Massachusetts has a deep and bipartisan commitment to clean energy. State leaders and the public at large recognize that clean energy is not only an environmental imperative but a key economic strategy for a small state that relies mostly on brainpower and technology for prosperity. Republican and Democratic governors and the Massachusetts legislature have implemented a wide array of policies to make Massachusetts a national leader in this transition to clean energy.
But Massachusetts has had one disadvantage when compared to many other states—it does not have the wide open, windy land mass to build large wind farms, or available land for massive solar arrays, or the mountainous areas for large hydroelectric installations.
But just a few miles offshore is a resource that has been referred to as the “Saudi Arabia of wind energy”—the Atlantic Ocean. And after some false starts, Massachusetts and its neighbor Rhode Island have just taken a big step closer to taking advantage of plentiful and steady Atlantic ocean winds, jump-starting a whole new industry in the United States: offshore wind.
What Massachusetts and Rhode Island just did
Today, Massachusetts approved a bid by a company known as Vineyard Wind to build an 800 megawatt wind farm in a wide-open ocean tract more than 15 miles offshore. This wind farm is phase 1 of a larger plan to build a total of 1,600 megawatts of offshore wind, enough to power about one-third of the homes in Massachusetts and meet about ten percent of MA energy demand, according to the Massachusetts Clean Energy Center. This bidding process was mandated by a law backed by UCS and signed by Governor Baker in 2016. The law requires Massachusetts utility companies to conduct a competitive bidding process and thereafter enter into long terms with offshore wind companies to purchase the power they generate. The long-term contracts provide a guaranteed revenue source for these projects, which makes it possible for them to obtain financing for the sizable upfront capital costs which could exceed $1 billion.
In addition to this, Rhode Island announced today its intent to enter into a long-term contract with another bidder, Deepwater Wind, for an additional 400 megawatts of wind energy to be built in an adjacent area.
The benefits of these projects are enormous. At full 1600 MW build out, offshore wind project will reduce Massachusetts greenhouse gas emissions by 2.4 million tons per year, about a fifteen percent reduction of emissions from electricity consumption, according to the Massachusetts Clean Energy Center. This large-scale generation will also help Massachusetts replace with clean renewable energy its aging power plants, such as the Pilgrim Nuclear Power Station, that is scheduled to close in 2019,. These projects will also help ensure that Massachusetts does not continue along its current path of over-relying on natural gas, which now accounts for about two-thirds of MA electricity consumption.
This offshore wind industry will also be a colossal job creator. The Clean Energy Center estimates that 1600 MW of offshore wind will generate approximately 7000-10,000 construction jobs over next 10 years, and once built, it will generate hundreds more thereafter in operations and maintenance. It is estimated that the “ripple effects” of this additional employment will add between 1.4-2.1 billion dollars to the economy as the workers employed by these projects spend money on other goods and services.
Note that these are direct jobs from construction and operation. These projections do not include the potential that turbine manufacturers will locate in Massachusetts or Rhode Island to manufacture components of the offshore wind arrays. Yet the cost of shipping giant wind turbines manufactured elsewhere is so high that it seems inevitable that some components will be manufactured close by. And there are attractive sites for this enterprise, such as the Brayton Point power plant site, which once housed a coal-burning plant but is now a vacant, industrially zoned property on Buzzard’s Bay with a direct water connection to the offshore wind areas. If just 25% of the components are manufactured locally, this could add thousands more good paying jobs.
What about cost?
Massachusetts has not released the estimated cost of the accepted bid, so the price will not be known until a contract is negotiated and submitted to the Department of Public Utilities for approval. However, the contract price is likely to reflect the remarkable worldwide decline of offshore wind costs due to technology innovation and economies of scale.
To put costs in perspective, one of the first US offshore wind contracts was for the Cape Wind project in Nantucket sound (more on that below). The Cape Wind developer planned on using 3.6 megawatt turbines, and the price of the power would start at 17 cents per kilowatt hour and escalate by 3% every year for 15 years. This price was well above the market price for power generally, and well above the price for onshore wind.
But in recent years, offshore wind projects in Europe have utilized much bigger and more efficient turbines, as large as 8.8 MW, and companies such as General Electric are developing turbines as large as 12 MW. As a result, new projects in Europe are entering into contracts for as low as 7-8 cents per kilowatt hour.
While we are not likely to see prices that low, as we lack the supply chain and trained workforce that Europe has developed over the last twenty years, it is highly likely that this project will take advantage of these much larger turbines and achieve significant economies of scale and price reduction as a result.
What’s next?
The next step is for Vineyard Wind to negotiate long term power purchase contracts with Massachusetts utilities, and for Deepwater Wind to negotiate with Rhode Island, processes that will likely take a number of months. In Massachusetts, the contract will then be submitted to the Department of Public Utilities, which will hold a public process and ultimately determine whether the contract is cost-effective and meets other statutory criteria. While this is occurring, the project developers will need to secure the federal, state and local permits needed to construct the wind turbines, transmission lines, and other equipment. It is hoped that this process can go forward expeditiously, so that the projects can take the necessary steps to qualify for at least a portion of federal tax incentives that will phase out by 2020.
But here is the best part: on top of the 1,200 MW approved by Massachusetts and Rhode Island, other states in the region have similar plans. New York is planning on 800 MW of project solicitations over this year and next, and is aiming for 2400 megawatts in total, and New Jersey has just announced plans for 3500 MW.
As one writer has observed, “commitments from northeastern states total 7,500 MW at a minimum, with more expected to follow. That’s enough critical mass to attract numerous bidders and create the foundation for an industry here in the U.S.”
A personal note
While I am always excited when states advance clean energy, this step forward is particularly sweet for me personally. Before I took the helm at UCS, I worked in the administration of Massachusetts Governor Deval Patrick, and under his leadership we laid the groundwork for offshore wind by building a wind test blade center in Boston and a marine terminal in New Bedford, passing legislation to authorize long term contracts for offshore wind energy, and working with Rhode Island and the federal government to designate appropriate offshore sites.
But Massachusetts’ first project—the Cape Wind project in Nantucket sound—crashed and burned, primarily because of the unrelenting and well-financed litigation brought by well-to-do homeowners on Nantucket sound who did not want to see wind turbines five miles offshore. When the Cape Wind project died, I feared it might be a very long time before another viable project would come along.
So, I am particularly heartened that Massachusetts and Rhode Island have kept at, and that technology has improved to allow for much larger, more cost-effective projects to be built farther offshore. Massachusetts and Rhode Island, all of the Northeast, and the entire country will benefit in ways we can barely foresee from this big, bold, and exciting new clean energy industry.