Now comes the hard part.
After state environmental officials finally recommended that Delaware get into offshore wind by agreeing to buy power from the industry, it’s now up to lawmakers to agree on a bill that would determine how much electricity from offshore turbines the state commits to buying; when it will seek bids from developers, and whether it will join with another state in developing a wind farm or seek to build a new facility off Delaware.
On Dec. 29, Delaware’s Department of Natural Resources and Environmental Control released a report calling on the legislature to pass a law authorizing the state to procure offshore wind power from a standalone source or in cooperation with another state.
The Proposed Offshore Wind Procurement Strategy also said the program should involve all Delaware utilities, should minimize the impact on ratepayers, and should build in economic development such as job creation without adding specifications that would drive up the cost.
DNREC is now drafting “model legislation” that would combine all that and more, and it is expected to be sent to legislative leaders in coming weeks as a guide for lawmakers to write their own bills. If a bill is passed in the current session, as expected, it would include an instruction for DNREC to create a request for proposals that would tell potential developers how much offshore wind power the state is willing to buy, and at what price. Bids must then be reviewed.
The whole procurement process is likely to take 18 to 24 months, and the winning bidder or bidders aren’t expected to have an operating wind farm off Delaware until 2030 or 2031, said Kris Ohleth, director of the University of Delaware’s Special Initiative on Offshore Wind.
The long lead time for any offshore wind project to become a reality looks like playing to Delaware’s advantage, Ohleth argued. She said the expectation for lower interest rates could entice developers who blame high capital costs as a major reason for the recent cancellation of some Atlantic coast projects, and could otherwise stay on the sidelines.
The expected schedule, she said, gives Delaware time to learn from the bruising experience of other Atlantic states that are facing a rash of project cancellations or requests to renegotiate contracts. Some developers say that higher interest rates and supply-chain problems mean they can no longer deliver power at the rates they previously agreed.
In the last year, offshore wind projects that would have generated almost 8 gigawatts – or more than eight times the capacity that advocates want to see in a potential Delaware wind farm – have been withdrawn in Massachusetts, Rhode Island and New Jersey, according to DNREC data.
One of the lessons of the projects’ cancellation is that some were conducted by only one developer, but arguably should have been made by two or more to spread the risk of the massive investments, Ohleth said.
“What we have seen in New Jersey and other states is that it makes sense to spread the great responsibility of building these projects across multiple developers. Delaware should be looking at multiple bids, and consider awarding them to more than one developer because that’s how you spread the risk,” she said.
More questions arose about the strength of the industry’s commitments when Orsted, the Danish wind developer, said on Jan. 25 that it is ending its agreement with Maryland to deliver power from Skipjack Wind, a 986 mw project off the Delmarva Peninsula. Although Orsted plans to continue to develop and seek permits for the project, it said its current agreement with the Maryland Public Service Commission to deliver offshore renewable energy certificates (ORECs) is no longer economic.
“The payment amounts for ORECs set forth in the orders are no longer commercially viable because of today’s challenging market conditions, including inflation, high interest rates and supply chain constraints,” said Orsted – which also cancelled its two projects off New Jersey last year.
Ohleth said it’s looking unlikely that Orsted will agree to restructure its current contract with Maryland, and that one possible solution will be that it will bid to supply power to the Delaware market instead.
The industry disruption, advocates say, represents an opportunity for Delaware to secure a major source of carbon emissions-free electricity that would play an important role in helping the state meet its ambitious climate goal of net-zero emissions by 2050.
“Delaware is ready to get in the game. They are seeing economic opportunities coming. They are also really having an opportunity to learn from what the other states are suffering from, unfortunately,“ said Ohleth. In 2022, her group produced a state-ordered report recommending an 800-megawatt wind farm, which would produce enough power for about 400,000 homes, as the optimal size for Delaware.
“Delaware is ready to get in the game. They are seeing economic opportunities coming. They are also really having an opportunity to learn from what the other states are suffering from, unfortunately.“Kris Ohleth, Director of the University of Delaware’s Special Initiative on Offshore Wind
Dustyn Thompson, director of the Delaware Sierra Club, argued that, despite the market upheaval, developers’ input costs including interest rates and materials are beginning to slow after a Covid-driven runup that forced the recent rash of cancellations. By the time any developer is ready to build a wind farm off Delaware, market conditions will be more attractive than they are now, he said.
Thompson urged lawmakers to agree on a bill that focused on the procurement of offshore wind power, and not to condition the purchase on economic stimulus such as job creation. Adding such economic conditions would raise the price of developers’ bids, and may even deter them from bidding, he said. “You can be overly prescriptive in a bill, and make it difficult to get bids,” he said.
DNREC’s report appears to show that it recognizes Delaware faces a “huge risk” if it doesn’t enter the offshore wind market now, Thompson said. Without committing to buying the power, the state risks missing its net-zero target and would contribute less to national emissions reduction. If it balks again, it may also miss out on the prospect of drawing power from one of a dwindling number of mid-Atlantic Wind Energy Areas, the latest of which is expected to be auctioned by the federal government this year.
For more than a decade, Delaware has weighed entering the offshore wind market, and in 2011 might have become the first Atlantic state to do so. But NRG Bluewater Wind, which was poised to be the first developer, walked away that year 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. Delaware is currently the only Atlantic state that does not have an official commitment to buying offshore wind power.
Now, lawmakers are being asked to consider a bill that would require the state to buy power generated offshore, said Sen. Stephanie Hansen (D, Middletown), chair of the Senate’s Environment, Energy and Transportation Committee, who is expected to lead the bill’s passage through the legislature.
“I would like to see legislation that makes it clear that Delaware is interested in procuring energy from offshore wind projects and that the structure of any procurement agreement should be flexible so as to allow for changes in the industry, in procurement structures, and in procurement partners,” Hansen said in a statement.
Echoing DNREC’s report, Hansen said it would be “difficult” for Delaware to reach net-zero by 2050 without offshore wind. Hitting the goal would also depend on whether other low-emissions energy sources including solar, hydrogen or biomass could be scaled up in time to make a significant contribution, but each is a “heavy lift” at startup, she said.
Thompson, who sits on a committee of energy stakeholders chaired by Sen. Hansen, predicted that a procurement bill will be approved by the legislature because enough lawmakers recognize the urgency of the climate challenge, and the need for Delaware to provide itself with a major source of emissions-free energy.
“Are we going to get unanimous support for this legislation? I don’t think so but I do think there’s enough support to get it done this year because I think folks understand that if miss the boat on this, we are really missing out in the long term,” he said.
In writing its “model legislation”, DNREC said it is talking to the Public Service Commission, the Division of the Public Advocate, Delmarva Power, the Delaware Municipal Electric Corporation (DEMEC), the Delaware Electric Cooperative (DEC), renewable energy advocates, and offshore wind industry experts. “We are talking with them to better understand their policy perspectives,” DNREC said in a statement.
Ruth Ann Price, the Public Advocate who represents consumer interests when regulated utilities seek changes in rates or services including electricity, said she would fight any ‘egregious” increases in household electric rates if offshore wind power enters the state’s energy mix.
But she fears that offshore wind power will inevitably drive up electric rates simply because the state will have to pay for it. “If Delaware partners with Maryland, for instance, Maryland is not going to pay the entire cost of construction or procurement, and that money has to come from somewhere,” she said.
Matthew Hartigan, executive director of the Public Service Commission, said he wants the procurement bill to require that if the offshore wind power is distributed throughout the state, then all ratepayers should contribute to it.
