Tag: renewable energy

COVID-19: IRS Extends Production Tax Credit/Investment Tax Credit Safe Harbors

On May 27, 2020, the IRS issued Notice 2020-41, which responds to industry-wide supply chain disruptions due to the COVID-19 pandemic by giving renewable energy developers additional time to complete their projects. Most importantly, the Notice extends two safe harbors applicable to the renewable energy production tax credit (PTC) and investment tax credit (ITC).

First, the “Continuity Safe Harbor” is extended from four years to five years for projects that began construction in 2016 or 2017. Developers that put the project in service by the end of the fifth calendar year after the year construction began will be deemed to meet the continuous construction requirement.

Second, relief is provided for developers that intend to meet the beginning construction requirement by incurring 5% of project costs, i.e., by making payments for services or property they reasonably expected to receive within 3½ months (a/k/a the 3½ Month Rule). Developers that pay for services or property on or after September 16, 2019 and actually receive the services or property by October 15, 2020, will be deemed to satisfy the 3½ Month Rule.

This relief is available to developers of wind, solar, biomass, geothermal, landfill gas, trash, hydropower, fuel cells, microturbines, and combined heat and power systems.

©2020 Pierce Atwood LLP. All rights reserved.

For more on IRS Safe Harbors, see the National Law Review Tax Law section.

Northeast State Solar Programs in Light of COVID-19

COVID-19 is impacting industries across the globe and clean energy is no exception. As the pandemic continues to influence economic relief efforts at both the state and federal level, states are beginning to offer specific forms of relief through their incentive programs.

Additionally, electric distribution companies in each state have declared COVID-19 a force majeure event, allowing extensions to interconnection milestones and in some cases payment schedules. Below are summaries of the specific relief efforts being offered by some states, and more details regarding electric distribution companies’ declaration of a force majeure event.

Massachusetts

The Massachusetts Department of Energy Resources (“DOER”) filed emergency regulations with the Secretary of State following its regulatory 400MW review of the Solar Massachusetts Renewable Target (“SMART”) Program on April 14, 2020. Among the regulations is a blanket extension of six months to all Solar Tariff Generation Units, including any projects that submit their applications before July 1, 2020, due to the ongoing impacts of COVID-19. More details are provided in the DOER’s Statement of Qualification Guideline.

The Massachusetts Department of Public Utilities has also developed a webpage with information and resources specific to COVID-19. The website includes information on the impacts of the electric distribution companies’ respective declarations of COVID-19 as a force majeure event.

New York

The New York State Energy and Environment agencies wrote a letter to the clean energy industry on April 1, 2020, expressing support for the clean energy industry, particularly as construction has been impacted by COVID-19. The agencies announced in the letter that they are seeking input from clean energy industry stakeholders so that the agencies and the industry can work together to form creative solutions. The letter is found on NYSERDA’s COVID-19 page.

Connecticut

In Connecticut, the Department of Energy and Environmental Protection (“DEEP”) is coordinating with governmental offices and stakeholders to offer webinars for clean energy contractors with information about available state and federal aid. Please check in with CT DEEP to find out more information on these offerings.

Maine

The Governor’s Energy Office (GEO) released a statement that the GEO is working with the Maine Public Utilities Commission (PUC) and clean energy stakeholders to answer questions and concerns that are related to COVID-19. Stakeholders that have questions and concerns should contact the GEO for further information.

Electric Distribution Companies’ Force Majeure Declaration

Several electric distribution companies have notified state’s public utilities commissions that COVID-19 is a force majeure event. By declaring a force majeure event, the electric distribution companies have allowed extensions to project milestone dates and in some cases interconnection payments. Electric distribution companies that have not formally declared COVID-19 a force majeure event have waived late fees and extended payment timelines. Individual projects should check in with the electric distribution company specific to the project to confirm how theirs may be impacted.

