Competition heats up for Md.’s first offshore wind farm
Two developers are going head-to-head in a battle to construct the first wind turbines off the coast of Ocean City, Md.
U.S. Wind Inc., a subsidiary of Italian conglomerate Toto Holding, and Skipjack Offshore Energy LLC, a subsidiary of Rhode Island-based Deepwater Wind LLC, have each submitted a separate bid.
It’s now up to the Maryland Public Service Commission to award one of the developers offshore renewable energy credits, or ORECs. Established by 2013 legislation, ORECs are public subsidies priced into a project and paid for through customer electric bills.
U.S. Wind has proposed a 750-megawatt project consisting of 124 wind turbines. But the developer is only seeking credits for a fraction of the project comprising 248 MW, or 62 turbines.
Meanwhile, Skipjack has its sights set on a more modest 120-MW project consisting of 15 wind turbines. Its project would be located between 17 and 21 nautical miles off the Maryland coast.
In a series of public and closed-door hearings last week, the Maryland PSC took its first steps toward awarding ORECs to one developer. The proceedings revealed that Maryland is gaining momentum toward its first offshore wind farm, but cost remains a determining factor as developers duke it out.
Resolving disputes
In a hearing last week that grew heated at times, the Maryland PSC sided with Skipjack regarding a dispute over the bidding process.
H. Russell Frisby, the counsel for Skipjack, said at the hearing that U.S. Wind had violated Maryland law by making a material change to its bid after the application period had closed.
U.S. Wind initially testified at a hearing last Monday that its project would have a levelized cost of $177 per kilowatt-hour (kWh), Frisby noted. But the developer cited a lower figure of $137 per kWh later in the day, throwing a wrench into the proceedings.
“It’s Maryland law that you can change minor irregularities in a bid,” Frisby said. “This is not a minor irregularity. This change is clearly material. As such, we believe that the commission is compelled to reject U.S. Wind’s filing yesterday.”
In response to these allegations, Carville Collins, the counsel for U.S. Wind, cited the amount of time each company had to prepare its bid.
Skipjack was notified on Feb. 5, 2015, that multiple bids to build the wind farm meant it would be engaged in a competitive bidding process. That gave Skipjack 270 days to prepare a bid, Collins said. But U.S. Wind was notified on Nov. 22, 2016, giving it eight days to revise its bid for a competitive process, he said.
Collins added that the revised price tag for U.S. Wind’s project would benefit ratepayers. “The reason that U.S. Wind should be allowed to submit a revised OREC price are first, fairness to the procurement process, and secondly, fairness to the ratepayers of Maryland,” he said.
Commissioner Harold Williams had a mixed reaction to the argument about ratepayers. “I agree wholeheartedly that price is important, especially to the ratepayer,” he said. “But I don’t agree that when the door has closed, you have the right to offer another price.”
The commission ultimately came down on the side of Skipjack, ruling that U.S. Wind had made a material change to its bid, said Tori Leonard, a spokeswoman for the commission.
Two public hearings in Annapolis, Md., and Berlin, Md., are also scheduled for later this month.
Building momentum, lowering cost
Liz Burdock, director of the Business Network for Offshore Wind, was one of many people in Maryland’s nascent wind industry keeping a close eye on the week’s proceedings. She said in an interview with E&E News that she thought the developers should have anticipated a competitive bidding process.
“It was my understanding that a developer would put in its best offer initially, fully aware that there could be somebody competing with them,” Burdock said. “The legislation was always set up so that there could be at least two developers competing for a PSC award.”
The week’s proceedings demonstrated that offshore wind is gaining momentum in Maryland, Burdock said.
“We’ve been working on bringing offshore wind to Maryland since 2011,” Burdock said. “This is the most important milestone in a very long process. We’re happy that it’s moving forward. We’re happy that there is competition for the award.”
Burdock said the proceedings also demonstrated that the state’s development credits play a crucial role in lowering the price of offshore wind projects. In addition, she said, technological advances in Europe could spread to the United States, leading to further cost reductions.
“I do believe that if Maryland wants to have a role in this emerging industry, with European developers looking at offshore wind, this door is not going to get shut,” she said. “So the market is here. It’s just a matter of who wants to capture those benefits.”