Applied Energy 86 (2009) 1845–1856

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Applied Energy

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A comparison of offshore wind power development in Europe and the US:Patterns and drivers of development

Brian Snyder *, Mark J. KaiserLSU Center for Energy Studies, Energy Coast and Environment Building, Baton Rouge, LA 70803, United States

a r t i c l e i n f o a b s t r a c t

Article history:Received 22 September 2008Received in revised form 18 February 2009Accepted 18 February 2009

Keywords:Offshore wind powerMinerals Management ServiceMarine energy

0306-2619/$ - see front matter � 2009 Elsevier Ltd. Adoi:10.1016/j.apenergy.2009.02.013

* Corresponding author. Tel.: +1 225 578 4559.E-mail address: snyderb@lsu.edu (B. Snyder).

1 Due to the higher wind speeds over the oceandisproportionate percentage (3.3%) of the wind genera

Since the turn of the 21st century, the onshore wind industry has seen significant growth due to the fall-ing cost of wind generated electricity. This growth has coincided with an interest in the development ofoffshore wind farms. In Europe, governments and developers have begun establishing small to mediumsized wind farms offshore to take advantage of stronger and more constant winds and the relative lack oflandowner conflicts. In the US, several developers are in the planning and resource evaluation phases ofoffshore wind farm development, but no wind farms are currently operational or under construction. Inthis paper, we analyze the patterns of development in Europe and compare them to the US We find sig-nificant differences in the patterns of development in Europe and the US which may impact the viabilityof the industry in the US. We also discuss the policies used by European nations to stimulate offshorewind development and we discuss the potential impacts of similar policies in the US.

� 2009 Elsevier Ltd. All rights reserved.

1. Introduction

Wind energy is the alternative energy source with the mostrealistic chance to displace large amounts of fossil fuel combustion.Over the past several years, the onshore wind energy industry hasseen dramatic growth, both in the US and Europe. In Europe, thegrowth in the onshore wind energy industry has been supple-mented with growth in the offshore industry (Fig. 1) which at pres-ent represents 1.8% of the total installed European wind capacity.1

The first offshore wind farm began operating in 1991; by the end of2008 there were approximately 1500 MW of installed capacity. By2009 or 2010 the wind capacity in Europe is expected to grow byanother 1500 MW [1], and by 2015, the rate of growth of theEuropean offshore industry is expected to be 1700 to 3000 MWper year [2].

In the US there has been significant interest in the developmentof an offshore wind energy industry (for example [3,4]). Increasingcoal, natural gas and oil prices, reliance on foreign sources of oil,and concerns about global climate change have made domestic,renewable and low carbon sources of energy particularly attractiveto policy makers. As of late 2008, no offshore wind farms are underconstruction in the US, but resource assessments are ongoing atCape Cod, Massachusetts, and Galveston, Texas.

There are a number of reasons why offshore wind developmenthas lagged behind in the US. Both the offshore wind resources and

ll rights reserved.

, offshore wind generates ated electricity in Europe [1].

the governmental subsidies for offshore wind power differ in Eur-ope and the US, and it is not clear if offshore wind power will beprofitable in the US in the short term. For offshore wind develop-ment to succeed, a combination of events must hold. The revenuepotential from offshore wind must exceed the associated costs andrisks, federal involvement in advancing renewables through regu-latory programs and economic incentives must be in place, stateinvolvement through renewable portfolio standards must con-tinue, and public acceptance of offshore wind farms must occur.

We begin this paper with a discussion of the patterns of off-shore development in Europe and compare to the proposed devel-opments in the US. We discuss the current status of offshore windplans and testing in the US and reasons for the cancellation of someprojects. We discuss the policy drivers of the offshore wind energyindustry in Europe, and compare these drivers to those in place inthe US. We end the paper with a discussion of the effects of poten-tial US policies on the offshore wind industry.

2. Offshore wind energy development in Europe

2.1. European wind farms

There are a number of operational (Table 1) and approved butnot constructed offshore wind energy projects in Europe [5,6].Denmark and the UK have the largest share of operational offshorecapacity (Table 2). Germany has the largest share of planned capac-ity, but has no significant operational wind farms [5]. In total, thereare 40 approved offshore wind farms with 20,000 MW of plannedcapacity, 81% of which is in German waters [5,6].

Fig. 1. Growth of capacity of European offshore wind farms. Data from Table 1.

1846 B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856

2.2. Trends in Europe

One of the clearest trends in the offshore wind industry in Eur-ope is the increasing size of wind farms (Fig. 2). Additionally,developments have progressed into deeper water, farther fromshore and have adopted larger turbines (Figs. 3–5).

In Europe, developers and nations began by developing rela-tively small test projects (10–50 MW), then developments of100–200 MW, and are now building or planning projects of 400–1000 MW [2]. This slow development has been intentional and

Table 1Operational commercial offshore wind farms in Europe as of January 2009.

