1. Offshore Wind (OSW) for Maryland Background, Status, & Issues

2. Presentation Outline Background History of OSW in Maryland
Wind & OSW in the world
Potential role in energy mix
Cost & financing (and the role of RECs)
Benefits & savings
History of OSW in Maryland
Legislation and associated stipulations
Progress toward operation
The U.S. Wind bid and proposed project
Where we are, and pending steps
Political issues
What can CPSR do?

3. Wind & Offshore Wind Globally
As of GigaWatts of electricity produced by wind
In > 80 countries: China (145 GW) > USA (74 GW) > Germany (25 GW) > India (25 GW) > Spain (23 GW)
Annual growth rate 22% (shifting from Europe)
Mostly NOT offshore
Offshore wind leaders are northern Europe & U.K.
Collectively about 11 GW in 2015

4. How much offshore wind is currently operating in the U.S.?
NONE!

5. Potential of Wind Power for U.S. & MD
Recent NOAA analyses* indicate that by expanding renewable energy (mostly wind and solar)…
“…the United States could cut total CO2 emissions 31 percent below 2005 levels by 2030 by making changes only within the electric sector, even though the electrical sector represents just 38 percent of the national CO2 budget;” and
“the model produced a system that cuts CO2 emissions 33 percent below 1990 levels by 2030, and delivered electricity at about 8.6 cents per kilowatt hour.”
Jacobson et al**estimate that MD could achieve 100% renewable energy by 2050 through 60% offshore wind, 33% solar PV, and 5% onshore wind.
* Future cost-competitive electricity systems and their impact on US CO2 emissions Nature Climate Change,
Volume 6, 526–531 (2016)
** 100% Wind, Water, Sunlight (WWS) All-Sector Energy Plans for the 50 United States; Energy Environ.
Sci., Volume 8, (2015)

6. OSW – Cost & Financing (1)
Offshore wind installation costs X more
than onshore wind
This makes an OSW project cost $4 million
per MW capacity
(So the MD 750 MW project will cost $3 billion!)
The cost structure of OSW is different from that of
conventional electricity generation:
Installation cost is 70-80% of OSW cost, pro-rated over LOP
(the balance is mostly operation & maintenance)
With predictable wind, OSW cost is therefore quite predictable
For fossil fuel-generated electricity, 40-60% of cost is fuel – less predictable

7. OSW – Cost & Financing (2)
The predictable return from OSW makes
it a potentially attractive investment
However, OSW power production cost
(about 20 cents per kWh) is still roughly
2 X greater than onshore wind or
present fossil fuel-generated power
The additional cost offsets provided by tax credits, Renewable Energy Credits (RECs), and other incentives are what makes an OSW project, and the energy it generates, affordable for now
The 2015 federal budget compromise restored the tax credits for wind and solar installation/production (wind can choose ITC or PTC)

8. RECs, and how they affect energy cost (A Digression)
Utilities (e.g., BGE, Pepco) buy much of the electricity they sell
In 29 states and D.C., Renewable Portfolio Standards require a specified % of electricity to be from “renewable” sources
Producers of such “renewable” energy get 1 “Renewable Energy Credit” (REC) for every MW they put into the grid
Utilities buy these RECs (usually separate from the electricity itself) to meet their required % of renewable energy
When there are source-specific carve-outs for certain kinds of RECs (e.g., SRECs, ORECs), those command a higher price
Proceeds from RECs helps make renewable energy investment feasible (and anticipated RECs can be used as collateral)
This required purchase of RECs increases the near-term cost of electricity to the utility (usually passed on to customers)
In the long run, cost of RECs may be offset by lower production cost of renewables (compared to fossil-fuel dependent sources)