 

 

© 2020 SHERIN AND LODGEN LLP
ARTICLE BY Tanya M. Larrabee at Sherin and Lodgen LLP, Amy L. Hahn also contributed.
For more on renewable energy programs, see the National Law Review Environmental, Energy & Resources law section.

Commercial PACE Works: National Study Shows Only One Default Out of 1,870 Deals

A recent study by the US Department of Energy’s Lawrence Berkeley National Lab shows that commercial property assessed clean energy loans (PACE) are growing in popularity and are a good bet for lenders and property owners. Through 2017, projects worth $887 million have been completed, creating more than 13,000 jobs.1 The study found just one default on a PACE loan out of 1,870 deals nationwide since 2008.2

PACE is an innovative program that enables property owners to obtain low-cost, long-term loans for energy efficiency, renewable energy, and water conservation improvements. Projects financed using PACE can generate positive cash flow upon completion with no up-front, out-of-pocket cost to property owners—eliminating the financial barriers that typically prevent investment in revitalizing aging properties. The term of a PACE Financing may extend up to the useful life of the improvement, which may be as high as 20 years or more, and can result in cost savings that exceed the amount of the PACE financing. The result is improved business profitability, an increase in property value, and enhanced sustainability. PACE financing is also available for new construction under Wisconsin law.

Along with the Wisconsin Counties Association, Slipstream and other partners, von Briesen had a leadership role in creating PACE Wisconsin, a joint powers commission comprising a consortium of Wisconsin counties. von Briesen’s vision of a uniform PACE program throughout the state was implemented through creation of a joint powers commission open to any county that wishes to join. PACE is now available in 43 Wisconsin counties, representing 85% of the state’s population.

The recent PACE study also showed that most jurisdictions adopting PACE programs are using a model similar to the one adopted in Wisconsin, because it is easy for local governments to administer.3 Midwestern states are leading the way in expanding PACE. Wisconsin now ranks 11th in PACE financing deals completed, according to PACENation data through 2017.4 In 2019 PACE Wisconsin closed an $8.8 million deal on a historic hotel renovation in Green Bay, financed with a taxable bond offering by the Public Finance Authority. PACE Wisconsin has $15 million in total closings so far in 2019, and over $10 million in the pipeline for the rest of the year.

PACE Wisconsin has registered more than 80 contracting firms that are ready to make buildings more efficient and more comfortable, and has 17 capital providers available to finance building upgrades and new construction. PACE Wisconsin is also supporting legislation to improve the program by reducing paperwork requirements and making financing available for electric vehicle charging equipment. More information about PACE Wisconsin can be found on its website, www.pacewi.org.

1 PACE Market Data, PACENation website, https://pacenation.us/pace-market-data/(accessed August 4, 2019)
2 Commercial PACE Financing and the Special Assessment Process: Understanding Roles and Managing Risks for Local Governments, Greg Leventis and Lisa Schwartz, Lawrence Berkeley National Laboratory, June 2019, http://eta-publications.lbl.gov/sites/default/files/final_cpace_brief_1_ 112308-74205-eere-c-pace-report-arevalo-fz.pdf (accessed August 4, 2019).
3 Commercial PACE Financing and the Special Assessment Process: Understanding Roles and Managing Risks for Local Governments, Greg Leventis and Lisa Schwartz, Lawrence Berkeley National Laboratory, June 2019, http://eta-publications.lbl.gov/sites/default/files/final_cpace_brief_1 _112308-74205-eere-c-pace-report-arevalo-fz.pdf (accessed August 4, 2019).
4 Study: Nonpayment risk remote for commercial clean energy loans, Frank Jossi, Midwest Energy News, July 31, 2019, https://energynews.us/2019/07/31/national/study-nonpayment-risk-remote-for-commercial-clean-energy-loans/ (accessed August 4, 2019) (citing PACE Market Data, PACENation website, https://pacenation.us/pace-market-data/ (accessed August 4, 2019)).

