The Biden administration in 2021 announced its goal of developing 30 GW of offshore wind energy by 2030. Deep water off the West Coast means that any wind energy generation on this side of the U.S. must float.
Advancements in floating offshore wind (FOSW) technology have opened a vast expanse of federally controlled waters to development. Offshore wind lends itself to large projects. For example, in an auction in January, Scotland leased 17 projects totaling 25 GW. More than half of the projects are FOSW.
The Offshore Wind Development Process
Since 2011, the Bureau of Ocean Energy Management (BOEM) has managed the leasing and development of offshore wind on the outer continental shelf. BOEM has developed a four-step process for developing offshore wind. The agency identifies and designates Wind Energy Areas (WEAs) where development should be permitted; issues a lease, via a competitive or non-competitive process; reviews and approves the lessee’s proposed site assessment plan (SAP); and reviews and approves the lessee’s construction and operation plan (COP).
BOEM conducts an environmental assessment (EA) once the WEAs are designated, before issuing a lease. A lease provides the lessee with the exclusive right to, within one year, submit an SAP. The SAP is also subject to an EA before BOEM will approve it. Within five years of the lease, the lessee must submit a COP, which will almost certainly be subject to an Environmental Impact Statement before BOEM will approve it. If the COP is approved, the lessee will then have a 25-year operation lease.
To reach the 30 GW-by-2030 goal, BOEM has promulgated an aggressive timetable, which thus far has remained on schedule. BOEM has already designated two WEAs off the coast of California, and the agency has released its draft EA for Humboldt, the first of these. The Humboldt WEA starts 20 miles off the coast, west of Eureka, and this summer BOEM expects to offer up to three leases totaling 1.6 GW of capacity. Only a few months behind is the draft EA for the Morro Bay WEA, and leases totaling 3 GW are expected this fall. Later this year, BOEM also is anticipating the designation of a WEA off the coast of Oregon, totaling 2.8 GW.
The economics of FOSW are particularly attractive in California, and the state has taken the lead in supporting FOSW deployment. Because of all the solar power in California, energy prices drop significantly during the middle of the day, sometimes approaching zero. However, the offshore wind energy potential tends to peak between 7 p.m. and 8 p.m., which is near the peak price of California’s infamous duck curve.
Offshore Wind Planning Goals
California in September 2021 passed Assembly Bill 525, which requires the California Energy Commission (CEC) to establish offshore wind planning goals for 2030 and 2045. The CEC must submit a strategic plan to legislators by June 2023. In creating the plan, CEC will identify suitable sea space, evaluate the infrastructure investments needed to reach the planning goals, and develop a permitting roadmap with timeframes.
The California Public Utilities Commission (CPUC) also has been focusing increased attention on the potential procurement of offshore wind. A recent proposed decision targets the buildout of at least 1,708 MW of offshore wind generation capacity by 2032. The CPUC also has asked the California Independent System Operator (CAISO)—the state’s power grid operator—to evaluate the transmission needs and costs to interconnect about 8 GW of offshore wind at various potential locations including Humboldt, Diablo Canyon, and Morro Bay. The agency will use the results of that analysis in its next integrated resource planning cycle to consider whether additional amounts of offshore wind should be procured.
In anticipation of the 3 GW expected to be leased in the Morro Bay WEA, and the expected decommissioning of the nearby Diablo Canyon Nuclear Power Plant, the proposed decision would also require Pacific Gas & Electric to consult with the CPUC prior to disposing of any of the transmission capacity currently used by the Diablo Canyon facility. Humboldt Bay Port, the northernmost port in California, would require more than $100 million in upgrades to handle FOSW infrastructure in its nearby WEA, and California has committed $11 million to support a federal grant application needed to make those upgrades.
More circumscribed than California, the Oregon Legislature is still requiring the Oregon Department of Energy (ODOE) to study the benefits and challenges of FOSW through a literature review and stakeholder engagement. The ODOE has completed the literature review and first stakeholder engagement. Two more stakeholder engagement meetings are expected before the ODOE finishes and submits the report. The report is due in September.
FOSW is developing quickly. BOEM is leading the charge to get projects sited, while California and Oregon are taking significant and important steps toward supporting the critical onshore infrastructure requirements. For developers interested in FOSW, now is the time to start planning. The leasing window for the California market is fast approaching, and Oregon is just around the corner.
—Seth Hilton is a partner, and Ken Pearson is an associate, with Stoel Rives LLP.