Offshore Wind Power Development Blows Across North America

Europe’s love affair with offshore wind may at last be venturing across the Atlantic as the first approved project in the US continues apace. However, the switch to this large-scale renewable energy form – which has the potential to displace both coal and nuclear in providing the bulk of energy consumed by coastal populations – has not been easy so far.

And, with the government of the Canadian province of Ontario going back on its commitment to this area, there are likely to be further hurdles to overcome before North America fully embraces this technology.

To date, the continent has largely sat back and watched the dramatic progress taking place in European waters.

Figures by the European Wind Energy Association show that offshore wind capacity throughout the region grew by 51 per cent in 2010. By the end of the year, a mammoth 883MW of offshore power was being fed into Europe’s electricity grids, with many more projects either approved or already under development. This level of growth is, however, yet to be witnessed on any scale in both the US and Canada.

A total of 38 states across the US now have utility-scale land-based wind projects up and running, but despite the location of these projects on both the East and West Coast, as well as bordering the Great Lakes, a single functioning offshore wind project has yet to be built.

There are, however, a number in the pipeline. In the US, the furthest along the development chain is the proposed Cape Wind project in the Nantucket Sound, Massachusetts.

Hot on its heels is Fishermen’s Energy’s 350MW installation, which recently received the major environmental permits from the New Jersey Department of Environmental Protection for it to be built in waters off Atlantic City.

Meanwhile in Canada, efforts in Ontario may have stalled, but NaiKun Wind Energy has recently been given the go-ahead for a 110 turbine installation off the north-west coast of British Columbia, to be located in the Hecate Strait. If the project continues to progress, the clean energy produced will displace the equivalent to 450,000 tonnes of greenhouse gas emissions.

Changing habits

While cleantech innovation has long found a home in the US, the nation’s dependence on oil is hard to break. Mark Rodgers, communications director at Cape Wind, says recent world events in the Middle East, and the huge earthquake and tsunami in Japan may help to break this addiction.

‘These have served as a reminder of the risks associated with energy coming from sources that are from unstable parts of the world or that carry nuclear risks. These, combined with last year’s oil spill in the Gulf of Mexico and various mining tragedies, have shown us that there are significant societal costs associated with conventional power sources that are not captured in an electricity bill. I think when a better accounting is done offshore wind starts to look really good.’

Cape Wind is a landmark project for the US and has paved the way for future projects to progress beyond the planning stage. The initial lack of any kind of regulatory framework during the early stages of planning for the  proposed 420MW project caused major challenges. But with new legislation now in place, Rodgers is confident the project and its progress to development will become a blueprint for future developers.

‘It has been a long road to get to the point where we are now, and one of the main challenges was that we were the first and at the time there was no regulatory framework. As such, there was an Act of Congress in 2005 that granted explicit authority to the Department of the Interior to regulate and approve these types of projects.

‘The project has generated about 100,000 pages of documentation through our permitting process that is in the public domain and these provide valuable records to other stakeholders. I think it should be smoother sailing and faster project approval for projects that follow us. But, by being first, it did take longer.’ He adds, ‘Cape Wind is going to be the first, and so Massachusetts will be the first state, but there is a lot of competition at this point to come in second.’

The US has strong land-based wind resources and has been active in exploiting their potential. According to statistics by the American Wind Energy Association, by the close of 2010 more than 40GW of capacity was installed and providing power to the grid. Although tough economic conditions slowed the rate of growth last year, the sector is expected to rebound as developers swiftly get projects approved, many supported by US stimulus funds.

Rodgers argues, however, that it is in US waters where the real potential lies. ‘The land-based resource is geographically in the middle of the country, mostly in an area that is sparsely populated and a great distance from urban areas where the bulk of electricity is consumed.’

With 70 per cent of electricity in the US being consumed by coastal states, opening up a resource within a few miles of these population hubs is clearly an area that is ripe for development. ‘In addition, in the US land-based wind resources are often best at night when consumption is at its lowest, there is a much closer correlation between supply and demand with offshore wind.’

Political hurdles

The Cape Wind project has now managed to secure a commercial wind lease, signed a power purchase agreement and is now undertaking project financing. But for Rodgers and the Cape Wind team, the regulatory challenges were coupled with fierce opposition by anti-offshore wind campaign groups. Wealthy sea-front homeowners have spent $25m to date opposing its construction, he claims, and have been lobbying hard to delay the project.

Political influence are also hampering Canada’s offshore wind ambitions. Ontario – regarded as one of the country’s forerunners in the adoption of renewables – has recently backtracked on its commitment to encourage offshore wind farms to be built in the Great Lakes. According to John Kourtoff, CEO of would-be developer Trillium Power, this has had disastrous consequences. Trillium has been working for 15 years on its proposal to construct a 420MW project in Lake Ontario – now in jeopardy.

He says the timing of the government’s announcement to halt any offshore wind projects in the region could not have been worse. ‘We had been closing a $26m financing deal with a North American-listed diversified energy company that we had been working on for five months on 11 February.