©2019 von Briesen & Roper, s.c

Three Strategies to Develop Renewable Energy Projects on Potentially Contaminated Lands

Developing renewable energy on contaminated lands has proven to be both effective and cost-effective for companies pursuing a new solar or wind energy project. The utility-scale solar farm constructed on the 120-acre Reilly Tar & Chemical Corporation Superfund site is a great example, and there are thousands more that are ripe for redevelopment.

Renewable energy continues to grow in volume and importance in the U.S. as corporations drive demand for sustainable energy, with 166 companies to date committing to go 100 percent renewable as part of a global initiative called RE100. At the same time, states and local governments are driving policy that prioritizes sustainable energy development. Two recent Illinois bills, the Path to 100 Act (HB 2966/SB1781) and Clean Energy Jobs Act (HB3624/SB2132), seek to incentivize the development of new renewable energy and move the state to 100 percent renewable energy by 2050. Other states, including California, New Jersey, New York, and Wisconsin, have called for or passed similar laws.

Using Superfund sites, brownfields, retired power plants, and landfills offers potential benefits to developers and community stakeholders:

  • Preserve Open Space: Large-scale renewable energy facilities – often called “utility scale” projects – can require a lot of land that may displace or impact agricultural lands, open space, or other “greenspace.” Developing renewable energy on potentially contaminated properties can help to preserve the “greenspace” while returning blighted lands to sustainable and productive use.

  • Lower Costs and Shorter Timeline: Developers can significantly lower costs and timelines because contaminated sites are usually already served by existing infrastructure, like substations, power lines, and roads, which would otherwise need to be constructed. Streamlined permitting and zoning can also reduce costs and timelines because potentially contaminated property is often already zoned for industrial or commercial use, which likely poses fewer obstacles to constructing renewable energy structures. Decreased land costs, programs for the procurement of renewable energy credits generated from developing renewable energy projects on brownfields or potentially contaminated properties, and federal and state brownfield tax incentives can drive costs down even further.

  • Greater Community Support: Communities may be quicker to get behind renewable energy projects that are sited on potentially contaminated lands because, rather than taking agricultural land out of production, the projects can clean up the otherwise abandoned sites, boost surrounding property values, increase tax revenues, and provide low-cost clean power.

Despite these benefits, developers often build renewable energy facilities on greenspaces rather than brownfields because of concerns related to potential liabilities or contamination. Below are three strategies that developers can use to move past those concerns and develop a successful renewable energy project on potentially contaminated lands.

  1. Screen Sites for Renewable Energy Potential

Screen potentially contaminated properties to see whether they’d be a good fit for your renewable energy project. For example, confirm that a property has enough usable space and is close enough to transmission or distribution lines to support development. Determine whether a site is free from land-use restrictions that would preclude the use of your chosen renewable energy. Ensure the community doesn’t already have a plan in mind to redevelop the property you’re assessing. And inspect the property for evidence of potential contamination, like soil surface staining or debris stockpiles. If a site has not yet been assessed, you will need to investigate the site to determine whether redevelopment is appropriate. To help, the EPA has published guidance to assist prospective developers in screening prospective sites for solar and wind projects on potentially contaminated lands.

  1. Coordinate the Cleanup and Renewable Energy Development

Developing renewable energy can occur at any stage of a property cleanup, from site inspection and preliminary assessment to post-construction completion. However, identifying and coming to a site at the beginning of or early on in the cleanup process has its advantages. It allows you to engage the community and other stakeholders, including potentially responsible parties, from the start of the redevelopment. It also allows you to coordinate and integrate the cleanup and renewable energy development decisions. For example, you can work with the governmental agency overseeing the site to fold renewable energy design requirements into the remedial design, rather than having to construct renewable energy structures on top of and around the completed remedy. Getting in early will ensure that the renewable energy project is compatible with the remedial design, institutional controls, monitoring activities, and engineering controls.

