Three Things to Watch in Development of U.S. Offshore Wind

Emerging Solutions to Grid Connectivity

As we have previously discussed, the existing onshore grid was not designed to accommodate large amounts of offshore power. The energy transition is shifting where electricity is generated, and the webs of transmission lines necessary to deliver that electricity to demand centers require significant upgrades and new construction. This is perhaps most true for offshore wind generation, as potential interconnection points near offshore production areas are limited.

Over the last several years, offshore wind developers, regional transmission organization (“RTOs”), independent system operators (“ISOs”), and utilities have approached transmission on an individual, first-come/first-serve basis, linking up wind farms one-by-one to the onshore grid. However, with more projects on the horizon, this model is likely not sustainable because without significant and expensive upgrades to existing transmission infrastructure, power lines will become more congested and will not be able to serve new projects. This is particularly true in concentrated areas such as the New York Bight.

To combat this issue, power regulators, developers, and grid operators are exploring shared transmission systems, such as “meshed” or “backbone” networks, that would connect offshore wind projects together and coordinate transmission to the onshore grid. A meshed network links offshore wind farms together through shared, multiterminal transmission facilities, whereas a backbone facility is a shared high-voltage transmission facility, several of which can form a longer backbone or mesh network.

For example, the New York State Energy Research and Development Authority recently requested “Meshed Ready” proposals from developers in future bidding for New York State energy contracts. Earlier this year, the state’s Public Service Commission directed Con Edison to submit details for an onshore interconnection hub that would support five to six gigawatts of offshore wind in Manhattan. In New Jersey, the state Board of Public Utilities recently solicited proposals to build an offshore wind backbone to connect multiple wind projects. The Board is already working with PJM Interconnection to evaluate dozens of draft proposals already submitted, including one from Con Edison that proposes to connect 2.4 gigawatts of offshore wind capacity via an offshore mesh-style network called Clean Link New Jersey. This kind of joint planning and coordination between state regulators, developers, utilities, and RTOs/ISOs may serve as a role model for other states and grid operators as the offshore wind industry and federal government push coordinated transmission to match expected growth in offshore power generation.

In addition to these state-led efforts, the recent Inflation Reduction Act spending bill reflecting compromise between Senator Joe Manchin and Majority Leader Chuck Schumer offers new financial incentives from the federal government to address transmission issues by providing $2 billion in loans to support new and modified electric transmission facilities, and another $760 million in grants to siting authorities to help them navigate the review and approval process of high voltage interstate and offshore electricity transmission projects. Among other transmission-targeted measures in the spending bill, these financial incentives should help improve offshore wind grid connectivity if the bill ultimately becomes law.

The Expanding, Though Uneven, Horizon of New Federal Offshore Leases

Over the last five to seven years, federal offshore leases sold in the range of millions to tens of millions, compared to new leases now selling for multiple hundreds of millions. But the expansion into new potential lease areas is uneven, not only because of varying wind potential, but also because of bureaucratic circumstance. In 2018, the Department of the Interior proposed a five-year offshore leasing plan that would open up nearly all federal waters to energy production and exploration, but in 2020, President Trump signed a moratorium, effective July 1, 2022, prohibiting offshore energy development for 10 years in federal waters extending from the Carolinas, across Georgia, and down to the Florida keys. The Bureau of Ocean Energy Management (“BOEM”) pushed forward the offshore wind auction for two lease areas in the Carolina Long Bay in May 2022 before the moratorium went into effect. If signed into law in its current form, the Inflation Reduction Act would override the moratorium and allow the leasing process off the Southeast coast to move forward (though there are questions about whether this specific provision would survive parliamentarian review that occurs as part of the reconciliation process).

BOEM is exploring leasing opportunities in other areas, including the Pacific Coast and the Gulf of Mexico. For example, BOEM has proposed new leasing areas near Coos Bay and Brookings, Oregon, which may avoid some of the engineering challenges presented by the Pacific Coast’s steep canyons. BOEM published the call for information and nominations on April 28, 2022, with comments accepted through June 28, 2022. Additionally, on May 26, 2022, BOEM announced a Proposed Sale Notice soliciting comment on what would be the first commercial wind energy leases off the coast of California, in the Humboldt Wind Energy Area and the Morro Bay region. The auction for these areas will be held in Fall 2022.

For the Gulf Coast, BOEM announced on January 11, 2022 its preparation of a draft environmental assessment (“EA”) to consider offshore wind leasing in the Gulf of Mexico. The EA is the first step towards narrowing down potential leasing areas, and it will consider the potential impacts of site characterization and assessment activities, such as biological and geophysical surveys and installation of meteorological buoys. The scoping period on considerations to be included in the draft EA closed on February 9, and the draft EA is expected to be completed this summer.

Finally, if the Inflation Reduction Act becomes law, offshore waters located near U.S. territories, including Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and the Northern Mariana Islands may see offshore wind leasing activity in the next several years. As proposed, the Inflation Reduction Act would require the government to issue calls for information and nominations for proposed wind lease sales in waters offshore of U.S. territories by September 30, 2025.

Review and Approval Hurdles Remain

Achieving the ambitious offshore wind goals of the Biden administration and several coastal states will require numerous projects running the gauntlet of state and federal environmental review. Renewable energy projects are no strangers to permitting hurdles and public opposition, and resource constraints at state and federal agencies can exacerbate delay risks. For example, BOEM announced a plan to hold up to seven offshore wind lease sales and to complete the reviews of at least sixteen Construction and Operations Plans (“COP”) by 2025 to help further the Biden administration’s goal of deploying 30 GW of offshore energy by 2030. BOEM’s review of sixteen COPs by 2025 would represent over 19 GW of energy but would take a significant commitment of agency resources to work through all of the requirement environmental reviews and consultations.

To support this goal, BOEM has proposed in its FY 2023 budget request an increase of $6.8 million in funding and forty-one full-time staff equivalents from the current year’s budget to support “an increase in workforce capacity to manage renewable energy activities . . . including the review of construction and operations plans.”  In the same request, BOEM also proposed a $3.4 million reduction to the National Outer Continental Shelf Oil and Gas Leasing Program, signaling a desired shift within BOEM from oil and gas to renewable energy funding. It isn’t until BOEM finally approves a COP that the leaseholder (or project owner) can finally submit installation plans and begin construction.

It remains to be seen how effective some project opponents may be in slowing agency review or in litigating approvals. Shipping and navigational interests, fishing interests, recreational users, and beachfront communities are just some of the groups who may oppose offshore development, and the agencies’ environmental review processes are where much of that early fight occurs. These issues are reminiscent of the opposition to the Cape Wind project in Nantucket Sound several years ago, where claims of visual impacts on scenic views and the determination that the Sound was itself eligible for listing on the National Register of Historic Places based on its cultural and spiritual significance to two Native American Tribes, among other claims, helped doom the project.

Not only must each offshore wind project in federal waters undergo significant reviews to consider environmental impacts (including impacts to a host of resource areas, such as cultural resources, protected species, recreation, and navigation), but the success of each project also depends on those components in state waters and all of the onshore interconnection and transmission infrastructure. Indeed, obtaining approvals for these nearshore and onshore components, especially in congested coastal areas, may ultimately be among the most difficult aspects of these projects. Federal permitting reform will likely be a topic on the floor of Congress this fall as a result of a deal struck by Senator Joe Manchin and Democratic leaders, but it remains to be seen whether any permitting reform bill will be able to pass the 50-50 Senate.