Establishing Floating Offshore Wind Development in Oregon: Lessons From East Coast State Policy Tools Promoting Offshore Wind.

• Author: Su, Andy

TABLE OF CONTENTS INTRODUCTION I. BARRIERS TO FLOATING OFFSHORE DEVELOPMENT A. Floating Technology Cost Barriers B. Environmental Challenges C. Community Barriers D. Transmission Barriers II. STATE POLICIES PROMOTING OFFSHORE WIND DEVELOPMENT A. Renewable Portfolio Standards and Offshore Wind Carve Outs and Mandates 1. Benefit to Offshore Wind Development 2. East Coast State Policy Survey B. Infrastructure and Port Development 1. Benefit to Offshore Wind Development 2. East Coast State Policy Survey C. Education and Workforce Training Investment 1. Benefit to Offshore Wind Development 2. East Coast State Policy Survey D. Research and Development E. Management Plans F. State Tax Incentives III. OREGON ENERGY MARKET IV. POLICY RECOMMENDATIONS FOR OREGON CONCLUSION INTRODUCTION

As we transition from fossil fuels to renewable resources, our world must undertake an energy revolution to address the climate change crisis. To facilitate a large scale and just transition, our energy sector must develop new renewable resources. Offshore wind energy is one new energy resource that Europe, Asia, and the Eastern United States are attempting to develop. Offshore wind energy development offers many advantages. The technical offshore wind resource in the United States has the potential to provide twice the current total U.S. energy consumption. (1) There is significant room for development of new energy resources as existing coal, natural gas, and nuclear generation is retired due to old age or policy choices, especially because electricity demand is expected to increase through 2050. (2) In restructured electricity markets, offshore wind also offers economic benefits as the marginal cost of generating the resource can reduce the market's clearing price. The clearing price in the wholesale electricity market is determined by an auction in which generation resources bid in a price at which they can supply a specific number of megawatt-hours of power with the cheapest resource clearing the market first, until the supply meets the needed demand. (3) Reducing the clearing price would save ratepayers money, even if the long term Power Purchase Agreement (PPA) price is above market. (4) Offshore wind also lowers prices because it has the tendency to coincide with peak summer electricity use loads and often has a "diurnal pattern aligned with peak demand." (5) Additionally, offshore wind has a favorable capacity value, which is the amount of energy that can be relied on during peak demand. (6) Offshore wind is often more energetic and less turbulent than onshore wind, and its energy output is typically more stable and less variable. (7) These attributes of offshore wind complement onshore wind and solar resources by providing an additional renewable resource that offers capacity value and stability. (8) Offshore resources also provide increased energy diversity and security that can hedge against electricity prices. (9) Land use is another advantage of offshore wind, as land use restraints and concerns are reduced offshore and certain impacts on wildlife are reduced. (10) Offshore projects also introduce fewer aesthetic and sound concerns than onshore ones because they are sited further offshore. (11) In coastal population centers, including much of the Eastern United States and California, transmission costs and risks are also reduced as the energy does not require long distance transmission lines to reach these population centers. (12) Offshore wind also offers economic benefits, with estimates of 170,000 new jobs by 2050. (13)

The first attempt to build offshore wind in the United States was the failed Cape Wind project in Massachusetts. (14) This project faced large scale opposition from local communities, which ultimately led to its termination after sixteen years in the planning and permitting stage. (15) The first and only finished project in the United States was completed in 2016 off the coast of Rhode Island. (16) In 2013, Principle Power, Inc. attempted to build floating offshore wind off the coast of Oregon. (17) Ultimately, the project was unsuccessful because it failed to obtain a longterm purchase agreement with Oregon utilities. (18) As of 2018, however, there is significant development on the horizon with 25,824 MW of offshore wind currently in the development pipeline in the U.S. (19) This development increase has been fueled by nearly 20,000 MW of state-level offshore wind development commitments by 2035. (20) Globally, the United States is well behind the rest of the world, especially Europe and Asia, where global offshore development has reached 22,592 MW of offshore capacity as of 2018, and 272,000 MW more is in the development pipeline. (21)

