Delaware moving toward decision on whether to buy offshore wind power
Just over a month ago, the state released a long-awaited report from UD’s Special Initiative on Offshore Wind. The conclusions reached in that report beg the question - is Delaware on brink of finally deciding to buy electricity from the offshore wind industry?
Contributor Jon Hurdle looks at where the First State is in the process of answering that question this week.
Is Delaware finally on brink of deciding to buy electricity from the offshore wind industry?
Comments by Shawn Garvin, Secretary of the Department of Natural Resources and Environmental Control, suggest that Delaware is poised to join every other Northeastern state by committing to procuring offshore wind power.
“We have not concluded one way or another but the information that we are getting is certainly positive that we may be able to make some type of offshore wind project in the State of Delaware viable,” Garvin said in an interview with Delaware Public Media.
His comments follow DNREC’s evaluation of a report from the University of Delaware’s Special Initiative on Offshore Wind which said last month that the cost of offshore wind power would be less than half what the state currently pays for fossil fuel-generated electricity, after health and climate benefits are accounted for.
“I want to make sure I’ve got the best information available before I make a firm edict on, ‘We’re definitely doing this’. But clearly we are putting a lot of work into this issue.”DNREC Secretary Shawn Garvin
The report is a crucial part of a renewed look at whether the state should commit to buying a specific quantity of offshore wind power, as nine other Atlantic coast states have done, in policy moves that underpin the region’s rapidly growing industry.
Garvin said the agency is considering its options in light of the state’s updated Renewable Energy Portfolio Standard (RPS), which says 40 percent of the state’s energy must come from renewable sources by 2035.
“We have not gotten officially to that point,” he said, referring to any decision to buy offshore wind power. “We still look at offshore wind as a potential very valuable move as we look at our RPS, as we look at how we move forward on the mitigation side of climate change. But we have not made anything official, we still have some work to do.” He declined to say when a decision could be made.
In 2018, a Working Group brought together by Gov. John Carney rejected the idea of a state procurement. But a sharp fall in costs since then – spurred by other states’ commitments and advancing technology – prompted Delaware to ask the UD team to take another look at whether the time is now right for the state to commit to buying offshore wind power.
It concluded that the economics of buying offshore wind power are much more attractive than they were four years ago.
“Recent technology improvements and industry scale-up have brought wind power prices to competitive levels for many utilities, including in the mid-Atlantic, based on recent market price data,” the UD study said. “Given the data and considerations of this report, we find that the state of Delaware now has the means to procure cost-competitive offshore wind power.”
The falling cost has made offshore wind power competitive with that from fossil fuel plants, so the state does not need to offer new incentives or subsidies to stimulate the market, the study said. It argued that one 800 megawatt wind farm – around the same size as several already planned off other Northeastern states -- off the coast of Delaware would reduce carbon emissions from power generation by almost a third, and create jobs.
“Given the data and considerations of this report, we find that the state of Delaware now has the means to procure cost-competitive offshore wind power.”University of Delaware’s Special Initiative on Offshore Wind report
The report said that to implement any state decision to buy offshore wind power, the Legislature would have to pass a law establishing procurement and designating agencies to manage the process that would lead to an offshore wind developer selling power to Delaware’s utilities.
But Garvin said a new law may not be needed, and that the process could begin with an executive order. “We wouldn’t necessarily have to have a bill to kickstart whatever paths are moving forward,” he said.
About half a dozen lawmakers did not respond to requests for comment but Joseph Fulgham, a spokesman for the House Republicans, said his caucus members had probably not read the whole report because of a press of legislative business.
Still, he said capital and maintenance costs remain a “valid issue” with offshore wind, even with the industry’s growth. And he said there’s potential for damage to Delaware’s economically important tourist industry if wind farms are visible from the shore.
If officials decide that a bill is required, it’s looking unlikely that lawmakers will be able to finalize one by the end of the current legislative session on June 30.
“It’s late in the session,” said Willett Kempton, a UD professor who headed the report. “We’ve only got three weeks in this month and all of next month to get something out. Would it be a full bill with everything in it? Maybe that’s hard to do. Would it be a bill that gets some process going as a legislative initiative? That seems much more doable.”
He warned that a lack of action by lawmakers would make it harder for an offshore wind developer to qualify for a federal investment tax credit which reduces the risk to invest in the multi-billion dollar projects. Missing a deadline for the credit would add 28 percent to the wholesale cost of electricity from an offshore wind farm, Kempton said.
And he said the wind industry is considering major investments such as a marshalling port for turbine assembly; a factory to make components, and a work force training center – all based on the assumption that Delaware will participate in the industry. “Inability to take any state actions would be a negative on such investment decisions,” he said.
At DNREC, officials are still looking at whether to recommend a standalone offshore wind project; partner with another state; base a project on the lowest price, or structure it to boost economic development. The agency is also examining how to connect offshore power to the onshore grid that supplies homes and businesses with electricity, Garvin said.
“The report is a very valuable piece of information and we are taking that and continuing to look at the bigger picture, also recognizing that we want to make a decision as quickly as we can but we also want to make it on the best information available so that we can make the right decisions as it relates to the future of offshore wind,” Garvin said.
Delaware is the only one of 10 Northeastern states that has not committed to buying a specific quantity of offshore wind power from an industry that is growing rapidly, driven by state commitments to cut carbon emissions, and the economies of scale that come with more participants and bigger turbines.
Surging demand from offshore wind developers was shown in February when a federal government auction of wind leases off New York and New Jersey saw record-high demand, and raised almost $4.4 billion.
The first two U.S. commercial-scale wind farms – off Massachusetts and New York – are under construction and are due to start producing power in 2023. They will be followed by at least 15 other projects from North Carolina to Maine over the next seven years.
A Maryland-permitted wind farm, the 120 mw Skipjack project, will be built by the Danish offshore wind giant Orsted about 15 miles off Fenwick Island. A little further to the east, another possible lease area is among 3.9 million acres off the Central Atlantic coast that has been identified by the federal government’s Bureau of Ocean Energy Management as containing wind-energy resources that could eventually be developed.
In 2020, Kempton proposed a marshalling port to be built near Delaware City to support a booming offshore wind industry. Such a site would complement one that’s under construction along the Delaware Bay coast of New Jersey, and another that’s planned in Virginia but the three together would still not meet all the anticipated demand, he said.
“You can build all of those, and you still don’t quite have the marshalling port space,” he said. “That is definitely a very good opportunity for Delaware.”University of Delaware professor Willett Kempton
Now, growth is likely to be even stronger than the 40,000 MW – enough to power around 12 million homes -- committed by the states between now and 2040, so there will be even more demand for onshore sites where giant turbines can be assembled and shipped out to sea, Kempton said.
“You can build all of those, and you still don’t quite have the marshalling port space,” he said. “That is definitely a very good opportunity for Delaware.”
To help decide whether to recommend a procurement, DNREC is looking to hire a consultant to advise officials on the recommendations of both the UD and Working Group reports; identify the barriers and opportunities of developing offshore wind, and advise on issues including transmission.
Garvin rejected a suggestion that bringing in an outside consultant shows the state is serious about offshore wind, and has effectively decided to go ahead and recommend procurement.
“I’m never pre-decisional,” he said. “I want to make sure I’ve got the best information available before I make a firm edict on, ‘We’re definitely doing this’. But clearly we are putting a lot of work into this issue to see if it is something that’s viable for the State of Delaware.”