Delaware Public Media

It's complicated: Governor’s panel takes more time to evaluate offshore wind options

Jan 12, 2018

Delaware’s latest exploration of how or whether to invest in offshore wind power is going to take a little longer than expected.

A working group set up by Governor John Carney to look into the issue said its discussions will extend well into this year, and that it would likely deliver a report to the Governor by this spring.

The group is constituted until June 30.

After being asked in the Governor’s executive order last summer to produce recommendations by December 15, the group published only a two-page memorandum by that deadline, saying that more work needs to be done in order to complete its mission.

The memo contained many more questions than answers, and merely framed the main issues facing policymakers, including how much an offshore wind farm would cost; what subsidies would be required; how much more would ratepayers pay for their electricity, and even whether there is a need for additional electric capacity in the multi-state region of grid-operator PJM – which includes Delaware.

The note also asked how an offshore wind subsidy should be paid for; whether the technology would reduce carbon emissions any more than land-based wind; how tourism might be affected by a wind farm visible from the shore, and even how the environment would be impacted by a tanker hitting an offshore wind farm.

And it said there are still other questions that the group will seek to answer as it resumes its discussions this year.

The only clear conclusion was that Delaware should not move immediately to buy offshore wind energy from a project already approved by another state. In practice, that means Maryland, which has proposed two wind projects that would have the potential to also supply Delaware.

But joining the Maryland project would have required rapid moves including legislation that Delaware wasn’t ready for, the group concluded, and so resolved to rule out that option for now.

“We just didn’t feel that we had conclusive answers on what the benefits would be,” said Bruce Burcat, chairman of the 19-member working group, and executive director of the Mid-Atlantic Renewable Energy Coalition, in an interview in early January. “We would have to make a pretty rapid turnaround.”

While the group has dropped the Maryland idea for now, it could revisit the project later if conditions allow, Burcat said.

Among the major issues facing the group is how an offshore wind farm would affect costs to electric ratepayers, who are still paying off planning costs for Bluewater Wind, a developer that dropped plans for a 150-turbine wind farm in 2011, saying it could not attract enough investors for the $1.6 billion project.

Drew Slater, Delaware’s Public Advocate, said about $1 million of Bluewater’s costs are still being paid by Delmarva Power ratepayers even though they may not know it because it’s not a line item on electric bills. By contrast, the utility’s bills do contain an item called Qualified Fuel Cell Provider, a reference to Bloom Energy’s fuel cell factory at Newark, to which ratepayers will be contributing $3 million a year for the next 15 years, Slater said.

Slater, a member of the working group, said he had expressed his concerns at recent meetings about how the cost of offshore wind could affect electric ratepayers.

“My concern in all the rate classes is that I like renewable energy but offshore wind is extremely costly where solar or onshore wind would be significantly cheaper,” Slater said.

Chairman Burcat said he recognized public sensitivity to possible rate increases to pay for renewable-energy projects.

“There’s clearly some public concern that we don’t get tied up in something that’s going to cost the public more than it should pay,” Burcat said.

He acknowledged that offshore wind is more costly than other sources of renewable energy such as solar, and so must be justified by the full range of economic and environmental benefits.

“If you’re going to do that, you have to make sure that the benefits at least balance out or outweigh those extra costs,” he said.

Burcat said Gov. Carney had hoped to get some definitive answers from the group by the Dec. 15 deadline but has now accepted its need to take more time.

Carney’s spokesman, Jonathan Starkey, said the group will take the extra time to “more fully evaluate” Delaware’s options for offshore wind.

Identifying economic benefits might be more difficult now that Delaware is no longer a pioneer in offshore wind power on the Atlantic Coast, as it would have been if Bluewater had succeeded, group members said.

Without the factories that would have built the region’s first generation of turbines, Delaware faces a different calculation when deciding whether to go ahead with the costly project, they said.

“Delaware would have been a first-mover at that time,” Burcat said. “There are benefits to doing that.”

Group member Brenna Goggin of the Delaware Nature Society defended the decision to extend the working period, saying that offshore wind is a costly and complicated proposition that takes time to evaluate.

“There just wasn’t the time, given the very short timeline provided, to bring in the experts that we needed, or to have a real robust transparent public conversation about what offshore wind would mean to Delaware both from an environmental perspective and a financial perspective,” Goggin said.

Now that the first U.S. offshore wind farm is operating – off Rhode Island – and several other projects are being planned along the Atlantic Coast, Delaware has a lot more information on which to base its decision than it did when Bluewater Wind was being planned about a decade ago, and that contributed to the need for more time, Goggin said.

Goggin and other panelists said the decision to extend the report period did not mean it was rejecting offshore wind, but just that members needed more time to produce a detailed analysis.

“I think we made the right decision when we asked the Governor to extend our timeline so that we would have an opportunity to address those questions,” she said. “It became abundantly clear that given the expertise that makes up the Offshore Wind Working Group, that we should dive a little deeper than we originally planned to do.”

Since the Bluewater Wind project failed, prices for wind turbines and other equipment have fallen significantly because of increasing supply, improving technology, and declining startup costs. That has created a more attractive environment for investors but also a dilemma for offshore wind entrants who may be tempted to wait for prices to fall further before committing, some of the panelists said.

“The prices that Maryland signed up for are significantly lower than those for Bluewater Wind,” said Dr. Jeremy Firestone, director of the University of Delaware’s Center for Carbon-Free Power Integration, and a member of the working group.

That creates the temptation for entrants to the offshore wind market to defer investment decisions in the hope that prices will continue to fall. “It’s like a deflationary environment,” Firestone said.

He said it wasn’t realistic to expect the multifaceted working group to come up with comprehensive recommendations between its first meeting in October and the end of the year, but predicted that it will do so in the months ahead.

“I think the Governor was overly-optimistic that we were going to be able to bring a group of diverse stakeholders together and come up with a consensus in just a few months,” he said. “Had we been an expert group we may have been able to.”

Although the group failed to reach conclusions by the recent deadline, all members were determined to complete the assignment, Firestone said.

State Sen. Harris McDowell, a skeptic on offshore wind, said he didn’t hear anything during the group’s discussions that would persuade him to support such a project.

He said offshore wind is about three times as expensive as the onshore equivalent, so can’t be justified.

“We don’t put enough effort into environmental improvements including renewable energy so to put our effort into something that costs three times as much is really a questionable thing,” he said.

McDowell, who chairs the Senate’s Natural Resources and Energy Committee, also argued that wind power is vulnerable to “intermittency” which must be offset by other sources such as natural gas which would lessen the reduction in carbon emissions from offshore wind.

For his part, Burcat declined to predict whether the group would eventually recommend offshore wind. Rather, he said, its members are determined to do a thorough job.

“They are cautious but they are taking their charge very seriously,” he said. “We want to make sure we get this right.”