State governments with strong offshore wind potential should issue competitive requests for proposals to develop utility-scale offshore wind energy.
In North Carolina, where the shallow-water coastline is ideally suited for offshore wind development, an innovative legislative proposal introduced in 2011 can serve as a useful policy model for how states could encourage offshore wind development. North Carolina’s Senate Bill 747, the Offshore Wind Jobs and Economic Development Act, proposed a state-managed competitive request for proposals (RFP) process to develop 2,500 megawatts of offshore wind energy starting in 2017. If the state determines that an industry bid has a positive net economic impact, then investor-owned utilities would be required to sign 20-year contracts to purchase power. Incremental costs or savings for ratepayers would appear on customers’ utility bills, with limits on the impact of rate increases to large consumers. If the state fails to determine that 2,500 megawatts of offshore wind energy would result in a net economic benefit, then there would be no obligation to grant a contract.
To enhance industry support, SB 747 also gives utility companies the option to co-invest or purchase an ownership interest of up to 50 percent in the projects. While the bill does not require any direct government spending, it also extends an existing manufacturing tax credit for wind through 2020 to help attract manufacturing jobs. This policy creates a practical path forward for offshore wind energy.
The National Renewable Energy Laboratory (NREL) estimates that the U.S. has 4,150 gigawatts of total potential wind turbine nameplate capacity from offshore wind resources around the country. For perspective, the nation’s total electric generating capacity from all sources was 1,010 gigawatts in 2008. There are currently no installed offshore wind projects in the U.S. Developing utility-scale offshore wind projects would raise consumer electricity rates, but these costs will likely be offset by a host of economic benefits. According to the U.S. Department of Energy, if the state installed 1,000 megawatts of new wind power, the construction phase alone would create 1,628 new jobs and bring $188.5 million into local economies. The first 20 years of operation for these wind turbines would sustain 243 new long-term jobs and bring $21.2 million annually to local economies. Investing in clean energy projects typically creates three times more jobs than the same level of spending on fossil fuel industries.
Developing 1,000 megawatts of wind power would also deliver 2.9 million tons of annual carbon dioxide reductions and 1,558 million gallons of annual water savings. The environmental, climate, and public health benefits of shifting from coal to cleaner forms of energy like wind are well-documented; a recent Harvard study found that “the life cycle effects of coal […] are costing the U.S. public a third to over one-half of a trillion dollars annually.”
Under this proposed policy, state agencies would evaluate RFPs based on a wide variety of criteria, including, but not limited to, the impacts on ratepayers, jobs and economic activity, tax revenue, system reliability, climate change, public health, export opportunities, system reliability, and existing industries. In order to level the playing field, this policy will effectively eliminate cost disadvantages for offshore wind by requiring the government agencies reviewing industry proposals to fully account for the externalized environmental and public health costs associated with continuing to rely on coal and other fossil fuel alternatives for electricity. States with substantial coastal wind resources should adopt this policy framework to move forward with developing offshore wind energy.