9. The “other side’s” argument…
“Electricity in Maryland is already too expensive”
(13th highest in U.S.)
Source – EIA (U.S. Energy Information Administration)
Electricity
Maryland
U.S. Average
Period
Residential
14.70 cents/kWh
12.80 cents/kWh
May-16
Commercial
11.16 cents/kWh
10.25 cents/kWh
Industrial
8.11 cents/kWh
6.54 cents/kWh
c.f. : Avg. residential rates in – Delaware: cents/kWh; Virginia: cents/kWh; Pennsylvania: cents/kWh; but New England (6 states) avg. : cents/kWh

10. Benefits & Savings from OSW
Reduced production cost of energy
No carbon emissions
No associated pollutants
Increased supply and reliability for the grid
Major step in transition to a clean energy economy
New industry –
new jobs

11. OSW for Maryland - Legislation
Maryland Offshore Wind Act of 2013 (HB 226)
Modifies RPS to establish basis and parameters for OSW development
Establishes conditions for PSC approval
Establishes OREC cap (2.5% of total MD electric capacity)
Requires PSC to establish OREC parameters
Project proposes OREC pricing, subject to PSC approval
Sets requirements for applicants, including financing arrangements; analyses of impact on income, employment, taxes, etc.; effect on energy markets; small business role; offering participation to minority investors; environmental impact & benefits; and health impact & benefits
Caps OREC price (< $190/MWh)
Caps cost to customers (< $1.50/month to residential; <1.5% of usual cost to non-residential)

12. So where are we in the process?
Competitive bidding for offshore lease done
Winner = U.S. Wind ($8.7 million)
Project application submitted with required analyses
& agreements
$ billion project; life of project > 25 years
187 6MW turbines, 150 m rotors, 100 m hub height
750 MW – “will power 531,000 homes” (150, ,000?)
U.S. Wind application complete Feb 2016
Mandatory 6 month wait for additional applications
PSC extended wait by 1 month (Sept. 22) to complete review
If no further extensions, PSC begins open comment period
(up to 6 months)

13. Maryland Offshore Wind Project Site (U.S. Wind, Inc. lease)

14. Projected Benefits Reduce CO2 by 1.65 million tons/year*
Reduce SO2 by 2,960 tons/year,* NOx by 1,050 tons/year*
Up to $280 million estimated benefits* from avoided mortality from reduced pollution
Reduce electricity shortage on Eastern Shore
Reduce “congestion fee” ($2.00/consumer??)
Possibly reduce “capacity
charges” as well
Job estimates: “thousands”
(Baltimore & Eastern Shore)
* Offshore-Wind _0.pdf

15. Additional Dimensions for Maryland
IF APPROVED… U.S. Wind is proposing
that – as first U.S. at-scale OSW
project – Maryland become a hub
for Atlantic OSW development
Federal grant application pending
to make improvements to the
Port of Baltimore for an OSW facility
at Sparrows Point

16. Examples (not MD) – Gains from OSW

17. The Competition (?) Atlantic Wind Connection (Google-backed!)
6,000 MW, N.J. to Virginia
Cape Wind
468 MW, Massachusetts
Deepwater Wind
Two stages (R.I. Sound):
30 MW, Block Island R.I.
900 MW for New York, R.I.

18. Political/Advocacy Issues
Concerns about sustaining MD’s OSW commitment
Hogan team’s main concern is ratepayer impact
Newly Hogan-populated PSC could deny OREC application
THAT WOULD STOP THE PROJECT!
Democratic legislators may not be focused on OSW now
Environmental (and health?) advocacy (MDCC) was important in passage of OSW legislation in 2013
Can’t assess PSC response or action needs until PSC hearing process begins
May need legislative intervention to sustain progress

19. Actions Under Consideration (MDCC)
Engage in PSC consultation and docket process
LTE’s, other public information during the process
Sign-on letters
Engage susceptible legislators
Republicans from Baltimore, Eastern Shore (jobs)
Other Republicans: stress economic development
Democrats: shore up/activate support
Accompany legislators on tour to R.I. project
Possible legislative intervention

20. CPSR Role? Further analysis of health benefits?
Participation in coordination with MDCC?
Other actions?
(Focus on November elections?)
A new energy dawn for Maryland?