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Offshore Wind’s State Power Grid Costs Add to Industry Woes (1)

Offshore wind turbines at the Scroby Sands Wind Farm, operated by E.ON SE, near Great Yarmouth, UK.

Posted on November 29, 2023

Atlantic Coast states and energy regulators are working to avoid the looming cost of plugging offshore wind into the nation’s power grid as the industry confronts rising inflation and project cancellations.

The push to improve regional power grid planning across the country has grown in recent years as renewable energy requires more transmission lines to deliver electricity to customers. The US power grid is a Balkanized system, with reliability managed by regional transmission organizations in most of the country but energy policy set by state officials.

Advance planning of transmission lines could save consumers $20 billion by 2050 and significantly accelerate deployment of offshore wind projects, energy experts have found. But states have so far fallen short of what’s needed to coordinate across state and regional boundaries, highlighting the challenge of injecting as much as 100 gigawatts of new offshore power generation into densely populated cities.

“States often just pick the cheapest wind farm bid without knowing what the onshore transmission upgrades will cost,” said Johannes P. Pfeifenberger, principal at Brattle Group and an author of an offshore wind transmission study published in January. “So they’re procuring an offshore wind farm that looks the cheapest but ends up being much more costly” due to those grid upgrades.

In some cases, it’s cheaper to run a longer undersea cable to a farther-away shore to avoid more costly and sluggish upgrades on land, Pfeifenberger said. Proactive planning efforts for offshore transmission now could result in 60% to 70% fewer shore crossings and onshore transmission upgrades and cut in half marine transmission cable installations on the ocean floor, reducing cables by about 2,000 miles, his study found.

“You can’t get there with every generator doing its own thing,” Pfeifenberger said. “Just imagine what would happen if every commercial building was building its own road.”

All Hands on Deck

Offshore wind presents unique challenges around building an underwater power grid from scratch. The Biden administration set a goal of 30 gigawatts of offshore wind capacity by 2030, enough to power 10 million homes. But a string of project cancellations has forced states to join forces in revamping their solicitation terms.

In September, the Energy Department released a plan that called for the establishment of collaborative organizations to identify cost and infrastructure challenges by 2025. The department has been meeting with a group of New England states to carry out those goals.

“Offshore wind will be a key contributor to reaching the administration’s aggressive climate goals,” Maria Robinson, director of the department’s Grid Deployment Office, said in a statement. “DOE is committed to supporting the deployment of the offshore and onshore transmission we need to bring this clean, renewable energy resource to where it is needed most. We can’t do that without thoughtful, collaborative, and actionable transmission planning.”

The department also just announced a $3.6 billion second round of funding for grid interconnection and reliability projects through the 2021 infrastructure law’s Grid Resilience and Innovation Partnerships (GRIP) Program. A coalition of New England states, which did not secure funding in the first round, got ahead of the department’s notice and called for project ideas on Sept. 25, emphasizing the need for grid connectivity to host offshore wind projects.

“We saw in the first round that DOE is looking for broad, regional cooperation,” said Daniel Phelan, an analyst in New Hampshire’s public utilities commission. “We’ll be making sure our efforts fit” into DOE’s goals this time around.

The group of states set a Nov. 17 deadline for project ideas, and DOE wants GRIP program concept papers by Jan. 24.

Because New England is so interconnected geographically and economically, there’s a growing awareness among states that offshore wind planning can’t be siloed off.

“States will need to work together as this industry moves forward,” said Dan Burgess, director of Maine’s energy office.

Working with DOE, Regions

In June, New England governors wrote to DOE asking for it to coordinate and possibly fund a multi-state initiative called the Northeast States Collaborative on Interregional Transmission. DOE responded later that month that it was interested.

The department has met with the states and is currently exploring ways it can provide support, including through convening and technical and analytical support, a DOE spokesperson said. The collaborative is still in the nascent stages, and the spokesperson stressed DOE’s work with the states’ collaborative will not provide any preference for future competitive funding.

A partnership announced in October between Massachusetts, Connecticut, and Rhode Island to jointly select offshore wind projects bodes well for grid planning, energy analysts said.

“We would underscore that a multi-state project solicitation could also encourage a multi-state ‘planned’ transmission system, too, which could provide larger cost savings to ratepayers,” ClearView Energy Partners, an independent research organization, wrote in a note to clients in October.

The analysts said Maine could eventually join the memorandum of understanding, and a similar MOU could emerge among Maryland, New Jersey, and New York. States within different regional electricity markets could face additional hurdles in reaching agreements. New York manages its own grid, while Maryland and New Jersey are part of PJM Interconnection, which oversees power flows among 13 states and the District of Columbia.

PJM has recently allowed states in its footprint to request the grid operator to approve projects serving policy goals. New Jersey has announced plans to pay for the transmission needed for an additional 3.5 gigawatts of offshore wind capacity under development, raising its total offshore wind target to 11 gigawatts by 2040. Ørsted’s cancellation of Ocean Wind 1 and 2 in October has since upended the state’s offshore wind development plans.

The current tribulations of offshore wind could add a wrinkle to transmission planners, who don’t want to fully commit to a new line until they know there will be offshore wind projects, said Timothy Fox, a vice president and research analyst at ClearView Energy Partners.

Meanwhile, offshore wind developers don’t want to totally commit to a project without certain transmission and grid-connection approvals, he said.

But Fox said he sees much of the unforeseen macroeconomic factors hitting offshore wind as temporary, while long-term transmission will be necessary in the future—but it may no longer be growing at the pace many states had hoped for.

“This is a very challenging time for the industry, but over the long-term we still see a lot of growth opportunity for offshore wind,” Fox said.


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