  1. Protect Yourself from Liability Exposure

Many prospective developers, purchasers, and lenders stay away from or tread cautiously around building on contaminated properties for fear of liability under federal or state cleanup laws. However, many state cleanup programs provide liability protections for new owners or lessees, like a developer, who are not responsible for prior contamination at a site. The federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) also generally limits EPA enforcement at certain qualifying brownfield sites, known as “eligible response sites”, where a party is conducting a response action in compliance with a state cleanup response program. Contact a lawyer and work with state government early on in the process to see what liability protections are available to you and how to qualify.

Other contaminated properties may be addressed under the CERCLA cleanup program. CERCLA has several self-implementing liability protections for developers and the like who acquire contaminated property but did not cause the contamination, including a protection for “bona fide prospective purchasers.” Ensure that you take the required steps to qualify for the BFPP protection, which will include, among other things, working with an environmental consultant to conduct “all appropriate inquiries” through a Phase I environmental site assessment. CERCLA can also offer liability protections for people who lease contaminated properties.

 

© 2019 Schiff Hardin LLP
This post was written by Alex Garel-Frantzen and Amy Antoniolli of Schiff Hardin LLP.

Bipartisan Bill Introduced To Reform Renewable Fuel Standard Program

biofuel, ethanolOn March 2, 2017, Congressman Bob Goodlatte (R-VA) reintroduced the Renewable Fuel Standard (RFS) Reform Act, which aims to guide the debate and reform of the ethanol mandate.  According to Goodlatte, the RFS program failed to lower prices at the pump and resulted in unintended and profound effects on consumers, energy producers, livestock producers, retailers, and the environment.  The RFS Reform Act, which had 42 bipartisan cosponsors, would eliminate corn-based ethanol requirements, place a ten percent cap on the amount of ethanol that can be blended into conventional gasoline, require EPA to set cellulosic biofuels targets at levels produced by the industry, and decrease the total volume of renewable fuel content in gasoline sold or introduced into commerce from 2017 through 2022.

ARTICLE BY Lauren M. Graham, Ph.D. of Bergeson & Campbell, P.C.

©2017 Bergeson & Campbell, P.C.

Developers Submit Unsolicited Requests for Wind Leases Offshore Massachusetts and New York

wind leases, windmills, Massachusetts, New YorkOn March 10, 2017, the U.S. Department of Interior’s Bureau of Ocean Energy Management (BOEM) posted four unsolicited applications for wind project leases on the Outer Continental Shelf.  PNE Wind U.S.A., Inc. has filed three lease applications, two for offshore Massachusetts and one for offshore New York. Separately, Statoil Wind US LLC filed a lease application for offshore Massachusetts.

The developers’ lease requests, particularly the overlapping requests for offshore Massachusetts, indicate continued interest and growing competition in the U.S. offshore wind sector.  The quickening pace of activity in the U.S. offshore wind market, including completion of Deepwater Wind’s Block Island offshore wind farm and today’s auction process for offshore North Carolina, suggests that offshore wind projects may become a more important part of the U.S. power generation portfolio in the coming years.  In addition, the unsolicited application for offshore New York and the federal government’s response may provide an early indication as to the Trump Administration’s position on offshore wind development going forward.  Increased activity and a new administration in the White House present opportunities to engage on this issue and shape the policies that will govern the federal offshore leasing program for the next four or eight years, or beyond.

Background

BOEM is charged with managing energy development on the U.S. Outer Continental Shelf (OCS), for both traditional energy resources and renewable energy projects alike.  The agency discharges this responsibility for renewable energy projects via its leasing process outlined in the Code of Federal Relations at 30 C.F.R. Part 585.  BOEM’s rules set out a comprehensive site evaluation, lease auction, project management, and decommissioning program for renewable energy projects on the OCS.

To date, BOEM has completed twelve offshore wind commercial leases and one research lease.[1]  BOEM has issued commercial leases to four lessees for offshore Massachusetts: Cape Wind, Bay State Wind, Offshore MW, and Deepwater Wind New England (joint lease offshore Massachusetts and Rhode Island).  Separately, BOEM has concluded a provisional lease with Statoil Wind for a site offshore New York.[2]  The Massachusetts auction in January 2015, lasted two rounds and the New York auction in December 2016, lasted 33 rounds, suggesting growing interest and competition for lease blocks on the eastern seaboard.

