Editor’s Note: EarthTechling, always looking to bring you interesting cleantech reading, is proud to repost this analysis courtesy of partner Offshore Wind Wire. Author credit goes to Todd Griset, who practices energy law with Preti Flaherty Beliveau & Pachios in Maine. He also writes a blog on offshore wind, renewable energy and policy issues.
This week Gov. Martin O’Malley unveiled his revised plan for offshore wind development off Maryland.
Previous efforts to promote economic development through offshore wind have failed to gain legislative approval. Gov. O’Malley is back with the Maryland Offshore Wind Energy Act of 2012 (Senate Bill 237) a retooled proposal that he touts as both empowering economic development and necessary to meet Maryland’s statutory renewable electricity requirements.
Maryland possesses an abundant offshore wind resource. A 2010 report by the University of Delaware’s Center for Carbon-free Power Integration, College of Earth, Ocean, and Environment found that even after excluding areas where electricity generation would conflict with shipping,Maryland waters could host over 39 gigawatts of nameplate capacity and could produce over 117 terawatt-hours per year. To put this in context, all electricity customers in Maryland consume only 65 terawatt-hours per year.
Full build-out of this projected offshore wind generation could produce up to 179 percent of Maryland’s electricity needs. (Gov. O’Malley’s current vision appears to be more modest, with offshore wind providing up to about a third of Maryland’s needs.)
Maryland is also favorably postured towards renewable energy from a policy perspective. Under Maryland’s renewable energy portfolio standard, utilities must source increasing amounts of electricity from renewable generators. By 2022, 20 percent of electric load must be served by renewable resources.
O’Malley has stated that Maryland will need a substantial investment in offshore wind to satisfy that standard. To facilitate that investment, last year O’Malley introduced House Bill 1054, the Maryland Offshore Wind Energy Act (of 2011). That proposal would have required developers to compete before the Maryland Public Service Commission for long-term contracts with the state’s four investor-owned electric companies.
The vision for this first phase encompassed between 400 and 600 MW of offshore wind capacity, located at least 10 nautical miles offshore Maryland or within the federal waters adjoining another state within the mid-Atlantic electric grid run by PJM. Contracts would likely have been more costly than for traditional resources, especially in early years, so customers would pay a special charge to divide costs equitably.
Ultimately, the 2011 proposal did not meet with legislative approval. Costs were a key concern, withestimates of between $2.16 and $8.70 in increased monthly costs for the average ratepayer. Legislators also raised questions about how much Maryland would actually experience economic development benefits through the program.
This year’s Maryland offshore wind bill was presented as a resolution of some of these challenges. Proponents compare the Maryland Offshore Wind Energy Act of 2012 to New Jersey’s 2010 Offshore Wind Economic Development Act, which managed to win broad support from both legislators and Gov. Chris Christie.
Mandated long-term contracting is gone from Maryland’s 2012 offshore wind bill. Instead, O’Malley’s 2012 bill features a specific renewable portfolio standard for offshore wind – 2.5 percent, starting in 2017. Utilities would comply with this standard by acquiring ORECs or offshore wind renewable energy credits. This offshore wind carve-out would not automatically increase, unlike the overall renewable mandate or an existing carve-out for solar energy. Utilities could make their own arrangements to satisfy this standard, buying ORECs or developing qualifying projects, subject to state regulatory review.
The 2012 bill also comes with a lower price tag than last year’s proposal, along with stronger cost-containment. Official estimates suggest the measure would add an estimated $1.50 to $2 to average residential consumers’ monthly bills. Customers would feel this increase in the form of increased utility supply costs, but would not see a specific offshore wine line item on their bills. If the Public Service Commission projects cost increases of more than $2 a month, the program will be suspended.
Will O’Malley’s 2012 offshore wind bill meet more support than his previous efforts? If it is passed, will it lead to offshore wind development off Maryland?
Maryland can point to program improvements and lessons learned from other states such as New Jersey, although as of today no commercial offshore wind projects operate in US waters. Whether Maryland’s offshore wind resource is developed in the near term may depend in part on how the Maryland legislature reacts to the revised pitch.