U.S. can replicate Europe’s wind build-out, executives say

Source: Saqib Rahim, E&E News reporter • Posted: Thursday, March 29, 2018

NEW YORK CITY — The CEO of a U.S. offshore wind company says project costs in America could one day approach the low costs seen in Europe.

It just takes three things, said Deepwater Wind CEO Jeff Grybowski: “projects, projects and projects.”

Speaking at an energy conference in New York City, Grybowski, whose company has built the only offshore wind farm in the United States to date, lauded the states trying to hurry up and build projects. He said that’s the same way solar and onshore wind slid down the cost curve.

“There’s no reason that offshore wind is going to have any different of a story,” he said on a panel at the Advanced Energy Conference. “There’s no reason why offshore wind ought to be really cheap in Europe and not so cheap in the United States. There’s no magic here the U.S. can’t replicate.”

“What will get us there? It’s not engineering; that’s not the issue. It’s projects,” he said.

Grybowski’s European rivals agree. “The fundamentals are as good here in the Northeast as anywhere in the world,” said Lars Thaaning Pedersen, an executive with Copenhagen Infrastructure Partners who heads up its North American offshore wind portfolio. He estimated the United States could approach European project costs in the next decade.

The comments came as policymakers prepare policies that could establish offshore wind as a utility-scale energy resource in the next few decades.

So far, only one project, a five-turbine installation off Rhode Island, exists in the United States. With that demonstration-scale achievement, policymakers in Maryland, Massachusetts, New Jersey and New York are advancing policies meant to erect wind farms in the hundreds of megawatts. By some estimates, their current commitments add up to a 4-gigawatt “pipeline” of projects.

Europe has built 15.8 GW to date. Grybowski, and his European competitors now eyeing the U.S. market, are trying to persuade policymakers that the bigger they go, the bigger the benefits will be, in terms of both project costs and job creation.

“It’s basically the amount of projects that’s going to determine how much supply chain you’re going to get in the U.S.Ñ,” said Christer af Geijerstam, project director for Statoil ASA’s proposed project off New York. “So if the supplier sees a pipeline of, say, 10 GW of projects in the next X number of years, they can make the investment to put manufacturing capabilities in the U.S.”

For now, states are tiptoeing carefully at the top of the cost curve.

Maryland regulators have awarded subsidies to 368 megawatts of offshore wind projects, expecting them to be up and running by 2022. Last year, Massachusetts held its first solicitation for projects going toward its 1,600-MW mandate. New York hopes to launch an 800-MW solicitation by next year. New Jersey regulators are currently designing an 1,100-MW solicitation.

One key issue is financing. Developers say they cannot build offshore wind without some form of state support, but states have been wary of overpaying. Officials are exploring creative financing tools that can get the maximum projects built but with minimum ratepayer ask.

Grybowski is a fan of power purchase agreements (PPAs), long-term contracts for power, because it’s the gold standard in the electricity industry and is easy to finance.

Maryland and New Jersey have so far favored the OREC, or offshore renewable energy credit — a direct subsidy to the project developer. For the projects awarded in Maryland, an OREC is worth $131.93 per megawatt-hour, for 20 years.

But as Grybowski said, and his competitors agreed, coming up with the precise financing tool isn’t the most pressing issue before U.S. policymakers. It’s putting up windmills.

New York regulators currently have seven financing options before them, and they’re taking public comments on each. But time is of the essence; the state’s goal is to launch its first-ever offshore wind solicitation by the end of this year.

Speaking at the conference, one state official said the Public Service Commission may prefer the ORECs now and another tool later.

“It’s unlikely that the commission will pursue a PPA at this point for phase one,” said Thomas Rienzo, a staffer at the state’s Department of Public Service. “This is very time-sensitive, and we don’t want to propose an option that’s going to be challenged in court.”