Offshore wind energy advances in Europe, lags in U.S., partly due to lack of national energy policy

While transmission supporting offshore wind energy is deemed by some as a solution to the transmission challenges of the United States, development of this renewable resource has lagged in the country, while advancing in Europe.

Offshore wind energy transmission can help “solve the heavily congested transmission systems that are bringing power to our heavily populated areas along the East Coast from Massachusetts to Washington, D.C.,” where there is significant transmission congestion but few opportunities to build transmission on land, Offshore Wind Development Coalition President Jim Lanard told TransmissionHub.

Power to the East Coast currently comes from the west, but the offshore wind transmission systems will provide power flowing from the east onto the East Coast grid. “[T]hese power lines from offshore can meet the demand right where it’s needed and reduce the congestion,” Lanard added.

In Europe, Lanard said that as more offshore wind energy generation is produced in European waters, there will be a need for numerous countries to share an offshore submarine transmission grid.

“Power is going to need to be able to flow freely back and forth between numerous European countries depending on where the wind is blowing and where the demand for the power exists,” he said.

The United Kingdom is leading in Europe in terms of offshore wind energy development, with Germany behind it, Lanard said. “Denmark is small but has a high percentage of their electricity coming from renewable energy and much of that from offshore wind,” he said, adding that other countries with offshore wind energy efforts include France, Spain, Sweden and Norway.

According to the European Wind Energy Association (EWEA), 5 GW of offshore wind energy was installed by the end of 2012.

Also, 40 GW of capacity is expected to be installed by 2020, the equivalent to 4% of EU electricity demand, and 150 GW is expected to be installed by 2030, meeting 14% of EU electricity demand.

EWEA further notes in its website that Europe’s offshore grid should be built to integrate the expected 40 GW of offshore wind power by 2020 and 150 GW by 2030. “EWEA’s proposed offshore grid builds on the 11 offshore grids currently operating and 21 offshore grids currently being considered by the grid operators in the Baltic and North Seas to give Europe a truly pan-European electricity super highway,” EWEA said.

Carolyn Heeps, development strategy manager with RES Offshore, told TransmissionHub that one of the key transmission challenges in Europe involves the need to invest in grid infrastructure.

RES Offshore, part of the RES Group, offers integrated development, engineering, construction and other services for utility-scale renewable energy projects, according to its website.

Heeps, based in the U.K., noted that among the company’s efforts, it is developing a 500 MW project in a joint venture partnership with Iberdrola Renewables off the coast of France, as well as a 600 MW project off the coast of northern Ireland as part of a consortium partnership with other entities. If all goes as planned, those projects will be operational in 2020, she said.

Iberdrola Renewables is the U.S. renewable energy division of parent company Iberdrola S.A.

“[T]here’s recognition that there is aging infrastructure and … the other key element is that infrastructure was not constructed to accommodate the integration of large-scale renewable energy from offshore,” Heeps said.

Because of the nature of offshore generation, often those offshore facilities have to be built where the resource is, which is often far from where the electricity is required, she said.

“We’re also facing increasing technology challenges because as offshore wind projects become much larger and are much farther offshore, we’re having to move towards high voltage transmission capacity and that brings with it particular technological challenges,” she said.

The fact that Europe wants to generate a lot more electricity from offshore resources means that “we are going to have to see quite a substantial change to Europe’s power grid,” which will require technological and market solutions, Heeps said. “We’re also going to have to be much more innovative about how we balance supply and demand throughout Europe,” she said, adding that there is also talk about interconnected grids throughout Europe.

Similar challenges exist in the U.S., she said, noting the country’s lack of transmission capacity. Issues include the difficulty of getting new transmission capacity built, cost allocation and aging infrastructure, she said.

As in Europe, the grid in the U.S. was not “built with offshore wind power in mind, so we have to look at ways in which we’re going to be able to improve that infrastructure,” she said.

Mark Rodgers, communications director with Cape Wind Associates’ Cape Wind, arguably the most known offshore wind energy project in the U.S., told TransmissionHub that the biggest transmission challenge in Europe is in Germany “where their population centers are far away from the shore, [and] we do not really have that problem in the U.S. where offshore wind potential is greatest, from Massachusetts down through the mid-Atlantic states.”

Energy Management owns Cape Wind Associates.