Unsolicited Lease Applications

Following these competitive lease auctions, both Statoil Wind and PNE Wind submitted unsolicited applications to lease OCS lands offshore Massachusetts for wind power projects.  In addition, PNE Wind also filed an application for a potential lease area offshore New York.

For the offshore Massachusetts lease proposals, BOEM has stated that it will proceed with the competitive leasing process outlined in the agency’s regulations.  BOEM notes that because both Statoil Wind and PNE Wind are qualified to hold an OCS lease and both companies nominated the same area for lease, BOEM has determined that there is competitive interest for this OCS land.  BOEM’s next steps will be to publish its leasing process in the Federal Register, including identifying the lease areas for environmental analysis, issuing a Proposed Sale Notice with a 60-day public comment period, and a Final Sale Notice at least 30 days before the lease sale.

In contrast, BOEM states that it will consider whether to move forward with PNE Wind’s application for offshore New York.  If the agency determines that it will move forward with PNE Wind’s application, BOEM will issue a public notice to determine whether there is competitive interest in the proposed lease area.  BOEM’s regulations allow the agency discretion to review unsolicited lease applications on a case-by-case basis.  The rules do not require that the agency formally evaluate the application.  BOEM may exercise its discretion to grant an unsolicited application following issuance of a Determination of No Competitive Interest and additional inter-agency coordination.

Implications

The key takeaway from these filings is that, as a new presidential administration assumes control over the Interior Department and BOEM, interest in U.S. OCS leasing for wind energy projects remains strong despite relatively low fuel prices for hydrocarbon-based power generation.  These lease applications suggest that the suite of subsidies and other incentives supporting offshore wind development at federal and state levels, including in Massachusetts and New York, continue to encourage developers to think creatively as to how they can access this growing market.

In addition, PNE Wind’s unsolicited application for offshore New York offers an early opportunity to gauge the Trump Administration’s support for offshore wind projects.  Given U.S. President Donald Trump’s past skepticism regarding offshore wind, industry players are unsure of the Trump Administration’s support for offshore wind development, notwithstanding Secretary of the Interior Ryan Zinke’s endorsement of an “all of the above” energy strategy during his confirmation hearing.  BOEM’s response to the unsolicited lease application may illustrate the Trump Administration’s level of support for offshore wind.

The next indicator for the strength of the U.S. offshore wind market will come from today’s OCS auction for offshore North Carolina.  Following a lease auction in New York that attracted a winning bid of more than $42 million, industry watchers will closely monitor the outcome of the North Carolina auction to determine whether the sector will maintain its rapid growth.  Recognizing that the specific characteristics for the North Carolina proposed lease and auction will differ from those in the New York auction, the strong showing of interest in the North Carolina auction, as demonstrated by the nine companies qualified to participate in the auction, may keep momentum building for the offshore wind sector in the United States.

ARTICLE BY Stanford D. Baird, Joseph D. Condo,  Ankur K. Tohan, David L. Wochner & Michael L. O’Neill of K&L Gates
Copyright 2017 K & L Gates

[1] BOEM Lease Areas Shapefile, https://www.boem.gov/BOEM-Lease-Areas-Metadata/ (last visited Mar. 15, 2017).

[2] In denying a preliminary injunction, the U.S. District Court for the District of Columbia recently held that BOEM complied with the National Environmental Policy Act when it relied on an environmental assessment and finding of no significant impact (“EA/FONSI”) to issue Statoil Wind’s provisional lease for offshore New York.  Fisheries Survival Fund, et al. v. Jewell, et al., Case No. 16-cv-2409 (D.D.C. Feb. 17, 2017).  This decision clears one potential obstacle for Statoil and helps reduce the risk of similar challenges to BOEM’s determinations to approve leases that allow project evaluation and design to move forward.  Responses on the merits to the challengers’ claims are due by May 8, 2017.