Wind farm Nation Yearbuilt

Capacity(MW)

Total cost(million)

Depth(m)

Developer

Vindeby DK 1991 5 11.2 3.5 SEASLely NL 1994 2 4.8 7.5 Energie Nor

WestTuno Knob DK 1995 5 11.2 4 MidtkraftDronten NL 1996 11 28.6 1.5 NuonBockstigen SDN 1997 3 4.8 6Blyth UK 2000 4 7 8.5 Nuon, Shell

E.ONMiddlegrunden DK 2001 40 53 6 Energie E2Utgrunden SDN 2001 10 14 8.6 VattenfallYttre

StengrundSDN 2001 10 18 8 Vattenfall

Horns Rev DK 2002 160 500 10 VattenfallFrederikshaven DK 2003 10 4

Nysted DK 2003 165 373 7.75 DONGSamso DK 2003 23 52 20North Hoyle UK 2003 60 148 12 npowerRonland DK 2003 17.2 26 1Scroby Sands UK 2004 60 155 16.5 E.ONArklow IRE 2004 25 70 3.5 AirtricityEms Emden GMN 2004 4.5 3 EnovaKentish Flats UK 2005 90 217 5 VattenfallBarrow UK 2006 90 190 17.5 DONGEgmond aan

ZeeNL 2006 108 334 18 Nuon

Rostock GMN 2006 2.5 2Burbo Bank UK 2007 90 185 5 DONGBeatrice UK 2007 10 70 45 TalismanLillgrund SDN 2007 110 300 7 VattenfallQ7 (Princess

Amalia)NL 2007 120 590 21.5 Econcern

Thronton Bank BEL 2008 30 197 20 C-PowerKemi A jos FIN 2008 24 PVO-

InnopowerInner Dowsing UK 2008 97 300 10 CentricaLynn UK 2008 97 300 10 CentricaBrindisi ITL 2008 0.08 108 Blue HHooksiel GMN 2008 5 2–8 BARD

Sources [1,3,8,69–81].

has occurred primarily due to government planning. The largefarms currently being planned may allow for large cost reductionsthrough scale economies.

The deepest offshore turbines constructed to date have been atBeatrice where turbines were constructed on jacketed foundationsin 45 m of water. Excluding Beatrice, the deepest offshore windfarms have been built in water only 10–20 m deep, due largely tothe constraints of monopole and gravity foundations. Floatingwind turbines are being tested by Blue H in Italy which would al-low for development in water over 100 m deep. The wind farm far-thest from shore is Thornton Bank which is 27 km from the Belgiancoast. In the near future the Belwind wind farm will be built over40 km from the Belgian coast. While both Thornton Bank and Bel-wind will be connected with AC cables, the costs of DC transmis-sion are declining which will allow for development further fromshore. While these farther offshore wind farms have a number ofadvantages (stronger winds further from shore and fewer user con-flicts) it is not clear how the long distances and open seas will im-pact the time available for maintenance [7].

The turbine capacity used in both onshore and offshore windfarms has increased over the past decade. Larger turbines arethought to allow for lower operation and maintenance costs,installation and foundation costs per unit of capacity. The largestturbines used so far have been 5 MW built by REPower and wereused in Beatrice and Thornton Bank. However, Enercon has

Foundationtype

Turbinemanufacturer

Turbine size(MW)

HubHeight (m)

Distance toshore (km)

gravity Bonus 0.45 38 1.5d mono NED Wind 0.5 39 0.8

Vestas 0.5 40.5 3mono Nordtank 0.6 50 0.03mono wind world 0.55 41.5

, Vestas 2 69 1

gravity Bonus 2 64 2mono Enron 1.425mono NEG 2 60

mono Vestas 2 70 141 suction, 3mono

Vestas, Bous,Nordex

3 80 0.2

gravity Bonus 2.3 70 10mono Bonus 2.3 63 3.5mono Vestas 2 67 7

Bonus/Vestas 2.3 78 0.1mono Vestas 2 68 2.5mono GE 3.6 74 10

Enercon 4.5 100 0.04mono Vestas 3 70 10mono Vestas 3 75 7.5Mono Vestas 3 70 10

Nordex 2.5 80 0.5mono Siemens 3.6 83.5 6.5Jacket Repower 5 88 22gravity Siemens 2.3 69 10Mono Vestas 2 59 23

Gravity Repower 5 94 28Artificialisland

WinWind 3 88 <1

Mono Siemens 3.6 80 5.2Mono Siemens 3.6 80 5.2Floating 0.08 20Tripod Enercon 5 <1

Table 2Distribution of offshore wind farms by country as of August 2008.

Country Capacity (MW) Number of wind farms Capacity (%)

Denmark 425.2 8 28.57The Netherlands 241 4 16.19Sweden 133 4 8.94UK 598 9 40.18Ireland 25 1 1.68Germany 12 3 0.81Belgium 30 1 2.02Finland 24 1 1.61Italy 0.08 1 0.01

Totals 1488.28 32 100

Data from Table 1.

Fig. 2. Increasing size of development of European offshore wind farms over time.Data from Table 1.

Fig. 3. Increasing depth of European offshore wind farms over time. Data fromTable 1.

