Smarter Business: Center for Market Innovation
Fulfilling the Promise of U.S. Offshore Wind
Targeted State Investment Policies to Put an Abundant Renewable Resource within Reach
Offshore wind is an inexhaustible resource that lies just off our shores. In fact, the U.S. Department of Energy's landmark study, 20% Wind Energy by 2030: Increasing Wind Energy's Contribution to U.S. Electricity Supply, found that the United States could obtain 20 percent of its electricity from wind by 2030, and more than 15 percent of that wind power could come from offshore projects, totaling 54,000 megawatts (MW) of generating capacity.
Despite the many benefits that offshore wind offers, exactly zero MW of offshore wind capacity are installed or even under construction in the United States, with only three projects in advanced stages of development. So, what is going wrong? In comparison with the rest of the world, particularly in Europe, where offshore wind has been spinning for more than 20 years, the United is just now on the verge of getting serious about implementing policies that will exploit this vast renewable resource at its doorstep.
The underlying limiting factor for offshore wind development in the United States, a factor not found in places where the sector has advanced, is that the basic economic and financial conditions for offshore wind success are not in place. Without them, investors are not comfortable providing capital for these projects, and the sector inevitably will struggle to get off the ground.
The way forward for U.S. states seeking to reap the benefits of offshore wind is clear: put in place targeted investment polices that provide the revenue certainty and debt capacity necessary to make projects viable and attractive to the equity and debt investors that comprise the sector. Germany is an example of a country that has taken those steps with a feed-in tariff achieving revenue certainty and a lending program for improving access to debt financing. In the United States, states should craft functionally similar solutions that unleash the American offshore wind energy potential and deliver transformative environmental and economic benefits.
This paper focuses on the German policy successes and the lessons they present for the United States and also briefly examines the very unsuccessful German approach to transmission as a cautionary tale that should not be replicated in the United States.
last revised 5/21/2013
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