DOE picks 3 projects for up to $141M investment

Source: Katherine Ling, E&E reporter • Posted: Thursday, May 8, 2014

The Energy Department today announced up to $47 million in funding each for three offshore wind projects to connect to the U.S. grid by 2017 as part of the agency’s efforts to lower costs and establish a domestic offshore wind industry.

The three demonstration projects could each provide 12 to 30 megawatts of electricity and are located off the coasts of New Jersey, Virginia and Oregon. They are the finalists from a group of seven offshore wind projects the agency selected at the end of 2012 for design, engineering and permitting work (E&ENews PM, Dec. 12, 2012).The finalists have $6.7 million and about a year to finish the front-end engineering design, an “off-take” agreement that identifies a buyer for the power and the necessary environmental reviews before they can access the rest of the $40 million, DOE Assistant Secretary David Danielson said during the announcement at the American Wind Energy Association’s annual conference today in Las Vegas. If any of the three demonstration finalists fail to meet these requirements, DOE has chosen two alternate projects that could step in or could be candidates for additional funding if Congress were to appropriate funds to support them, Danielson said.”These are very aggressive timelines that we are holding these projects to,” Danielson said. “These are pioneering projects to really show what is possible with regards to offshore wind, and we will do it right regardless.”

DOE also provided a preview of the findings of its second “Wind Vision” report during the AWEA conference. Jose Zayas, director of the Wind and Water Power Technologies Office at DOE, said current research shows that achieving 35 percent wind energy on the U.S. grid by 2050, including a substantial amount of offshore wind, could save consumers $520 billion, cut electricity costs by 3 percent and save 336 billion gallons of water. DOE plans to make the report public this fall after additional peer review this summer, according to AWEA.

“Offshore wind offers a large, untapped energy resource for the United States that can create thousands of manufacturing, construction and supply chain jobs across the country and drive billions of dollars in local economic investment,” Energy Secretary Ernest Moniz said in a statement. “The Energy Department is working with public and private partners to harness this untapped resource in a sustainable and economic manner.”

At a recent hearing on the fiscal 2015 budget, Rep. Lamar Smith (R-Texas), chairman of the House Science, Space and Technology Committee, criticized offshore wind and told Moniz that DOE should not support it with dwindling government funds when it costs more than twice as much as onshore wind.

“Why put a single dollar in something so expensive?” Smith asked. “Why put money in the most expensive type of production? … We have to set priorities.”

Zayas told the AWEA conference that DOE’s goal for offshore wind is to achieve 16.7 cents per kilowatt-hour by 2020 and 13.2 cents per kWh by 2030. The average cost of electricity was about 10 cents per kWh in February, according to the U.S. Energy Information Administration.

Zayas and Danielson both stressed the importance of innovation in the selection process for the final projects that would particularly focus on U.S. technology issues in the Great Lakes, Atlantic and Pacific oceans, and Gulf of Mexico.

One finalist, Principle Power Inc., will install five 6 MW direct-drive wind turbines on a semisubmersible floating foundation in deep waters 18 miles off the coast of Coos Bay, Ore., that will lower the cost of installation by eliminating the need for specialized ships, DOE said.

Dominion Virginia Power, the second finalist, will install two 6 MW direct-drive wind turbines 26 miles off the coast of Virginia Beach, Va., with a lower cost and a stronger foundation known as a “twisted jacket” that will also test resiliency to hurricanes.

Fishermen’s Energy, the third finalist, will also install a twisted jacket foundation for five 5 MW direct-drive wind turbines 3 miles off the coast of Atlantic City, N.J., and will be a “laboratory” for interactions between wind turbines.

Danielson said DOE’s review team still believes in the project even with the recent actions by the New Jersey Board of Public Utilities, which denied a settlement agreement between the company and the New Jersey Division of Rate Counsel to use offshore renewable energy certificates to finance the 25 MW pilot project.

“If a team is not able to get an off-take agreement then they won’t go forward,” Danielson said, although he added that he hoped DOE’s thorough vetting and approval process may actually help future purchase agreements to move forward for these projects.

The alternate projects are from the University of Maine for a project off the coast of Maine and from the Lake Erie Energy Development Corp. for a project in Lake Erie close to Cleveland. DOE will continue to work with these projects to finish the design and engineering work through support from the national labs, Danielson said.

Likely a key factor in the financing of any of these projects is the fate of a 30 percent investment tax credit for offshore wind that expired at the end of last year and whose extension is currently being debated in Congress. The Senate Finance Committee passed a tax extension package at the beginning of April that included a two-year extension of the renewable energy production and investment tax credit, but the House has yet to consider the credit (E&E Daily, May 7).