Fig. 4. Increasing turbine capacity of European offshore wind farms over time. Datafrom Table 1.

Fig. 5. Increasing distance to shore of European offshore wind farms over time.Data from Table 1.

B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856 1847

installed a land based 6 MW turbine and Clipper Windpower isplanning on building a 10 MW turbine.

2.3. Industry structure

European wind farms have been developed by some of the larg-est energy companies in Europe including Vattenfall (Sweden),Shell (The Netherlands), DONG (Denmark), Nuon (Denmark),E.ON (Germany), and Centrica (UK). Shell, DONG, and Centricaare integrated energy companies that are involved in both electric-ity generation and oil and gas exploration. Nuon and E.ON are elec-tricity and gas providers, Vattenfall is an electricity provider.Vattenfall and DONG are owned largely by the Swedish and Danishstates, respectively.

In addition to these large energy companies, a few companiesspecializing in renewable energy have also developed offshorewind farms; however, these companies are generally subsidiariesof large electricity and gas companies. Airtricity, a wind farmdeveloper and subsidiary of a large electricity and gas providerScottish and Southern Energy, has developed the Arklow Windfarm.2 Npower Renewables, a developer of wind, hydroelectricand biomass power facilities and a subsidiary of RWE, developedthe North Hoyle wind farm. Evelop, a subsidiary of Econcern anda company specializing in the development of renewable powerplants, developed the Q7 wind farm and is developing the BelwindWind Farm.

2.4. Installation

Marine construction companies fabricate and install offshorewind farms. Installation is accomplished using jack-up barges forpile driving and lifting [8]. Often several boats are active simulta-neously so that one boat is pile driving while another is installingtowers or turbines and another may be ferrying equipment fromport to the site.

Construction companies have attempted to minimize the workdone offshore by assembling as much of the turbines onshore aspossible. This speeds the expensive offshore work and reducesthe number of lifts required for construction. Among the mostcommon techniques for minimizing offshore work is to connecttwo of the turbine blades to the nacelle on land and lift them to-gether onto the tower; the so called, bunny-ear configuration.The most extreme onshore assembly to date has occurred at Bea-trice where a jacketed foundation was assembled onshore andsunk in place. The entire turbine and tower were assembled on-shore, floated to the site, and connected to the foundation.

2 Note that Airtricity was not affiliated with Scottish and Southern Energy when itdeveloped the Arklow wind farm.

1848 B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856

Seventy-five percent of the offshore turbines have been in-stalled by the Danish company A2SEA including the turbines atQ7, Lillgrund, Nysted, Horns Rev, Egmond aan Zee, Kentish Flats,Scroby Sands, and Fredrishavn. A2SEA was formed in 2000 withthe specific goal of providing construction services to the offshorewind industry. It currently operates three specially equipped jack-ing boats. While it has installed a number of turbines, it has gener-ally not installed foundations.

In other cases, companies that do not specialize in the offshorewind power industry have been used for installation projects. Forexample, the North Hoyle and Beatrice projects used the compa-nies Seacore and Scaldis, respectively. Both of these companiesare marine construction companies with experience in the oiland gas and civil works industries. Seacore has also been involvedin the construction of foundations, met masts and geotechnicalsurveys for a number of other offshore wind projects.

Larger international companies have also installed some windfarms, but their work seems to be limited to the foundations. Forexample, HOCHTIEF installed the foundations for the Lillgrundwind farm while Van Oord installed the foundations at Q7 andKBR installed the foundations and electrical connections at the Bar-row wind farm.

3. US development

There are several offshore wind farms that are currently in thelate planning stages in the US. There have been several others thatbegan planning and development at roughly the same time asthese two developments, but have since been cancelled or placedon hold due to economic reasons. These include the Long IslandOffshore Wind Park and the Padre Island Wind Park. In each case,the developer or utility decided that there were cheaper ways togenerate renewable energy. Table 3 describes the planned and can-celled developments in the US Project cancellations in the USshould not necessarily be taken as a sign of the impracticality ofthe industry since cancellations and delays have been common inEurope as well.

3.1. Cape wind

The Cape Wind project is the best known and most controver-sial wind project in the US Cape Wind and its opponents have been

Table 3Proposed offshore wind projects in the US as of August 2008.

Developer Wind Park Location Numberturbines

P(M

EMI Cape Wind Cape cod 130 4WEST Galveston Offshore

WindGalveston 50–60 1

Winergy(deepwaterwind)

Plum Island Long Island 2–3 1

FPL Long Island WindPark

Long Island 40 1

SRE/Babcock andBrown

Padre Island South Texas 100+ 5

Patriot Renewables South Coast Wind Buzzards Bay,Massachusetts

90–120 3

BlueWater Wind Delaware 4Southern Company Georgia 3–5 1

Hull Municipal Hull Offshore Wind Massachusetts 4 1Deepwater Wind Rhode Island �100 �Deepwater Wind Garden State Offshore

EnergyNew Jersey 96 3

Radial Wind Radial Wind Park Lake Michigan 390 1

Source: [20,82].

featured in national media including the CBS News, The New YorkTimes, and NPR. Originally proposed as the nation’s first offshorewind farm in 2001, its development has been delayed by opposi-tion by local and powerful activists including Bill Koch, Mitt Rom-ney and the Kennedy family.

