Guest Commentary: How to secure low-cost offshore wind power for Delaware
Kris Ohleth is director of the Special Initiative on Offshore Wind, a philanthropy-funded think tank, and a member of the Governor’s Energy Advisory Council. Willett Kempton is technical adviser for the initiative and a professor in University of Delaware’s College of Earth, Ocean & Environment and the Department of Electrical & Computer Engineering. For more information. visit offshorewindpower.org.
Offshore wind power projects are proceeding up and down the East Coast. Delaware’s neighbors, Maryland and New Jersey, have procurement laws and have already contracted for project development.
Further north, the first U.S. commercial-size projects have started construction, to serve Massachusetts and New York. Sixteen leases for ocean waters have already been issued by federal regulators. Delaware is still the only East Coast state from North Carolina to Massachusetts with no offshore wind law or policy. On the positive side, that means Delaware can learn from our neighboring states’ experiences. Plus, having waited while the industry grew, power prices have fallen dramatically, enough to be in line with what Delaware now pays for fossil fuel-generated power.
Now is the time for Delaware to start, by legally defining a procurement process for offshore wind power. Why now? Two reasons. First, job-creating manufacturing facilities are being located over the next few years, and with sparse exceptions, they are being put in states that have a procurement process in place — manufacturing facilities are already being built. We can see two just across the bay in New Jersey (Salem and Paulsboro). Second, ocean areas near us are being committed to build offshore wind for nearby states. Thus, the longer we wait, the less choice we will have among the more favorable areas.
Delaware already has clean energy requirements for solar and efficiency. Why is another clean energy source needed? Other states in our region (notably Maryland, New York and Massachusetts) have officially concluded that they can’t reach their clean energy requirements without offshore wind in the mix. (Analysis by the University of Delaware shows this is also true for Delaware.)
Offshore wind power is unique because nearby ocean winds are a huge power resource, because it is already proven and commercialized, and also because projects can be built in large increments. For example, a single cost-effective project, well-sized to Delaware (800 MW in electric terminology), could displace about 30% of Delaware’s existing power plants.
Based on our experience from advising New York and Massachusetts how to procure offshore wind power, from our analysis of Delaware requirements and drawing from advisers and reviewers, the Special Initiative on Offshore Wind has written comprehensive guidelines for Delaware to set up a procurement and to carry it out. The guidelines are in the procurement report we published last year and can be found online at offshorewindpower.org/category/publications.
How does an offshore wind procurement work? The steps are:
- The Delaware General Assembly passes a law defining requirements and conditions for a procurement and authorizing a state agency to carry it out.
- The authorized agency sets up requirements and publishes a solicitation for bids to sell electricity.
- Wind developers submit sealed bids, each specifying their price and terms.
- Among bids received, agencies select the best bid for Delaware, or select no bid if none are desirable.
- The selected developer signs power contracts with utilities under fair terms set up in the procurement law.
- Extensive environmental reviews must be carried out by the developer and approved by both federal and state government.
- The developer borrows the capital, builds the project and starts producing clean power for Delaware.
Creating a procurement law now does not require a project to be built. If there are no bids that meet the law’s criteria or bids that fail to control costs or that don’t create jobs, then the authorized agency can choose to not accept any bid — optionally, there could be another solicitation a year later. If a developer is selected, they will have to meet the robust environmental requirements at the local, state and federal level. If not, the project can’t be built.
In short, the procurement law doesn’t require a project. It generates offers — so Delaware has a chance to see what projects are possible, at what price, and to proceed if we like any of the offerings.
Why do we need all this process? The average person might think, “Some wind developers are already working in our area. Why don’t we just ask them to add some turbines and sell power to us at a good price?” This isn’t like a home remodel, where perhaps you just call your pal from high school who’s now a builder. Offshore wind involves large contracts affecting electricity rates for two decades. Each developer’s proposal has to be well specified in advance, the bidding has to be competitive, and state-appointed reviewers must evaluate it according to thoughtful criteria that will meet the needs of Delaware. Without those, the price is less likely to be competitive. Anyway, making a deal behind closed doors will seem suspicious to the public and to Delaware’s electricity buyers.
The first step in moving Delaware forward is passing a procurement law. Several requirements and terms should be in the law to keep the price reasonable and reduce risk. These are spelled out in the report and are important but don’t require debate. Other procurement terms involve trade-offs that are best discussed and debated when establishing a law.
If the procurement law has the recommended cost-reduction provisions and the bidding process is commensurately carried out, the Special Initiative on Offshore Wind calculates that some bids will be at competitive prices. And, if bid prices are cost-competitive, there is no need for any new state subsidy.
We hope that Delaware’s General Assembly will pass such a bill for Gov. John Carney to sign into law, as all our neighboring states have done. This would demonstrate that Delaware is moving forward with a new industry that can reduce pollution, attract new jobs and that can scale to make a significant effect on climate change.
If you agree, let your elected Delaware representatives know. And, if you are interested, participate in the discussion.