EU mandate of 20% by 2020 has been key

Unlike within the European Union (EU), which according to the European Commission, aims to get 20% of its energy from renewable sources by 2020, there is no national energy policy in the U.S.

The key to offshore wind energy’s development in Europe has been the fact that the EU has ambitious renewable energy targets, which stem from concerns about climate change, the drive to low carbon economies and security of supply, Heeps said.

There are EU-wide obligations set out in a renewables directive and each member state has to put in place national legislation to meet those obligations, she said.

Other drivers include energy affordability, she said, adding, “There is certainly recognition within the European context that offshore wind can play an important role in meeting those renewable energy targets and capacity requirements.”

In the U.K., the government has recognized that offshore wind is of strategic importance – and that it is linked to job creation and economic growth – and that has enabled the industry to develop and mature.

“We’ve recently had a lot more emphasis on cost reduction to make offshore wind competitive with other low carbon technologies, but again, that cost reduction roadmap is really being supported and underpinned by government or political will,” she said.

Another important aspect is having a route to market, or being able to sell the electricity generated from an offshore wind energy facility into the market, she said.

A clearly defined and streamlined permitting process has also helped, but Europe did not have that at the outset, she said, adding, “It’s taken some time to get that in place, so we have had to learn from mistakes and learned from past experience.”

There is more of a long-term vision for offshore wind in Europe than there is in the U.S., she said.

Still, while Europe works toward the 20% by 2020 directive, there is recognition that in order to maintain a pipeline of projects and investor confidence, “we need to look beyond 2020,” Heeps said.

In the U.S., the federal government and states have not been able to focus on a long-term vision to build a successful offshore wind energy industry, she said.

Rodgers noted that proactive action on the part of national governments in Europe to make offshore wind a priority and to streamline permitting and incentivize commercial investments has prompted offshore wind development’s growth. Those initiatives have been largely lacking in the U.S., he said, adding, “In the U.S., we need stable policies that promote clean energy.”

U.S. deals with lack of national energy policy

Efforts to streamline the permitting process in the U.S. include the U.S. Department of the Interior’s “Smart from the Start” initiative, launched under then-Interior Secretary Ken Salazar in November 2010, which identified priority wind energy areas for potential offshore wind energy development.

Lanard noted that the U.S. does not have a national energy policy because energy policy is, to some extent, set by the states.

Additionally, it is “very tough” to find consensus on national energy policy because “if you’re in the oil and gas part of the country, regardless of whether you’re a democrat or republican, you want an oil- and gas-focused policy.” The same goes for states that are rich in coal, nuclear or renewable energy resources, he added.

“There really will be what everybody likes to say is ‘an all-of-the-above strategy,’” which is “just another way of supporting the status quo,” Lanard said.

Another difference between Europe and the U.S. is that many European countries do not have much indigenous energy supply and have to import a lot of their energy resources.

“They have done this by keeping the price of gasoline high, by keeping the price of electricity high, which reduces demand,” Lanard said. “You don’t see a large number of SUVs in many European countries and you also don’t see huge numbers of McMansions in many European countries. They keep their houses small and actually closer together.”

The U.S., on the other hand, has “lots of oil, lots of natural gas, more coal than we’ll ever use, probably, and great nuclear resources, so the pressure to reduce per capita consumption is not great in the United States as it is in Europe,” he said.

Perhaps most important than anything, he said, is that many European countries take climate change very seriously and are acting aggressively to make their contributions in the reduction of carbon dioxide emissions, which means moving away from the carbon-based energy supply. That leads to renewable energy and in particular in many countries, huge support for offshore wind, which, Lanard added, “is the most largest scale of the renewable energy supplies that can reduce carbon emissions.”

The European countries, because of the public policy that they have adopted on energy independence, energy security and climate change, have recognized that they need to pay for those policies through innovative technologies such as offshore wind, which initially is going to cost more than traditional energy sources.

Those differences, however, would be smaller if the true cost of energy produced from coal, oil or natural gas were factored into the price, Lanard added. If one factored in costs associated with the externalities of such fossil fuels, including the impact on the environment and public health, then “we’d be really competitive because we don’t have any external costs,” he said.