Energy Management Incorporated (EMI), the developer of theCape Wind project, plans to place 130, 3.6 MW turbines approxi-mately 6.5 miles off the coast of Cape Cod on an area calledhorseshoe shoal. The 130 turbines will be arranged in a grid-likepattern. The total footprint of the site will be 25 square miles(70 km2). The hub height will be 78.5 m which will ensure aclearance of 23 m between sea level and the blades’ lowest posi-tion. The turbines will be placed in shallow water, between 0.15and 18 m deep [9].

The Cape Wind project is in the final stages of approval. Underthe 2005 Energy Policy Act, the Mineral Management Service(MMS) completed an Environmental Impact Statement (EIS) whichfound generally negligible or minimal impacts on wildlife or navi-gation [10]. MMS is likely to approve the project [11]. According toEMI, if approved the Cape Wind project could be operational by2011 [12].

3.2. WEST

Wind Energy Systems Technologies (WEST) is a Louisiana basedcompany that is planning on building a series of wind parks instate waters off the coast of Texas. Unlike other states, Texas’ statewaters extend 3 marine leagues (9 nautical miles) from the shore.As a result, WEST is only required to negotiate leases and permitswith the State of Texas, and is not under MMS jurisdiction. None-theless, WEST will still have to apply for a Rivers and Harbors ActPermit from the US Army Corps of Engineers.

WEST has negotiated to lease 11,000 acres of submerged landfrom Texas for the next 30 years. The lease is for an area approxi-mately 7 miles off the coast of Galveston. The lease requires WESTto pay the State at least $26 million over the course of the 30 yearlease. WEST has placed two meteorological observation towers onthis land. Their plan is to build a 150 MW wind farm at a cost ofabout $300 million [13]. WEST submitted a Rivers and HarborsAct permit in 2008. WEST has also signed leases with the state ofTexas for four additional tracts off the coast of south Texas. In late2008 WEST lost two potential investors when Lehman Brothers

roject sizeW)

Depth(m)

Distance toshore (km)

Status

50 .15–18 10.5 Draft EIS completed50 16 11 Lease signed

0 4–11 0.5 Awaiting COE approval

50 15–20 5.8 On-hold

00 Cancelled

00 Under20

2 Conducting state EIS

50 19 Agreement signed0 Expressed interest to MMS in non-

commercial lease2–20 7–14 2 Applied for state permit385 Agreement under negotiation50 �30 Recently awarded

950 25

B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856 1849

and Wachovia failed, however, WEST still hopes to have a windfarm operational by the end of 2010 and to sell electricity at6.5 cents/kWh [14].

WEST has investigated a number of engineering concepts forbuilding offshore wind farms in the Gulf of Mexico. It had origi-nally planned on placing wind turbines directly on unused oilstructures in the Gulf of Mexico without removing and relocatingthe structures, however, WEST seems to have abandoned this plan[13,15]. WEST then planned to use a jacked platform recycled fromthe oil industry as a foundation for their wind turbines and hopedthat this would save the company money and make the operationprofitable [16]. It has also planned to install some type of jack sys-tem which will lower the turbines in the event of a hurricane. Mostrecently, WEST has opted for installing the turbines on tripod foun-dations [13].

3.3. Bluewater Wind

Bluewater Wind is a subsidiary of Babcock and Brown. Theyare in the planning stages for constructing a large wind farmoff the coast of Delaware. In November 2006 Delmarva Power,in response to actions by the Delaware legislature, issued a re-quest for proposals for the construction of a new power plantin Delaware. Bluewater Wind submitted a proposal for a450 MW wind park located 11.5 nautical miles (21 km) from theshore and was selected to negotiate a power purchase agreementin May of 2007. They estimate that it will take one to 2 years forconstruction to commence and an additional one to 3 years tocomplete construction [17].

Delmarva Power had stated that they were more interested inonshore wind than offshore wind power and that they believe on-shore wind power will be less expensive for Delaware consumersthan offshore wind power [18]. They also believed that onshorewind power will be ready more rapidly. Delmarva Power solicitedbids from other power producers, but in the summer of 2008, Del-marva Power and Bluewater reached an agreement on the terms ofa contract [19] which was then approved by the state.

3.4. Winergy/Deepwater – Plum Island Wind Park

Winergy Power LLC (now Deepwater Wind) was formed in1999 by a former offshore mariculture executive. Deepwater Windis developing a test site off the Northern Fork of Long Island calledPlum Island Wind Park. This development is meant to be a small-scale research facility. The Plum Island Wind Park is designed toconsist of 3, 3.6 MW turbines or 2, 5 MW turbines. The closet tur-bine would be 1500 feet off of Plum Island in Gardiner’s Bay andthe turbines would be approximately 1000 m from each other. Atleast one turbine (and perhaps two) will be installed on a mono-pile foundation while one other turbine will be installed on a tri-pod jack-up barge foundation. Winergy intends to tow anassembled wind turbine into place on a jack-up barge and leaveit in place. Winergy has applied for a Rivers and Harbors Act per-mit from the Army Corps of Engineers. The public comment periodclosed in August 2007 and Winergy is responding to thesecomments.