‘Then, in the afternoon of that day the Ontario government announced it was putting a moratorium on the development of offshore wind,’ he says. ‘This was done for political reasons and it has harmed an industry. We had manufacturers ready locate in Ontario. It has been extremely destructive for investors.’

Kourtoff says in addition to the moratorium, the sites it was planning to develop have also been confiscated by the government. A note in the Environmental Bill of Rights Registry says that all Crown land applications, which cover Trillium Power sites, have been cancelled, implying that all developers will have to start on proposals from scratch.

‘On a path of 15 steps to get to construction, we were on step 14. We have done 104 studies and have reports ready to submit for the feed-in tariffs and environmental approvals.’

Kourtoff’s frustration is compounded by the fact this is the second moratorium the government has put in place, the first being lifted in 2008 after a number of comprehensive studies found there to be no insurmountable environmental reasons why development could not go ahead.

Trillium’s first proposed project was to sit within the Canadian waters in the north-east of Lake Ontario, about 20km from the shore. He says the government’s decision goes against general support from the Ontario population, which in major polls comes out about 80 per cent in favour of renewable energy, but is aligned with the interests of the province’s strong coal and nuclear industries.

‘It is a very difficult situation right now and the harm of these actions won’t be fully shown for a number of months.

Tthe problem is investment in energy infrastructure is a 15-year decision. It is not something that can be on three-year timelines and change when elections are coming up. We have invested millions of dollars at the request of the government.’

Kourtoff now believes that if the government’s actions are not rectified, the matter may have to be resolved in the courts. ‘The reality is we have had many other offshore wind proponents in Ontario approach us about litigating, which is not our first choice. We are not going to go quietly into the night and either there is a solution found on this, or we will have no choice but to defend the shareholders who have invested money.’

He says although the developments on the East Coast of the US are definitely more positive and point to the birth of a potentially huge industry, there are still states such as Wisconsin where politics is coming before  progress. ‘What had looked rosy has in many cases has been harmed by political actions and many of these have been fed by virulent anti-wind groups.’

Ontario’s government insists more work is needed to assess possible environmental or health threats, but a study by the Conference Board of Canada has estimated the potential of offshore wind generation in the province alone to be 35GW, underlining the mass of untapped potential for both clean energy and the birth of a new local industry.

With more than 2GW of installed offshore wind at the end of 2009 across ten countries – proving its widespread attraction – the result has drawn widespread murmurs of disappointment. Robert Hornung, president of industry association at CanWEA, says, ‘This is an unfortunate decision that surrenders the province’s leadership in exploring the potential for offshore wind energy in the Great Lakes and creates significant uncertainty for investors.’

Elsewhere in Canada, however, developments look more positive. NaiKun Wind Energy Group has recently been granted a federal licence confirming that there is no significant environmental, social or health effects from its plan to build a 396MW project off the coast of British Columbia.

‘This is an exciting and noteworthy milestone for NaiKun Wind and for British Columbia,’ NaiKun Wind CEO Michael O’Conner says. ‘The project offers a renewable, green energy resource, with ideal wind conditions – better than ten-metres per second average annual wind speed. With environmental approvals in place, we are confident that NaiKun Wind is well-positioned to become Canada’s first offshore wind energy project and the beginning of the development of the remarkable north coast wind energy field.’

Exploiting potential

Despite obvious setbacks, innovators in the field are still confident as to the sector’s potential. Graham Howe, who heads up international business development for renewables at AXYS Technologies says the growing pains being witnessed across the continent are a natural progression in the growth of the sector. AXYS Technologies recently won an order from Fishermen’s Energy for its WindSentinel wind resource assessment buoy.

‘The US needs to reassure itself that the move to offshore wind power is the right thing to do. While onshore wind is now an accepted industry, offshore wind is still in its relatively early days,’ he says.

He adds that by gathering wind resource data in a noninvasive manner, both project developers and investors can be reassured as to the stable returns the industry can bring.

But while North America may be at the early stage of the development curve, he believes those becoming involved in the industry are open to innovation.

‘Europe has been a good testing ground for offshore wind power, developing a number of techniques the US can learn from. This experience can shorten the timeframe for developments and ensure that new projects can achieve efficiencies. It is worth noting, however, that the US has adopted the WindSentinel before the Europeans have – Europe is still reviewing the technology.’

Another factor to be considered is that in North America there are not the same onshore space constraints as there are in Europe, so offshore wind will develop in a more measured way, Howe says. ‘Having said that, the current administration has shown a strong commitment to the industry and it would not surprise me to see the US offshore industry picking up speed in the near future.’

With C$1.7bn ($1.78bn) of investment flowing into Canada’s wind sector in 2010 – resulting in 690MW of installed wind being added – it is clear that despite the hold-up there is real appetite to embrace wind energy, which is still relatively new to the country as a whole.

The country now ranks ninth globally in terms of new installed capacity, but this could rise sharply if the switch to offshore wind generation gathers momentum.

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Source: axystechnologies, May 06, 2011;