How States Can Get Serious About Offshore Wind Development

Apr 10, 2012Stewart Boss

earth-150As part of the 10 Ideas: Generating a Green Future series, a call for policies that level the playing field for wind power, which would in turn create jobs and revenues for the states.

North Carolina has 140 gigawatts (GW) of potential offshore wind energy capacity -- the largest resource of any state on the East Coast -- in part because its shallow-water coastline is ideally suited for offshore wind development. But while North Carolina may be number one in potential offshore wind energy, it's hardly alone. The National Renewable Energy Laboratory (NREL) estimates that the U.S. has 4,150 GW of total potential wind turbine nameplate capacity from resources around the country. (For some perspective, the nation's total electric generating capacity from all energy sources was 1,010 GW in 2008). The U.S. Department of Energy reports that North Carolina alone could conceivably install 10 GW of offshore wind capacity by 2030.

Offshore wind farms have existed in Europe for more than 20 years. States like Massachusetts and Rhode Island are advancing offshore wind energy projects, and Maryland's state legislature is currently considering a bill that would create wind industry incentives. But despite all the benefits, there are still no installed offshore wind projects in the U.S. And there are none currently even planned here in North Carolina.

Yet the economic and environmental benefits of turning to this cleaner energy source are substantial. Building just one GW of offshore wind energy in North Carolina would create an economic ripple effect over the next two decades that could pump an estimated $1.1 billion into the state's economy. The more than 8,000 component parts of offshore wind turbines are often too large to transport long distances, so development in North Carolina would mean new manufacturing facilities and thousands of manufacturing jobs in the state. That same DOE study showed that installing one GW of offshore wind power would create 1,628 new jobs and bring $188.5 million into local economies in the construction phase alone. This is not surprising; investing in clean energy projects typically creates three times more jobs than the same level of spending on fossil fuels.

Developing that one GW of wind power in North Carolina would also deliver tangible environmental gains: 2.9 million tons in annual carbon dioxide reductions and 1,558 million gallons in annual water savings. The environmental, climate, and public health benefits of shifting from coal to cleaner forms of energy like wind are well documented. A recent Harvard study found that "the life cycle effects of coal... are costing the U.S. public a third to over one-half of a trillion dollars annually." These externalized costs add roughly 17 cents per kWh of electricity generated from coal. And as one of the most coal-dependent states in the country, North Carolina is spending almost $2.2 billion every year to import coal from other states. That's money that could be invested in developing energy and creating jobs in North Carolina.

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In an event co-sponsored by the Roosevelt Institute | Campus Network at the University of North Carolina, Chapel Hill this past fall discussing the opportunities and obstacles for offshore wind development in North Carolina, we brought together state leaders from government, industry, coastal law, and scientific research. The consensus among the speakers was clear: what's missing in North Carolina is a policy framework for getting turbines installed. Investors and utilities need regulatory certainty to commit to trying something new. As Congress squabbles over what to do about extending the critically important federal production tax credit for wind energy, there's also no state legislation pertaining to offshore wind on the books in North Carolina.

So what can we do? A bill in North Carolina might have an answer. North Carolina's Senate Bill 747, the Offshore Wind Jobs and Economic Development Act, proposed a state-managed competitive request for proposals (RFP) process to develop 2.5 GW of offshore wind energy starting in 2017. If the state determines that a bid has a positive net economic impact, then investor-owned utilities would be required to sign 20-year contracts to purchase power. Incremental costs or savings for ratepayers would appear on customers' utility bills, with limits on the impact of rate increases to large consumers. If the state fails to determine that 2.5 GW of offshore wind energy would result in a net economic benefit, then there would be no obligation to grant a contract.

In an effort to enhance industry support, SB 747 also gives utility companies the option to co-invest or purchase an ownership interest of up to 50 percent in the projects. While the bill does not require any direct government spending, it also extends an existing manufacturing tax credit for wind through 2020 to help attract manufacturing jobs. State agencies (in this case, the Department of Commerce) would review RFPs under a wide variety of criteria, including, but not limited to, the impacts on ratepayers, jobs and economic activity, tax revenue, system reliability, climate change, public health, export opportunities, system reliability, and existing industries.

This policy could create a practical path forward for offshore wind energy. The emphasis on ensuring that any offshore wind project would have a net positive economic impact on the state should make the policy more politically attractive to state legislators concerned about consumer groups opposed to rate hikes, electric utilities eager to avoid anything resembling regulation, and coastal industries that may conflict with proposed turbine locations. This kind of bill also levels the playing field for clean energy in a way that prioritizes economic considerations. Adopting this policy will effectively eliminate cost disadvantages for offshore wind by requiring the government agencies reviewing industry proposals to fully account for the massive and externalized environmental and public health costs associated with continuing to rely on coal and other artificially cheap fossil fuels for electricity.

On a national level, the public strongly supports developing clean energy technologies like wind. A recent nationwide survey conducted by the Civil Society Institute showed that roughly 71 percent of Americans support shifting federal "support for energy away from nuclear and towards clean renewable energy such as wind and solar." The sooner we start implementing policies that lead to more wind development, the better.

Stewart Boss is the co-director of the Roosevelt Institute| Campus Network's center on energy and environmental policy at the University of North Carolina, Chapel Hill.

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