ENERGY TRANSITIONS

The future of offshore wind may depend on Bernhardt

Could anything make greens pine for the return of Ryan Zinke?

The former Interior secretary's penchant for fossil fuels, along with a healthy string of scandals, made him an opponent of Democrats and environmentalists. But Zinke had one redeeming quality among those inclined toward cutting carbon: He loved offshore wind.

Now the success of the embryonic industry — and the state climate goals pinned to it — is being newly questioned under Zinke's successor, Secretary David Bernhardt.

Zinke touted offshore wind at an industry conference and in newspaper op-eds. He wrote in The Boston Globe that offshore wind was part of the Trump administration's strategy for "American energy dominance." The collective sigh of relief in the Northeast, where a series of states have made offshore wind central to their climate plans, was nearly audible at the time.

If the Montanan loved the idea of turbines in the sea, then the views of his replacement are a mystery. Bernhardt, a former oil and gas lobbyist who served as Zinke's No. 2, has been tight-lipped since taking the reins at Interior earlier this year. He has said barely a word about the large pipeline of projects proposed for federal waters up and down the East Coast.

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Bernhardt will have a large hand in deciding the future of America's offshore wind industry. Even as Northeast states enact laws calling for large amounts of offshore wind, the Interior Department has final say in whether to sink giant turbines into the ocean. Yet industry representatives, state officials and analysts say Bernhardt is a black box when it comes to offshore wind.

"I agree it is somewhat of a mystery," said a former Interior official who worked with Bernhardt at the department. "I wonder if it is in contrast to the previous administration, which was really gung-ho about wind. Wind had an easy audience at Interior, [the Bureau of Ocean Energy Management] or wherever else. Now, it's not that they're hostile, it's just more normal course of business."

The secretary's role in determining the fate of the nascent industry has been highlighted by recent permitting challenges faced by Vineyard Wind, the country's first major offshore wind project. Vineyard Wind officials said last month they expected a federal environmental review of the 800-megawatt facility to be delayed. They warned that moving forward would be "very challenging" if the pause stretched much longer than a month.

The announcement prompted a scramble to speak with Bernhardt. Massachusetts Gov. Charlie Baker (R) flew to Washington to meet with the secretary last week. Vineyard Wind officials followed with a meeting with Bernhardt on Monday. Details from both meetings were scarce.

A Baker spokeswoman did not answer questions about the conversation and instead pointed to the governor's comments from last week. Baker told local reporters he had gone to Washington to get "some clarity." He called the meeting a "good one," saying the state is looking for a cure to the permitting delay "because we really want this project to happen."

An official with Vineyard Wind declined to comment on the meeting with Bernhardt, except to say the developer "appreciates the secretary's close attention to the project and his confirmation that the Department of the Interior is working diligently to move the project forward."

Bernhardt, meanwhile, has remained mum. An Interior spokeswoman provided a terse response to a list of questions from E&E News about the secretary's view of offshore wind and the permitting issues surrounding Vineyard Wind.

"Proposed offshore wind facilities are major infrastructure projects that must undergo appropriate review and approval," Molly Block, the Interior spokeswoman, wrote in an email. The department "continues to incorporate feedback received on the Draft Environmental Impact Statement and is working closely with cooperating agencies to facilitate the environmental review of the Vineyard Wind project."

The stakes for the offshore wind industry, and Northeastern states, are enormous. Vineyard Wind is the first major development to reach the final stages of permitting since Cape Wind's aborted effort in Nantucket Sound. It has the potential to set regulatory precedent for a series of large projects in New York, New Jersey and other states. And Northeastern states are counting on offshore wind to provide an injection of jobs and investment to the region's struggling ports, in addition to large amounts of low-carbon electricity.

All six New England states and New York have pledged to reduce carbon emissions at least 80% by midcentury. Offshore wind is critical to those goals because it represents the region's best renewable energy resource, analysts said.

"It's worrisome. We already had one start at offshore wind in New England with Cape Wind, which got delayed for so long it collapsed under its own weight," said Ken Kimmell, who leads the Union of Concerned Scientists. "I don't think that is going to happen with Vineyard Wind. But these projects need to get built on time in order for us to enjoy their carbon-free energy and low cost. An extensive permitting delay is really detrimental to these goals."

Vineyard Wind estimates the project would supply 3% of New England's energy needs while cutting emissions 1.68 million tons annually, the equivalent of taking 325,000 cars off the road.

If the project were to fail, a project official said, it would create a chilling effect on investment in the industry.