In late September and early October 2008, it was announcedthat Deepwater Wind had won competitions to develop commer-cial sized wind farms off the coasts of New Jersey and Rhode Island[20,21]. The New Jersey project is in conjunction with the largeutility PSEG and is part of a plan by the State to build 1000 MWof capacity off the New Jersey coast by 2012 [22]. In early 2009Deepwater and Rhode Island reached an agreement for a twophased construction of a wind park with a production of 1.3 mil-lion MWh per year. The first phase is to be located in state waterand completed in 2012 [23].

3.5. LIOWP

The Long Island Offshore Wind Park was a project proposed bythe Long Island Power Authority (LIPA). In January 2003, LIPA is-sued a request for proposals to develop an offshore wind farm.FPL Energy, one of the nation’s largest providers of wind and solarpower, was selected. In 2007, the project was put on hold after LIPAcommissioned a study conducted by PACE Global Energy Servicesto evaluate the costs of the proposed wind park. PACE estimatedconstruction costs to be 4841 $/kW, far higher than previouslyanticipated or experienced [24]. The LIOWP would have consistedof 40, 3.6 MW GE turbines with a combined capacity of 144 MWand 3.6 miles from Jones Beach on Long Island’s southern side. LIPAis now exploring the possibility of building a wind farm off ofQueens with Con Edison [25].

3.6. Superior renewable energy/Babcock and Brown – Padre Islandwind farm

Babcock and Brown is an Australian investment firm with alarge alternative energy portfolio. In August 2006 Babcock andBrown (B&B) bought Superior Renewable Energy (SRE), a Houstonbased company that had planned on building a wind farm off thecoast of Padre Island, Texas. SRE had leased the rights to39,900 acres of submerged lands off the coast of Kennedy Countyand had planned to build a 170 turbine, 500 MW wind farm. Thelease allowed for a 4-year research period followed by constructionand required annual payments of $80,000 plus a percentage of fu-ture earnings [26]. However, in June 2007 B&B cancelled the leasesaying it was ‘‘too expensive to produce energy that way in thatmarket” implying that the price of electricity in Texas made it dif-ficult for its project to be profitable. B&B planned on developingonshore wind farms in Texas, and through their subsidiary, Blue-water Wind, are developing offshore wind farms on the Atlanticcoast. The Texas General Land Office still hopes to develop the site[26].

3.7. South Coast Wind

Patriot Renewables, LLC, has developed a plan to build an off-shore wind farm in Buzzards Bay, Massachusetts. They submittedtheir plans to the Massachusetts Office of Environmental Affairsin May of 2006. Called South Coast Wind, their plans call for 90–120 turbines placed in up to three separate groups. The total capac-ity will be approximately 300 MW, however, the exact size turbinehas not been determined. Each group will be within 3 miles of theshore in under 20 m of water. Therefore, a MMS lease will not berequired.

The Secretary of the Office of Environmental Affairs of Massa-chusetts ruled that an Environmental Impact Report (EIR) underthe Massachusetts Environmental Policy Act (similar to an EIS un-der NEPA) was necessary. Patriot Renewables is currently conduct-ing the environmental analyses called for by the EIR.

3.8. Proposals to MMS

In November 2007, MMS asked for nominations for areas to beleased for offshore wind energy, and other ocean energy develop-ment. They received over 40 nominations for resource evaluationleases; however, it is unclear how many were related to offshorewind development. MMS has decided to proceed on leasing 10blocks, each 9 square miles for offshore wind evaluations. Five ofthese areas are off New Jersey, three are off the coast of Georgiaand one is off the coast of Delaware. MMS also received interestin wind leases off New York, South Carolina and Massachusetts,but decided not to proceed with leasing these tracts [27].

1850 B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856

4. Patterns of development

The plans for US wind farms are more ambitious than the firstoffshore wind farms built in Europe. In the US, developers arenot planning small 10–50 MW developments, but much larger pro-jects of hundreds of MWs. There are only a few small test projectsunder consideration (the Hull project, Deepwater Rhode Islandproject first phase and a proposal off of Cleveland are severalexceptions). American projects are also not limited to shallowwater close to shore, as were European projects in the early stagesof development. WEST is planning on building its offshore windfarm in relatively deep water while Bluewater Wind is planningon building its Delmarva Wind Park over 20 km from the coast.The advantage of the European pace of development was that it al-lowed for the development of infrastructure, institutional capacityand experience.

American developers do not have ready access to the special-ized construction equipment currently available to European com-panies, such as that developed by A2SEA and Seacore, but in theGulf of Mexico significant expertise and construction equipmentused in the offshore oil industry can be utilized. If marine construc-tion equipment is limited, it will cause the costs of construction toincrease. It is possible that global companies, for example KBR andHOCHTIEF, may contribute to the development of wind farms inthe US. Alternatively, American developers could use novel con-struction techniques such as those under consideration by Deep-water, but these are untested and may prove expensive orunreliable.

