Legislation encourages wind farm, but hurdles remain for Maryland

Source: By Timothy B. Wheeler, The Baltimore Sun • Posted: Thursday, March 21, 2013

Federal government expected to seek bids this year

After three years of trying, Gov. Martin O’Malley has won approval of legislation that aims to spur construction of towering wind turbines off Maryland’s Atlantic coast.

Now comes the hard part.

Daunting regulatory, political and financial hurdles remain before a wind-driven power plant could be built in the water 10 to 20 miles from Ocean City. Even if all goes right, construction could be four to seven years away, industry and government experts say — long after O’Malley has left the State House.

“We have a lot more work to do,” said Abigail Ross Hopper, the governor’s energy adviser and acting director of the Maryland Energy Administration.

Jim Lanard, president of the Offshore Wind Development Coalition, a national group of developers, praised the Maryland legislation, saying projects that can cost billions of dollars to build need help from states to ensure a market for the electricity they generate.

The bill will require suppliers of electricity in the state to get up to 2.5 percent of their power from offshore wind as early as 2017. And it would offer a successful developer a subsidy of up to $1.7 billion over 20 years — paid for by Maryland’s residential and commercial electric ratepayers through slightly higher bills.

To pay for the subsidy, the Public Service Commission could authorize an additional charge of up to $1.50 a month for residential electricity customers. Commercial customers could see a charge of up to 1.5 percent of their electric bills. The higher rates would help assure that the wind energy developer takes in enough money to pay its investors.

To keep customer costs that low, the governor scaled back the project that would be supported by Maryland ratepayers to 200 megawatts, about a third the size of offshore wind developments proposed in other states.

Some have said the smaller scale of the Maryland project could deter developer interest. Hopper said state officials hope developers can find ways to leverage the state subsidy to finance a larger wind facility.

Attention now shifts to the federal government, which is preparing to issue a notice of its intent to lease nearly 80,000 acres of ocean off Maryland for one or more wind energy projects. A spokeswoman for the Interior Department said the notice will go out later this year.

“There is a leap of faith proposals will come in that work,” said Nathan Hultman, an associate professor at the University of Maryland who focuses on energy policy.

Six companies expressed interest last year in bidding for a lease off Ocean City, but they haven’t yet been required to put any money down to stake a claim. That will come once the Interior Department holds an auction for the Maryland patch of Outer Continental Shelf and selects one or more winning bidders. Hopper said state officials hope that will happen by the end of the year.

Securing a lease is only the next hurdle. Any proposed wind project must be reviewed by the Public Service Commission, and the legislation limits what the commission can approve.

To encourage bids, Maryland officials awarded a $3.3 million contract this year to a Florida-based marine survey firm to map the ocean bottom to be leased. The information will help developers assess the terrain on which they would be anchoring turbines.

Some opposed O’Malley’s wind legislation because they object to the government’s subsidizing any particular industry, arguing that the market is better at choosing the least costly way to generate energy. Hultman noted that the state tried to boost solar panel manufacturing in Maryland, only to see the plant in Frederick close. But he said other efforts to help fledgling industries get started have succeeded, pointing to Denmark’s subsidy of wind projects and the growth of land-based wind in the United States, largely with the aid of a generous federal tax credit.

Hopper said she hopes developers can use Maryland’s subsidy for a modest-sized complex of perhaps 40 turbines to get financing for a larger project. And the state has proposed carving its offshore wind area into two zones, with an eye to getting enough interest that the federal government would issue two leases instead of one.

Meanwhile, state and federal officials still are reviewing potential effects of a wind project off Maryland’s coast on fish, migratory bird and marine mammal populations, and on human activities such as commercial and recreational fishing and shipping. Any of those could result in trimming the area available for building turbines, particularly shipping.