Offshore wind power generated in the ocean waters off New York is now significantly closer to becoming a reality, thanks to two important announcements yesterday. In the first, U.S. Department of Interior Secretary Sally Jewell announced that the federal government is moving forward with the offshore wind power leasing process for an 81,000-acre “wind energy area” 11 miles off Long Island, with an auction to be held by the end of the year. Next, New York State stepped forward with its own bold news that the New York State Energy Research and Development Authority (NYSERDA)—the state’s clean energy agency—will participate in that auction with the goal of securing the offshore wind power site, doing the necessary early environmental studies, and then holding a competitive process to select a private developer to construct and operate the offshore wind power project.
Both announcements are great news for clean energy in New York. I will focus here on New York’s announcement, which could provide a game-changing new model for the development of offshore wind power in the United States. It’s inspiring to see New York State build on its already impressive record of climate and clean energy leadership by committing in clear and specific terms to move offshore wind power forward as a core part of New York’s clean energy strategy.
In its announcement, NYSERDA affirmed that “Offshore wind is a critical component in meeting Governor Andrew M. Cuomo's aggressive clean energy goals, including generating 50 percent of the state's electricity from renewables by 2030.” NYSERDA President and CEO John B. Rhodes said, “Offshore wind will bring clean energy and economic development to New York’s coastal communities, growing the state’s economy and supporting Governor Cuomo’s commitment to protecting the environment.”
Federal and state roles
But in addition to inspiration, there’s a thoughtful strategy at work. New York’s approach could provide an important model for other Atlantic coast states seeking to unleash the power of offshore wind. As with many energy issues, both the federal government and state government play a role in developing offshore wind power. The federal government owns ocean energy development rights in the federal waters that are more than three miles off the Atlantic coast. That’s why the federal government conducts the offshore wind auction process and is in charge of siting offshore wind power projects.
But it’s up to the states to craft their own clean energy policies that build demand for renewable energy, including the authority to allow or require that utilities purchase offshore wind power through long-term contracts known as power purchase agreements.
This divided authority has the potential for problems. For instance, if the federal government awards an offshore wind lease to a developer, there is no guarantee at the state level that the developer will secure a power purchase agreement. That could result in a standstill. Also, if a single developer wins a federal lease for an entire wind energy area, there could be no competition for a power purchase agreement, potentially leading to higher costs. Conversely, if a power purchase agreement is approved by the state for an offshore wind developer via a competitive process in advance of the federal lease sale, there’s no guarantee that the winner of the power purchase agreement would also be granted the lease.
New York’s innovative new strategy presents a thoughtful, possible solution to these issues. If NYSERDA wins the offshore wind lease rights, it would undertake the initial geological studies and wind resource assessments that must take place before a project can be proposed. That, in turn, will help reduce the project’s costs and impacts. NYSERDA would then select a project developer to build and operate the project through a competitive process, which would include a power purchase agreement.
As NYSERDA explains, “This strategy minimizes project risks and provides developers certainty to secure financing, maximizing competition and ultimately lowering project costs for consumers.” Bundling a lease with revenue is also a successful strategy that has worked in European countries to reduce the costs of offshore wind, as my colleague Doug Sims explained in his 2013 paper on offshore wind power financing.
New York is also committing to extensive stakeholder outreach, including to Long Island coastal communities and fishermen, which is also crucial to the success of offshore wind.
It is important to note that there are many possible models for offshore wind development in New York and if a private developer wins the auction instead of NYSERDA, that will be a good outcome, too. A successful project supported by smart financing can be produced in many different ways. But it’s great to see New York think through the issues and pilot a deliberate, thoughtful approach as it takes the first step in a series of actions that will be needed to scale up offshore wind power in New York. The next important step will be to set a visible offshore wind target that will allow for scale, with a pipeline of offshore wind projects rather than simply one. That too will reduce costs and help the state meet its renewable energy goals.
With the support and enthusiasm expressed for offshore wind power from the Obama administration, Governor Cuomo, New York City Mayor Bill de Blasio, state and local elected officials, communities, labor, and a broad array of environmental activists, offshore wind power is having a New York moment. Yesterday’s announcements will help provide the momentum and the strategy to hold on to that moment and bring about the reality of offshore wind power as an important element in New York’s clean energy mix. In pioneering a smart, cost-effective approach to launching and scaling up offshore wind power, New York State can help jumpstart a new U.S. clean energy industry.