"Many global investors fully expected that the lessons of Cape Wind would help to ensure that state and federal regulators would 'get the process right' for permitting of future projects," said Erich Stephens, chief development officer for Vineyard Wind. "As the first utility-scale offshore wind project in America, Vineyard Wind represents an important bellwether for the U.S. offshore wind energy industry's success."

Turbines and squid nets

At least part of the delay can be traced to an interagency disagreement about the initial environmental review conducted by the Bureau of Ocean Energy Management (BOEM), a division of Interior.

NOAA Fisheries criticized BOEM's draft study, saying it did not adequately consider the project's potential impact on fisheries or spell out the mitigation efforts needed to compensate fishermen. NOAA Fisheries is a division of the National Oceanic and Atmospheric Administration, which is a branch of the Commerce Department.

BOEM fiercely contested that criticism in a letter sent to NOAA Fisheries in April, noting, among other things, that the agency had not provided the data it accused BOEM of failing to analyze (E&E News PM, July 29).

NOAA Fisheries' concerns present a problem for Vineyard Wind. While BOEM could move forward with its study, NOAA Fisheries' comments create a potential legal opening for opponents to sue and halt the project.

Some fishing companies say the exchange between the federal agencies represents the first time officials in Washington, D.C., have seriously considered their concerns.

The layout of Vineyard Wind's project is of particular concern for squid fishermen, said Meghan Lapp, who represents Seafreeze Ltd., the largest producer and trader of frozen fish on the East Coast. The 84 turbines to be installed 15 miles south of Martha's Vineyard would present a hazard to the long flowing nets used by squid trawlers, making the project area off-limits to squid fishermen.

"The commercial fishing industry has voiced concerns over and over. At state meetings, local meetings, BOEM meetings, task force meetings. And the response back from BOEM has been, 'You will be heard at the end,'" she said. "From our perspective that is a very precarious situation."

She predicted that if all the current areas leased for offshore wind are developed, "you will see a collapse of the East Coast fishing industry."

Lapp, who met with Zinke and Bernhardt to voice her concerns, said she detected a shift in tone between the two secretaries. She said Zinke didn't "understand the magnitude of the impacts." Bernhardt was acting secretary at the time of their conversation earlier this year but "seemed receptive to listening to what we had to say," she said.

Vineyard Wind officials have said that reorienting the layout of the turbines would disrupt the project's schedule. They maintain the project has consulted extensively with the fishing industry. A company slideshow addressing fishing concerns notes that the layout of turbines and location of transmission cables were designed with input of fishing officials in New Bedford, Mass., home to the largest commercial fishing fleet in America. New Bedford's fleet is primarily geared toward scalloping.

The project faces a time crunch to begin construction. Vineyard Wind won a competitive bid from Massachusetts to provide the first 800 MW toward the state's initial 1,600-MW offshore wind goal. (Massachusetts has since increased that target to 3,200 MW.) Part of its winning bid owed to the low prices associated with the investment tax credit, a federal subsidy available to wind projects.

Avangrid Inc., which is developing Vineyard Wind in partnership with Copenhagen Infrastructure Partners, has said it anticipates collecting a 24% tax credit on $2.8 billion in capital costs.

The problem? The tax credit expires at the end of this year, and Vineyard Wind's contract with Massachusetts calls for electricity delivery to begin in 2022.

The importance of the credit is evident in Vineyard Wind's pricing. Its contract with Massachusetts calls for selling an initial 400 MW of electricity for $74 per megawatt-hour and a second 400 MW for $65 per MWh. New Jersey's contract with Ørsted A/S is projected to go online in 2024 and has a projected cost of $98.10 per MWh (Climatewire, July 22).

In a quarterly earnings call with financial analysts last month, Avangrid officials expressed confidence they could overcome the permitting hiccups but signaled they were considering backup plans.

"If we're required to, I think we'll look at other alternatives, but really our focus remains on maintaining our current schedule and working through these issues," Laura Beane, president of Avangrid Renewables, said in response to questions about the delay.

Max Cohen, an analyst at IHS Markit, said the offshore wind industry could likely survive the setback if Vineyard Wind failed to move forward. Opponents would likely portray the event as evidence that the industry is too fragile to survive without intense government intervention. Yet strong leasing activity and a wave of new state contracts in New York and New Jersey give the industry a strong tailwind, he said.

The real question is whether other projects begin running into the same concerns.

"Then you would see people get skittish about the market," Cohen said.

Twitter: @bstorrow Email: bstorrow@eenews.net

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