It is possible that the lack of companies with direct wind farminstallation experience could increase the expense of development.Construction costs are sensitive to the amount of time it takes toinstall each turbine. In general, these construction times declineas an operator gains experience. For example, the first foundationsat North Hoyle required 132 h to install while the last foundationstook only 67 h to install [28]. A similar trend occurred at Horns Rev[29]. It seems likely that companies with offshore wind farm instal-lation experience would be able to complete installation morequickly than companies without experience.

4.1. Corporate involvement

The developers of the larger offshore wind projects in Europeare among the largest energy companies in Europe. Conversely,in the US, relatively small and newer companies (WEST, Winergy,EMI), are planning on building wind farms that may cost close to$1 billion. There has been some interest among large energy com-panies in the US in offshore wind development, most notably PSEG,Southern Company and FPL Energy, but the most advanced devel-opments (the Galveston and Cape Wind projects) are being led bycompanies without the large capital and institutional experience ofthe larger energy conglomerates.

There are a number of advantages for large corporations oversmaller start-ups in the development of offshore wind farms. Off-shore wind farms are capital intensive; they can cost over $1 bil-lion and generate little revenue for years. Large corporations willhave more available capital and will be able to raise additionalcapital at lower interest rates; large corporations will have less dif-ficulty securing surety bonds and may not require decommission-ing bonds; large corporations would be able to spend more timeplanning projects and testing new technology without the needto quickly generate revenue; and large energy companies wouldgain the positive environmental publicity associated with an off-shore wind farm, something of less value to a company that spe-cializes in offshore wind energy. Finally, a large company may beable to build a large number of offshore wind farms and thereby

gain the institutional experience required to lower costs. A smallercompany that has developed one wind farm, even a successfulwind farm, would be heavily indebted and may be unable to raisethe capital necessary to build additional wind farms.

While small companies like WEST, and EMI may indeed buildthe first offshore wind farms in the US and be successful, it is likelythat offshore wind power will be developed at a larger scale whencompanies like Southern Company, PSEG, Babcock and Brown, andFPL Energy are involved in offshore wind energy [7]. These compa-nies are beginning to show an interest in the offshore wind indus-try and their continued involvement will be critical to thedevelopment of a multi-gigawatt scale industry. Even larger multi-national corporations such as Shell and BP, both of which havebeen active in the European offshore wind industry, might also de-velop an interest in the US industry, further improving the chancesof a large-scale industry.

The large corporation most interested in offshore wind seems tobe Babcock and Brown (through their subsidiary Bluewater Wind).However, over the past year (late 2007 to early 2009) Babcock andBrown lost approximately 90% of its value. It is now attempting tosell many of its investments in order to raise capital to pay offdebts [30]. Thus, the future of Babcock and Brown and BluewaterWind’s developments are currently unclear [31].

5. Causes of differences in European and US industries

Over the last decade, the costs of producing wind power havedropped dramatically while the costs of conventional sources ofelectricity, especially oil and natural gas have risen significantly[32]. This has stimulated growth in the wind industry in generalin both Europe and around the world, but it has failed to stimulatethe offshore industry in the US. This failure is due to a number offactors including different financial incentives, regulatory systems,wind resources, population densities and industry representation.

5.1. Financial incentives and subsidies

Every nation in Western Europe is an Annex 1 party to the Kyo-to protocol and as such is mandated to reduce their carbon dioxideemissions. The nations of Western Europe have responded by set-ting mandates for the amount of electricity produced from renew-able sources by specific times. In order to meet these goals,European nations have instituted a series of financial incentives(Table 4). The primary mechanisms of financial support for renew-able energy are through tax credits, feed-in tariffs, renewable en-ergy credits, or tenders [33].

The exact cost of a kWh of offshore wind produced electricityvaries depending on the specifics of the wind farm; estimatesrange from 5 to 12 cents/kWh [34,35]. Thus, a wind farm developerhas to be able to reliably sell electricity for more than 5 to 10 cents/kWh in order to make a profit. The easiest way for a developer todo so would be to negotiate a feed-in tariff, as is done in Denmark.The feed-in tariff is thought by renewable energy advocates to bethe most beneficial method of renewable energy promotion, butit is not clear if this is actually the case [33]. In the case of Danishfeed-in tariffs, the developer submits a bid to build an offshorewind farm at a certain feed-in price, thereby ensuring that theoperation is, at least according to their plans, profitable. An alter-native method for incentivizing renewable energy is through theuse of a renewable energy credit market. This is the primary meansof providing financial incentives in the UK. Many nations in Europealso have carbon taxes, from which renewable energy generatorsare exempt. Finally, in the UK the government will give offshorewind developers grants to help pay for the capital costs of offshorewind farms. So far, $194 million has been divided among 10 pro-

Table 4Economic incentives for offshore wind development in Europe.