In the United States, the federal and state government often provide support for renewable electricity generation to enter the market. (22) The government creates "(i) a target market demand for renewable energy output (i.e., renewable portfolio standards), (ii) incentives to make development of renewable generation economically feasible given the early stage of development of utility-scale technologies, and (iii) research and development to allow for new technology introduction and proliferation." (23) Over time, these mechanisms allow the renewable resource to reach market parity and become competitive with other resources. (24)

This Comment will recommend policy tools that Oregon can use to best support offshore wind development, drawing lessons from the experience of east coast states in developing offshore wind policies. First, this Comment will examine the barriers to floating offshore wind development, as Oregon would implement this type of technology for any development. The Comment will then focus on state policies that have been used in eastern states to promote and overcome these barriers to create the necessary commercial demand. Next, the Comment will outline the current state of Oregon's energy market to examine whether the identified policy tools have the potential to promote development of offshore wind in Oregon. Lastly, drawing from these east coast policy lessons, this work will provide policy recommendations to encourage Oregon offshore wind development.

1. BARRIERS TO FLOATING OFFSHORE DEVELOPMENT

   1. Floating Technology Cost Barriers

      Any offshore wind development off Oregon's coast would have to utilize floating wind turbine technology, as opposed to the conventional fixed bottom turbines. This is because 97 percent of the technical offshore wind resources off of Oregon's coast are in more than sixty meters (197 ft) of water, a depth at which floating technology is the primary technology. (25) Floating offshore wind technology has unique cost barriers as it is less developed than conventional fixed bottom technology, which has been used on the east coast and for most projects around the world. Oregon's previous attempt at floating offshore wind development are an example of how the cost barrier of the floating technology is a barrier that can be difficult to overcome.

      In 2013, Principle Power attempted to build up to 30 MW of offshore wind off the coast of Coos Bay, Oregon utilizing floating wind turbine technology. (26) This project would have been the first floating offshore wind development in the U.S., and the first offshore wind project on the West Coast. (27) The project ultimately failed to secure a long term power purchase agreement (PPA), which was necessary to qualify for a $40 million grant from the U.S. Department of Energy. (28) Securing a long term PPA was also required for the project to obtain adequate financing. (29) Furthermore, the project's high levelized cost of energy (LCOE) would require Oregon to pass legislation mandating utilities enter into 20-25 year PPAs to purchase the project's electricity at above market price. (30) In opposition to the legislation, several utilities, including Oregon's two largest, PacifiCorp and PGE, wrote a letter to the House Energy and Environment Committee. (31) The utilities argued that the proposed offshore project would cost between three and four times more than they paid for offshore wind, and that it is "unreasonable to require by law that the responsibility for the costs of a[] [research, development and demonstration] project is saddled on the backs of the customers of two utilities ... " (32) The required purchase agreement for a 24 MW project would have cost ratepayers an estimated $0.14 a month more if spread across all Oregon ratepayers and $0.45 a month more if spread only to IOU customers. (33) The estimated PPA price would have been $240/MWh to $260/MWh for the project. (34) The estimated LCOE for the project was $197/MWh. (35)

      This cost barrier that the Principle Power project faced has decreased over the last few years and floating offshore wind is projected to become more cost competitive. Part of the high cost of the Principle Power project was that it was going to be a pilot-scale demonstration project using semisubmersible floating technology. (36) In 2013, Principle Power was one of only two companies that had successfully deployed and operated a multi-megawatt floating turbine. (37) In the years since, floating technology has developed quickly. Eight floating offshore wind projects currently exist worldwide, with fourteen more projects under construction or approved by regulators. (38) Moreover, sixteen other projects are in the planning and permitting phases. By the end of 2018, there was 4888 MW of floating offshore wind in operation or in the development pipeline. (39) There are no commercial-scale projects yet in operation, but several have been proposed. (40) There are three design concepts for floating technology, the spar-buoy, semisubmersible, and tension leg platform. (41) Of the project proposals in the pipeline, 94 percent use semisubmersible technology. (42) The semisubmersible technology relies on buoyancy and water plane area in order to maintain...