Maryland takes next step toward offshore wind

Source: By Sarah Gantz, Baltimore Sun • Posted: Wednesday, March 15, 2017

Hearings starting Monday could determine whether Maryland becomes a leader in the development of offshore wind power in the United States.

The Maryland Public Service Commission will begin what could be two weeks of hearings on proposals from two developers to build wind farms in the Atlantic Ocean off Maryland. The two developers are competing for up to $1.9 billion in subsidies over 20 years, paid for by the state’s electricity ratepayers, a crucial financing mechanism for developers to recoup the cost of building the massive wind farms.

The commission is expected to decide whether to move forward with one by May 17.

Offshore wind energy, which is booming in Europe, offers significant potential to replace aging energy infrastructure along the East Coast, create jobs and bolster the economy.

The federal government has leased thousands of acres off the Eact Coast to be developed into wind farms, but the industry has yet to take off in the United States. Wind development has been hobbled largely by its cost as well as regulatory hurdles and opposition from politicians opposed to subsidizing energy, coastal residents worried about views and environmentalists worried about migratory birds.

Only one small offshore wind farm has been installed in the United States, just five turbines off Block Island in Rhode Island. But other projects are in the works off Massachusetts, New Jersey and North Carolinia.

If Maryland successfully becomes one of the first states to establish an offshore wind farm, the project could position the state to be a leader in the industry and serve as a hub for the contractors who could service future offshore wind farms up and down the East Coast.

“The opportunity Maryland has is huge,” said Liz Burdock, executive director of the Business Network for Offshore Wind, a national advocacy group. “Where the infrastructure goes into place, where first companies set up, will be the base for where the rest of the industry is served.”

Maryland has set a goal of getting a quarter of the state’s power from renewable sources by 2020. Of that, up to 2.5 percent must come from offshore wind.

To meet those goals, utility companies such as Baltimore Gas & Electric Co., will be required to buy energy credits from offshore wind farms, solar companies and other renewable energy producers.

To encourage development in offshore wind, state lawmakers in 2013 approved legislation that will allow energy companies to pass on the cost of the offshore wind credits to ratepayers. Under the law, residential power bills could go up $1.50 a month and businesses could pay up to 1.5 percent more, to support an offshore wind project once it is up and running.

The Maryland Public Service Commission will decide how much utilities should pay for the offshore energy credits and from which project, essential determining which might get built.

“Maryland wants to be a leader in renewable energy and wants to have more homegrown renewable energy,” said James McGarry, a policy director for Chesapeake Climate Action Network, an environmental nonprofit in Takoma Park. “Offshore wind is potentially the biggest untapped source of homegrown renewable energy.”

The two proposals under consideration are from US Wind, a Baltimore-based subsidiary of Italian energy and construction giant Toto Holding SpA, and Deepwater Wind, the Providence, R.I. -based developer of the only wind farm off the U.S. coast.

In 2014, US Wind won a federal auction for the leases of two offshore wind sites off the coast of Ocean City. The company wants to build a 750-megawatt wind farm with 187 turbines on the 80,000-acre site. The project would be built in three stages, with the first capable of creating 250 megawatts of wind power. The first stage could be complete by 2020 and the entire project could be built by 2022.

The first stage of the project would cost about $1 billion, said Paul Rich, US Wind’s director of project development. He declined to share the proposed impact to ratepayers’ energy bills.

Rich said he thinks the company’s “go big” approach is Maryland’s best bet for establishing itself as a long-term industry leader.

The plan calls for manufacturing facilities at Sparrows Point in Baltimore County that would be run by contractors who will make the massive turbines and bases they sit on. Rich envisions those facilities becoming the go-to resource for future projects up and down the East Coast.

All told, the project could create 5,000 construction, fabrication, electrical and support jobs, he said.

“We are trying to embrace a vision,” Rich said. “This will be the Silicon Valley of industrial activity for the offshore wind industry for the whole East Coast.”

Meanwhile Deepwater Wind is proposing a smaller, $720 million project that executives called the “right size” for Maryland.

The Skipjack Wind Farm would be located on a 96,400-acre site about 17 nautical miles northeast of Ocean City, actually in waters off Delaware. The company has proposed building 15 turbines, capable of producing 120 megawatts of energy, with the possibility of adding more turbines in the future. Construction could start in 2020 with the farm operational by 2022.

Deepwater has proposed a price for its energy that would cost residential customers 34 cents a month, said Deepwater CEO Jeff Grybowski.

Deepwater acquired the site’s lease last year from utility company NRG Energy. The lease had been among the first granted by the federal government in 2012, but NRG’s planned wind farm stalled due to financial constraints.

Deepwater leaders said their more conservative proposal is based on their experience developing the only other offshore U.S. wind farm.

The five-turbine Block Island Wind Farm is capable of producing just a quarter of the energy as the proposed Skipjack Wind Farm and took almost a decade to bring to fruition, said Chris van Beek, president of Deepwater, who discussed the project at an event hosted by Business Network for Offshore Wind in Linthicum Heights last week that also featured a presentation by US Wind.

“The problems we had, we were able to handle them because it was small,” van Beek said. “I think we start small and prove to the industry that a wind farm can be built and is possible, and I think that’s more important than the size of the project.”

The Skipjack project also calls for manufacturing operations at Sparrows Point and several hundred construction jobs.

Both companies would establish operations and maintenance offices in Ocean City.

Regardless of which developer Maryland regulators chose, labor unions say the project could be a lifesaver for trade workers who have struggled to find jobs as manufacturing declined in Maryland.

“The promise is enormous for our ready and willing, skilled ironworking workforce and apprenticeship program,” said William Beckman, a representative of the Ironworkers Local 5, in testimony submitted to the public service commission. “We will all thrive with exciting new economic development projects that can revive our great city.”

Despite such promise, cost remains a concern among consumer advocates. Maryland People’s Counsel Paula Carmody, whose office represents residential utility consumer interests, worries that the projects could end up being more costly and a bigger burden to consumers than projected.

“This is a cost impact — what that risk or impact might have on the rates they pay in the future, that’s what we’re talking about,” Carmody said. “What we are taking a look at is the level of uncertainty in those projections.”