Denmark UK Germany The Netherlands Belgium

Feed in price Negotiable: recently13.2 c/kWh

9.1 eucrocents/kWh

Premium likely to be over0.28 €/kWh

Tax exemptions Exempt from 20 €/tonnecarbon tax

4.3 p/kWh Yes Yes

Renewable energycredits

� 5 p/kWh 0.108 €/kWh for first 216 MW

Other subsidies Constructiongrants

Government pays some of cable costs,resource assessment costs

Renewable Goal for2020

30% 15% 18% 14% 13%

Source: [83].

B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856 1851

jects [36]. Given that the costs of these wind farms have been inthe hundreds of millions of dollars, this represents a small, butnot insignificant, fraction of the total capital costs.

In the US, the primary federal mechanism for the stimulation ofrenewable energy is the Production Tax Credit (PTC). The PTC isanalogous to a bonus feed-in-tariff, or a carbon tax exemption. Itis a 2 c/kWh tax credit for companies that produce electricity fromcertain renewable sources (including wind). It has expired threetimes over the last 10 years; each time it has expired has beenassociated with a decrease in the growth of the onshore windindustry [37]. This suggests that it is an important stimulant forthe wind energy industry.

The US federal government does not have a renewable energycredit trading scheme, however, 25 states and the District ofColumbia have adopted Renewable Portfolio Standards (RPS)requiring that a certain percentage of the state’s electricity be gen-erated from renewable sources [38]. RPS requirements generallyrange from 10% to 20% of production. Utilities that fail to meetthese requirements must purchase tradable credits that representan equivalent amount of renewable energy (renewable energycredits, REC) or face penalties of up to 5.5 cents per kWh.

Ten mid-Atlantic and northeastern states have also set up a Re-gional Greenhouse Gas Initiative (RGGI) a cap-and-trade programthat aims to reduce CO2 emissions by 10% by 2018. The RGGI auc-tioned off allowances in late 2008 for just over $3 per ton CO2.Assuming that each MWh of fossil fueled electricity generates0.6–0.9 metric tones of CO2 (values for coal and natural gas firedelectricity, respectively), the RGGI might be expected to increaseconventional power prices by 0.2–0.3 c/kWh.

Given that the largest penalties for non-compliance with RPSgoals are 5.5 c/kWh, and that the federal PTC is 2 c/kWh, the totalstate and federal subsidy for offshore wind energy is at most 7.5 c/kWh. In most cases the actual subsidy will be much lower due tolower prices for RECs. For example, in Texas the cost of a REC in2007 was 0.5 c/kWh. Even at the upper limit for RECs, the subsidiesfor offshore wind energy in the US are significantly lower thanthose in Europe. For example, in the UK the tax exemptions andRECs amount to 18 c/kWh.

It is unclear if the subsidies offered in the US are sufficient to al-low offshore wind power to compete on price with conventionalpower. In the US in 2007, the average wholesale price of electricitywas about 6 cents/kWh [32]. The average wholesale price at theNEPOOL hub in New England (the most likely hub to be influencedby offshore wind power) was 7.7 cents per kWh. Thus, an offshoreoperator may be able to sell the electricity generated from a windfarm for between 6 and 8 c/kWh, plus the value of any REC gener-ated and the PTC. Thus, an operator would need to generate a kWhfor under 15 to 15.5 cents (8 cents for the electricity plus 2 cents intax credits, plus 5 cents for the REC, plus 0.5 cents in capacity pay-ments) in order to be assured of a profit. This would seem possible;however, a very different picture of the profitability of offshore

wind emerges if you consider the historical prices of wind gener-ated electricity, rather than the prices of electricity generally. Windpower is intermittent, and therefore less valuable than predictableforms of energy. As a result, the price of wind generated electricityranged in 2007 from 3 to 6 c/kWh, inclusive of RECs [32]. This sug-gests that given current state and federal subsidies offshore windoperators would need to generate electricity for between 5 and8 c/kWh in order to compete with conventionally generated elec-tricity. This is likely to be below the current capabilities of offshorewind. There are, however, a number of factors that could alter thisanalysis including changing regulation and fossil fuel prices.

In addition to being smaller, subsidies in the US are less certainthan those in Europe. The PTC could expire and REC prices are notset at minimum levels. Thus, unlike in Denmark where developersare guaranteed a certain price, developers in the US are taking asignificant risk in developing an offshore wind farm and are gam-bling that REC prices increase and/or the PTC is renewed and/orelectricity prices increase.

Recently, the US Department of Energy (DOE) instituted a pro-gram in which it will guarantee private loans for up to 80% of thetotal project costs made to renewable energy developers. Guaran-tees may exceed $500 million, but may only be made for technol-ogies that are not in general commercial use (are not operatingin more than three facilities for more than 5 years). These loanguarantees should make financing offshore wind projects morefeasible, but unlike European programs, do not provide directgrants for capital expenditures.