European Commission Gives Portugal Two Months To Address Issues With Biofuel Law Compliance

On April 28, 2016, the European Commission (EC) encouraged Portugal to become fully compliant with the Renewable Energy Directive (Directive) through the release of an April infringements fact sheet. The Directive has set the goal of 20 percent of the European Union’s (EU) 2020 energy consumption coming from renewable energy, with each Member State consuming at least ten percent renewable energy. Biofuels used in reaching this goal must meet a set of harmonized sustainability requirements, and must be treated equally by Member States regardless of the country of origin. Portugal has been sent a reasoned opinion urging it to stop favoring biofuels produced in Portugal over those produced in other countries, and to reduce sustainability requirements that are not warranted by the Directive. Portugal has two months to address these concerns, or else it could be sent to the Court of Justice of the EU.

Article By Kathleen M. Roberts of Bergeson & Campbell, P.C

©2016 Bergeson & Campbell, P.C.

U.S. Solar Installations Reach 1 Million

Last week the Solar Energy Industries Association (SEIA) and George Washington University (GWU) issued a report estimating that the United States has reached 1 million solar installations and will surpass 2 million installations by 2018.  This is a 1,000-fold increase over 15 years as only 1,000 systems were installed in 2001, and these numbers highlight the tremendous growth experienced by the solar industry.  Of the 1 million PV systems, there are currently over 942,000 residential installations, nearly 57,000 PV installations at businesses, non-profits and government agencies, and over 1,500 utility-scale PV installations.  SEIA and GWU anticipate 4 million installations by 2020 and for the U.S. to be installing one million PV systems annually by 2025. To learn more about this solar milestone and the factors contributing to the solar industry’s growth, read on!

While currently only supplying 1 percent of U.S. electricity generation, solar energy accounted for 30 percent of new capacity last year and is expected to continue developing.  This growth has profoundly affected the job sector, where solar jobs grew 123 percent in the past five years and created 1 in 83 new U.S. jobs in 2015.  Overall, the solar industry now employs over 200,000 Americans, three times more jobs than U.S. coal mining.

Multiple factors were credited for playing a role in the U.S. reaching 1 million solar installations, including lower installation costs and predictable, stable federal and state policies.  In the last ten years, installation costs have dropped more than 70 percent, driven by declining solar module prices.  Enacted in 2008, the solar Investment Tax Credit (ITC), a 30 percent tax credit for solar systems on residential and commercial properties, was extended in December through 2021.  Meanwhile, state policies such as net-metering and renewable portfolio standards (RPS) have allowed solar to enter markets.  Currently, 44 states have net metering policies and 29 have RPS policies.

One challenge for the future of solar is the inability of lower-income households to benefit from solar due to a multitude of barriers, including a high rate of renters, multi-tenant buildings, and a lack of access to financing.

Article By Thomas R. Burton, III of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2016 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

San Francisco Mandates Solar Power on New Buildings

The City of San Francisco announced today that it will now mandate solar photovoltaic or solar water panels on all new residential and commercial buildings of 10 floors or less. The City’s renewable energy ordinance makes San Francisco the first major city in the country to require solar panels on new construction.

Will San Francisco’s action spur Cal/OSHA to take a renewed look at workplace safety in the solar industry?  Indeed, as solar installations increase rapidly throughout the country, perhaps Federal OSHA will dust off its Green Job Hazards guidance in light of what appears to be a continued movement toward renewable energy sources and the inevitable increase in workplace hazards that occurs when industries rapidly expand.

Article By Matthew Linton of Holland & Hart LLP
Copyright Holland & Hart LLP 1995-2016.

