renewables in U.K. at a Turning Point

— April 18, 2012

The United Kingdom seems to always be trailing the European renewable energy starting line-up of Germany, Denmark, Spain, Sweden, and any one of Holland/Finland/Portugal.

As we’ve observed in our offshore wind, small wind, and marine and hydrokinetics reports, though, the U.K. has taken enormous strides to stimulate its renewable energy industries and is taking on some of the most difficult technological challenges in cleantech today.  (See this map to locate offshore wind and marine energy activity.)  Below are a few of the highlights:

  • The U.K. has a current target of 15% target for renewables across electricity, heat and transportation sectors and has enacted almost 50 policies and programs to achieve that goal
  • The U.K. has been at the forefront of offshore wind since 2000 and is one of the world’s leaders in terms of current installations, nearing 2 gigawatts (GW), and a potential pipeline of more than 40 GW
  • The U.K. is the clear leader in incubating marine energy companies with leases approved for 1.6 GW of wave and tidal projects; with Scotland aiming for 2 GW installed by 2020
  • The UK is home to one of the largest markets for small wind turbines, in large part thanks to a generous feed-in tariff scheme passed in April 2010 and great wind resources

Current events, including the recent announcement by German utilities RWE and E.ON that they are scrapping their plans to build two nuclear reactors in the U.K., plus The Economist’s apparent obituary on new nuclear plants in Europe (and the United States), seem to underscore the trend in favor of renewables.

At the same time, however, U.K. members of Parliament are increasingly scrutinizing the country’s renewable energy incentives, and there are even hints that the U.K. is moving closer to a “low carbon” strategy, opening the door to a wider role for nuclear which currently provides approximately 20% of the U.K. electricity mix.

No doubt the financial crisis has changed the equation for many U.K. political leaders, and each country will choose its own carbon reduction path – but members of Parliament must keep in mind that there are trade-offs.  The most critical trade-offs include the possibility that tying up precious capital on nuclear could reduce investment in smart-grid/transmission infrastructure required to realize the ambitious offshore targets and to enable distributed generation to succeed at scale.   Opting out of new nuclear, of course, is the path that Spain, Sweden, Denmark and Germany decided to take, instead doubling down on renewables (Germany’s reduction in solar feed-in tariff rates notwithstanding).  That’s why they’re in the starting line-up.


Offshore Wind’s New Neighbor

— April 4, 2012

Results from a recent offshore wind industry survey show concern among offshore wind farm operators, manufacturers, and policymakers in Germany, Denmark, the UK, China, and Japan that other forms of offshore energy could eclipse wind.  Based on Pike Research’s reports on the offshore wind and marine and hydrokinetic (MHK) industries, we concur that MHK technologies have the potential to be more cost-effective than offshore wind, but it will ultimately depend on the specific technology and location of the installation.

Put simply, the growth of the MHK industry does not pose a direct threat to the offshore wind energy industry in the next five years.  In some cases, there might even be areas where the two technologies can be integrated or even share transmission costs.  All eyes will be on the UK which is home to 90% of offshore wind installations currently installed and may see as much as 700 MW of wave and tidal projects installed by 2017.

Pike Research’s analysis of the offshore wind market shows that with 4 gigawatts (GW) currently installed, the industry has proven it can overcome the major engineering challenges of installing colossal turbines in some of the world’s harshest operating environments.  While offshore wind installations typically generate more megawatt-hours (hence greater revenue potential) per unit due to their higher capacity factor (up to 45%, compared to 30% for onshore) and larger design (2.3-5 megawatt nameplate capacity), the jury is still out on its overall cost-effectiveness when you factor in operations and maintenance costs (which can be up to 60% of the lifetime cost) and transmission.

For comparison, the MHK industry is where the offshore wind industry was five to seven years ago – with several 10-50 MW commercial deployments expected in the next few years.  MHK companies are all targeting a levelized cost of energy that would make them competitive (or better) with offshore wind, when deployed at scale.  Like offshore wind, the biggest unknown is the operations and maintenance costs for these systems.  Pike Research’s recent MHK report revealed that although wave power companies have been in the spotlight for the past few years, corporate interest and investment in tidal power technologies could make it the lowest cost MHK technology in the near-term.  Rolls Royce has invested in tidal power for a number of years.  Siemens’ recent acquisition of Marine Current Turbines shows that they think the technology is ready for primetime.

There is a sense that both industries are facing a make-or-break  phase.  If MHK can replicate the experience of offshore wind in the next few years, with a slow and steady rollout, it will be considered a major success by virtue of the high level of difficulty for installing 700 ton machines under water.  But neither industry will be out of the woods.  Both will need to continue to find ways to reduce O&M costs and minimize their impact on marine life.  We’ll be watching closely.


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