Offshore wind developers renew interest in Delaware as DNREC weighs its options

The offshore wind industry has plenty of interest in building a wind farm off Delaware but only if the state commits to buying a certain quantity of power from a turbine farm, according to an offshore wind specialist at the University of Delaware.

Kris Ohleth, executive director of the school’s Special Initiative for Offshore Wind, said she has had discussions with Orsted – which is planning two wind farms off New Jersey – and US Wind -- which has plans for a project off Maryland and southern Delaware – indicating that they are both watching Delaware closely to see if it will for the first time procure offshore wind power from the rapidly growing industry.

Both companies have unused wind-power capacity in their ocean-lease areas, and could build more turbines if they could be assured of more customers in Delaware, Ohleth said. The developers could also add to their leases by acquiring new offshore wind areas that are expected to be auctioned by the federal government next year, she said.

“They are very interested,” she said. “The additional capacity for the Orsted and US Wind sites, plus the central Atlantic leasing that is scheduled to happen in 2024, there’s interest in having another off-taker, for sure. Developers are always interested in another customer.”

The comments come as Delaware officials continue to evaluate whether to recommend an official procurement for offshore wind, and after lawmakers resoundingly approved a bill that set a deadline of Dec. 31 for the Department of Natural Resources and Environmental Control to recommend a procurement process for offshore wind power, after an analysis that has been underway for at least 14 months.

The bill, sponsored by Sen. Stephanie Hansen (D-Middletown) would also require the agency to work with the grid operator PJM to study the transmission “impacts” of offshore wind; to work with neighboring states on the transmission of offshore wind power, and to report to the Governor and the Legislature on a process for procuring the power.

If Delaware eventually decides to commit to buying offshore wind power, it would join at least eight other northeastern states whose procurement targets underpin the many plans for offshore wind farms along the Eastern Seaboard. It would also help hit a national goal of 30,000 mw of offshore wind by 2030, as set by the Biden administration.

If the Carney administration decides to buy offshore wind power, the industry will also need to see how the state plans to implement that decision – either through power-purchase agreements with utilities, or through Offshore Wind Renewable Energy Certificates (ORECs), which are purchased by the state from project developers as the power is delivered, Ohleth said.

“They are going to need to see actual legislation that codifies the state’s mechanism, whether that’s a power purchase agreement or an OREC,” she said. “Developers want to see that so there’s certainty about what the bidding process will look like, and whether or not they consider that financeable.”

And she urged DNREC to take into account the requests by offshore wind operators in some other states to rebid their projects because inflation and supply-chain problems have strained their finances.

“Developers in New Jersey and other states are saying they are having a hard time with the current macroeconomic situation, and they want to rebid their projects,” she said. “I’m hoping that DNREC and Delaware are paying attention to these critical issues like inflation and supply chain.”

The current absence of a state commitment to buying offshore wind power is also hindering any industry interest in building a Delaware wind port where turbines would be assembled before being shipped to offshore sites, Ohleth said. Her colleague Willett Kempton, a UD professor, proposed the idea in 2020 for a site near Delaware City, arguing that there would be strong demand for its services from a surging industry along the Atlantic coast.

“There’s a link between a commitment to procurement to bring developer interest to a state,” she said. “Until Delaware has a procurement mechanism, it is my opinion that there will not be a port in Delaware.”

For more than a decade, Delaware has weighed entering the offshore wind market, and might have been the first Atlantic state to do so. But NRG Bluewater Wind, which was poised to be the first developer, walked away in 2011 after the withdrawal of federal tax credits. In 2018, a panel set up by Gov. John Carney to advise on offshore wind development decided the time wasn’t right for Delaware to get into the market.

Now, with Delaware lawmakers codifying the state’s goals for cutting greenhouse gas emissions to net zero by 2050, and the state again weighing whether to buy offshore wind power, the industry has revived its interest in moving into Delaware waters.

Baltimore-based US Wind is already planning two wind farms that would generate a total of 1,100 megawatts off Maryland, although its lease areas have a total capacity of 1,800 mw. Its smaller MarWind project, to generate 300 mw of the total, or enough to power 92,000 homes, is planned for coastal waters partly off Fenwick Island, Delaware.

"We’re watching what’s happening in Delaware with interest and we’ll pursue whatever options are available to provide this renewable resource to more of the region when they’re presented," said US Wind CEO, Jeff Grybowski, in a statement.

The Danish developer Orsted also indicated that it is watching developments in Delaware.

"Ørsted's lease areas include space that is not currently under development, and we will evaluate any procurement opportunities in the region as they become available,” said Chris Bason, the company’s stakeholder relations lead for Delaware, in a statement. “Ørsted has no plans to develop the space at this time as there are no active procurements in the region."

DNREC Secretary Shawn Garvin said he would deliver a report on the progress of the agency’s offshore wind analysis by the new Dec. 31 deadline but it wouldn’t necessarily include a decision on whether to procure offshore wind power. PJM is working on its own report on the transmission of offshore wind power in Delaware, and that would not be ready until 2024, Garvin said.

“We need to deliver a report by Dec 31, 2023, updating where we are in the process,” Garvin told Delaware Public Media. “I’m not looking at it as being a deadline for making a decision. We may not be in a position by then. There are pieces like PJM that we know will go beyond Dec. 31, 2023.”

PJM spokesman Jeff Shields said the grid operator is working on the second phase of a study on what reinforcements are needed to the electric grid to meet the policy goals for renewable energy including offshore wind in its 13-state territory, including Delaware.

He said the new phase will use updated offshore wind scenarios for Delaware and other coastal states and moved its publication date from 2023 to 2024 to account for major transmission upgrades that are being made.

“PJM has worked closely with the Delaware PSC on our study and have kept DNREC and legislative officials updated on our activities,” Shields said.

For his part, Garvin declined to say when his agency would complete its study. He said the state is keeping its options open on whether to procure offshore wind power, and if it does, whether to add to an existing project such as the planned US Wind farm off Maryland, or to buy power from a new wind farm off Delaware.

“It could be buying into existing projects. It could be working with BOEM [the federal Bureau of Ocean Energy Management] and getting a location which would be a completely new offshore wind development that would be Delaware-led. Those are the two most-likely scenarios,” he said.

He acknowledged that the industry is watching the regulatory and legislative developments in Delaware for any opportunities. “There are a number of offshore wind companies that are gauging the interest of the state, and they know that we are looking into what a project for Delaware might look like. We are doing all of our due diligence, and clearly there are companies that are interested in continuing to develop, and potentially work with us,” he said.

Garvin rejected a suggestion that Delaware has been left behind in the race to secure the environmental and economic benefits of offshore wind. He argued that it would have had to pay a higher price for offshore wind power if it had made that decision during the last decade but now that the power price has come down substantially because of improved technology, bigger turbines, and economies of scale, the state will pay less than it would have done before if it decides to buy the power.

“I don’t think we are left behind; we are learning and benefiting from what’s happening, which I think will help us for the cost to consumers as well as having a more streamlined process when and if we engage in it,” he said.

Garvin said his agency is doing a thorough analysis of the alternatives facing Delaware, and he signaled that it won’t be rushed into a quick decision. “This is not a quick process on the federal side; it’s not a quick process on the development side,” he said. “This is an important but fairly complicated process, and we want to make sure we do it right, particularly for the benefit of ratepayers, the environment, and public health.”