DOE Releases 2014-2015 Offshore Wind Technologies Market Report

On September 29, 2015 the Department of Energy released the 2014-2015 Offshore Wind Technologies Market Report, assessing the nation’s offshore wind potential and planned projects through June 30, 2015. The report summarizes domestic and global market developments, technology trends, and economic data with the purpose of aiding U.S. offshore wind industry stakeholders. The Report builds upon previous market reports conducted by the Navigant Consortium between 2012 and 2014, which would track U.S. wind projects that had reached an “advanced stage” of development. The 2015 Market Report not only assesses the progress of offshore wind projects in various stages but it also analyzes projects in a range of countries. To learn more about where the U.S. offshore wind industry stands in comparison to other countries as well as about domestic and global ongoing projects and expected trends, read on!

New Method for Tracking Offshore Wind Projects

The National Renewable Energy Laboratory (NREL) re-developed its system for classifying and tracking the progress of projects within the development pipeline. The purpose of this new method is to increase connectivity across markets and regulatory regimes as well as to objectively assess the status of projects.

Global Offshore Wind Market on Target to Set Annual Deployment Record in 2015

The increase in offshore wind projects in the pipeline is leading to an upsurge in operational capacity spread out across the world. While 1,069 megawatts (MW) of new wind capacity was installed in 2014, it is expected that 2015 will provide approximately 3,996 MW of wind capacity, making 2015 a record year for offshore wind deployment. The total global installed capacity is now 8,990 MW. At this rate, the global cumulative capacity could exceed 47,000 MW by 2020. Projects are also beginning to spread out beyond Europe. While currently 63% of the projects are located in Europe, 23% are located in Asia, 9% in North America, and 5% spread across the rest of the world.

15,650 MW of U.S. Projects are in Various Stages of Development

There are 21 U.S. offshore wind projects in the development pipeline, which equates to 15,650 MW of potential installed capacity. 13 of these projects have achieved site control or a more advanced phase of development. While most of the offshore wind projects are located in the North Atlantic region, there seem to be feasible offshore resources in the South Atlantic, Great Lakes, Gulf of Mexico, and Pacific regions of the U.S.

Deepwater Wind Begins Installation of First U.S. Offshore Wind Project

The Block Island Wind Farm (BIWF) began offshore construction in 2015. Led by Deepwater Wind, clients of ML Strategies, BIWF is expected to be the nation’s first offshore commercial wind project, it also has the potential to lower electricity prices for the residents of Block Island, provide substantial clean energy to the mainland townships of southern Rhode Island as well as produce approximately 300 jobs during its construction phase.

Cost Trends and Learning from Europe

Offshore wind projects are capital-intensive, where utility scale projects (>200 MW) generally require investments of over $1 billion. With projects expected to be built in locations that are located in deeper water, further away from shore, and larger in size, operating costs becomes an even greater concern. The industry is focused on introducing a variety of technological innovations to drive down the cost. The DOE’s Report suggests the U.S. will likely enact a cost structure similar to that of Europe. Part of the reason Europe’s offshore wind industry is so widespread is due to its ability to subsidize projects via investors and its action on the part of policymakers. For instance, policymakers in the UK have set goals to reduce the Levelized Cost of Electricity (LCOE) and are implementing programs designed to lower costs, reduce risk to developers, and minimize the prices required to make projects financially viable as evidenced by their initiation of competitive auctions for subsidies, their classification of zones that emphasize size affordability (choosing projects closer to shore), and their sponsoring early-stage development activities to reduce uncertainty about site conditions. Recent state and federal policy developments including President Obama’s issuance of the Clean Power Plan regulation and the initiation of the BIWF project provide hope for the U.S.’ offshore wind industry.

Overall, even though the EU continues to lead projects in the wind industry, the industry is becoming more geographically dispersed with projects now underway in the U.S. and Asian markets. While the biggest challenge the U.S. offshore industry faces is the current high cost of offshore wind generation, the industry is focused on cutting such costs through leveraging European technology and experience.  It is also the hope that cost reductions of projects in the EU caused by its target to reduce the LCOE for offshore wind projects, the Cost Reduction Monitoring Framework set up by the UK government, and additional actions by policymakers, will translate to the U.S., further strengthening the wind industry in the U.S.

Article By R. Neal Martin & Sarah Litke of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.