March 1, 2010

Going Coastal: The Case for Offshore Wind

Ed Feo

Offshore wind has the potential to be a significant source of renewable energy. The U.S. Department of Energy has estimated that more than 900 GW of potential wind energy blows off the U.S. coast. The European Wind Energy Association has estimated that less than 5% of the North Sea’s wind resource could supply 25% of Europe’s electricity needs. Offshore wind projects have the benefit of relative proximity to coastal load centers, thus mitigating transmission costs. Yet despite this great potential, there are no commercial offshore wind farms in operation in the U.S., and, in the European Union (EU), offshore wind accounts for less than 2% of all generation. Offshore wind projects involve regulatory, technological, and economic challenges that are greater than those confronted by onshore wind projects. Overcoming these challenges will be necessary to permit offshore wind to achieve its full potential.

Setting Up the Regulatory Framework

The regulatory challenge in the U.S. stems from the absence of a comprehensive permitting regime for offshore projects — understandable in light of the paucity of such projects. Offshore wind projects have had to deal with conflicting regulatory schemes at the local, state, and federal levels. The Energy Policy Act of 2005 was the first federal legislation to address offshore wind.

The Federal Energy Regulatory Commission (FERC) and the U.S. Department of the Interior’s Minerals Management Service (MMS) disagreed over conflicting authority to regulate offshore energy projects on the Outer Continental Shelf (OCS). Fortunately, this dispute has been resolved, with the MMS and FERC entering into a memorandum of understanding to clarify jurisdictional understandings. Under the accord, MMS now has exclusive jurisdiction to issue leases on the OCS for all renewable projects, and FERC has exclusive jurisdiction to issue licenses and exemptions for projects on the OCS. Also fortunate is the fact that a number of East Coast states have been promoting offshore wind by sponsoring demonstration projects, supporting power purchase contracts, proposing purchasing regimes, and coordinating state and local permitting.