“In the United States, the policy that we have to make is both at the federal and the state level and that is to say, who do we want to create a new industry here – jobs, economic development, manufacturing – and if we do, offshore wind stands ready to be that industry,” he said. “As we’ve seen in Europe, the trend will be toward hundreds of thousands of jobs in the offshore wind industry, billions and billions of dollars invested every year.”

First-mover projects in the U.S. will have a cost associated with them, he said. “Just like our first rounds of computers and cell phones were much more expensive than what we’re paying now, people paid for them and as supply and demand changed, the price came down, the technology improved, the people even want more – that’s what’s going to happen with offshore wind,” Lanard said. “But, we need to get over that first-mover challenge and the states are going to have to play a role in saying, if we help this industry now, they’re going to help us tenfold in the later years as this becomes sustainable and they build factories, create jobs – operations, maintenance, construction, manufacturing and installation jobs – [in] their state.”

The American Wind Energy Association earlier this year said there are 13 offshore wind energy projects in various stages of development spanning 10 states off the East and West coasts, as well as off the coasts of Texas and the Great Lakes. Those projects represent more than 5,100 MW of offshore development.

As for why the industry has not developed in the U.S. yet, Lanard noted that Cape Wind in Massachusetts, for instance, “would be built and running and showing the rest of the United States the value and benefits of offshore wind but for the $20- or so million dollars that have been spent in lawsuits against Cape Wind.”

Rodgers said the project is in the financing stage.

Maryland stands out

Another reason for the industry’s slow start is that developers need to find revenue streams, or places where they can sell their power so that they can then go to the banks and other lenders knowing that those investors will get the money back through the sale of the power, Lanard said.

That is primarily a state issue, he said, noting that states have lagged behind in helping to create the necessary revenue streams.

Maryland, which recently passed offshore wind energy legislation, “is a great model for a first-mover offshore wind project,” Lanard said, adding that the state has, through the legislation, created the revenue stream and ensured that there will be real competition between two developers to win the right for that revenue stream.

That competition is essential because it forces both developers to keep their prices as low as possible and bring as much economic development and job creation to Maryland as possible, he added.

The Maryland General Assembly earlier this year passed the Maryland Offshore Wind Energy Act of 2013, creating a “carve-out” for energy derived from offshore wind in the state renewable portfolio standard, beginning in 2017 and extending beyond 2022.

Lanard noted that New Jersey is close behind, New York is also working on getting the industry ready to go and Massachusetts has supported policies that have allowed Cape Wind to sell a little more than three-quarters of the power it will produce, but “we need to see in Massachusetts revenue streams that will support the rest of Cape Wind and other projects that will come out of what’s called the Massachusetts Wind Energy Area.”

U.S. ‘doesn’t have to start the process from the very beginning’

Heeps said the U.S. can draw upon Europe’s lessons learned, adding, “[T]he U.S. doesn’t have to start the process from the very beginning.”

The U.S. can, for instance, partner with European developers or bring in European experience into project management teams. Utilities need to be involved as well, she said, noting that utilities are key to the offshore wind industry in the U.K.

“There have been some costly mistakes in Europe, but I think as a consequence of that, we can’t emphasize enough the significance of early planning and risk management and building project teams with that expertise within them is going to be critical,” she said.

On lessons from Europe from which the U.S. can learn, Lanard highlighted planning the project and fully understanding the logistics of negotiating contracts through the purchase of products, delivery of those products in an orderly and timely way and deployment of those products to the offshore wind site.

“There’s a tendency to underestimate the value of logistics,” which must be valued as high as any part of the entire development operation, he said.

Another lesson involves ensuring quality control of every product that goes into a wind turbine or its foundation. “We’ve seen failures of tower structures – being shipped across the ocean and being warped, bent or damaged by rough seas – and we’ve seen poor quality steel – allowing steel to degrade in sensitive parts of the equipment,” he added.

Another issue, from a cost reduction point of view, is how one oversees the contracting of the offshore wind projects. “[T]he contracting between the developer and all its suppliers is something that is really critical and the Europeans have experimented with different types of contracts or arrangements,” he said. “[T]he U.S. could learn a lot from the best way to reduce risk, maximize efficiency and reduce cost in the construction and operation of the facility.”

Rodgers said, “We benefit from being able to stand on their shoulders and adopt their best practices and lessons learned.”

About Corina Rivera-Linares 3160 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.