Finally, while federal subsidies for offshore wind power aremore modest in the US than Europe, and while this difference isgenerally not compensated with REC’s, it is possible that local reg-ulated electric utilities may offer offshore wind farms rates that ex-ceed the current market rates. This could occur as hedge againstfuture conventional price increases, or it could occur at the direc-tion of state governments or public service commissions, or both.For example, Delmarva Power has agreed to pay Bluewater Wind11.4 c/kWh (in 2007 dollars; 98.9 $/MWh and 15.32 $/REC). Thisis above the current average wholesale power price on the PJMday ahead market, and Delmarva plans on receiving a 350% creditfor each REC purchased, and it has locked in a price for both elec-tricity and RECs for 25 years.

5.2. Regulations

The governments of Western Europe have instituted regulationsspecifically for expediting and encouraging offshore wind energy.In Denmark the government issues tenders for offshore wind farmsin which developers compete to offer the government the lowestfeed-in price for a given development. This central planning has al-most certainly sped development. In the UK, the Crown Estate hasheld two rounds of leasing which have provided an expeditedsystem of approval. In the most recent round the government

Table 5Regulations for leasing land for offshore wind development in Europe and the US.

Nation Denmark Germany UK Texas US

Fee None None One time lease fee of up to£500,000

3.5–5.5% royalty duringoperation

2% of Gross revenue

Term 25 Years 25 Years Up to 50 years 30 Years 30 YearsCompetition Lowest feed-in

priceFirst-comefirst-served

Quality of proposal Monetary benefit to state Monetary benefit tostate

Selection of sites byregulators

Yes No Yes Yes Mixed

3 In the Danish case the willingness-to-pay was estimated on a per householdannual basis, while in the U.S. study, payments were assumed to be one time and perperson.

1852 B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856

identified areas for development and conducted environmentalstudies before leasing. In Germany, approval of wind farms wasmade non-discretionary; wind farm developers have a right tobuild wind farms unless the government decides that they pose athreat to navigation or the environment. Furthermore, in both Ger-many and The Netherlands, competition is based on a first-come-first served process in which developers compete to be the firstto submit an acceptable application for a given area. This couldencourage speculative claims, but would also encourage develop-ers to quickly apply for developmental rights.

The US currently lacks a final regulatory system for offshorewind energy, and the development of a regulatory system has beenslowed by legal challenges, Congressional action and detailed plan-ning on the part of regulators. Therefore, despite the fact that thefirst offshore wind farm was proposed in US waters in 2001, as ofJanuary 2009, it has not been approved. Conversely, many Europeanwind farms have begun operation within 4 or 5 years of being pro-posed. The MMS is in the process of developing regulations [39].

Regulations stipulate the fees that developers must pay for useof the seabed. The fees that European nations charge for use of theseabed are either minimal or non-existent and they are almostnever competitively determined. The proposed US regulations in-clude royalties for use of public lands that are based, in part, oncompetitive bidding for the proposal with the largest monetarybenefit to the government. The presence of these fees will havean effect on the profitability of wind farms in the US; however,their impact will be small when compared to the differences insubsidies offered in Europe and the US.

Nonetheless, MMS regulators view their responsibility not asencouraging the development of an offshore energy industry, butto ensure that any offshore activities are conducted safely, accord-ing to environmental law, and with a fair compensation to the pub-lic. This contrasts with European regulators which explicitlyencourage the development of the industry. Some other differencesin regulatory structure that may impact development are given inTable 5. It is possible that the long leases of the UK system or thesite selection by regulators in the UK and Denmark could have speddevelopment in these countries [40].

5.3. Wind resources

Offshore wind speeds vary positively with latitude [41]. North-ern Europe is at higher latitudes than the US coast (excluding Alas-ka), and it should therefore be expected that there will be moreeconomically suitable sites for offshore wind power in NorthernEurope than the US. There are a number of sites off the coast ofnorthern Europe where wind speeds average 9–10 m/s at 50 m[42,43]. These wind speeds are considered superb by NREL forwind energy production. In contrast, the winds off the coast ofNew England are generally 8–9 m/s while those in the Gulf of Mex-ico are 7–9 m/s [41]. The Pacific coast does have large areas of 9–10 m/s winds, but these are generally in deep water. There aresmall areas of high winds and shallow waters off the coast ofNew England [44,45]. These sites are likely as suitable as those inEurope. Even the more modest winds of the Gulf of Mexico can

be developed; however, they are likely to have lower capacity fac-tors and lower revenues.

It is important to note that since power scales with the cube ofwind speed, the local wind speed at hub height is important for off-shore wind developers. It is also important to recognize that manywind resource estimates have been done at 10 or 50 m, not themodern hub heights of approximately 80 m. Individual developerswill need to assess wind speeds on location at hub height beforecommencing construction. As a result, comparisons between Eur-ope and the US are rough and broad and cannot be taken to suggestthat offshore wind development will not occur in the US, only thatthe US industry as a whole may be at a disadvantage relative to theEuropeans.

5.4. Population density and impacts

Population density is an overlooked driver of offshore winddevelopment. Due to the high population density of Europe, Europehas less room to expand onshore wind energy production [46].Much of Europe is densely populated, including Denmark, the UKand Germany, the countries that have seen the most offshore winddevelopment. This high population density partially forecloses in-creased onshore wind development, often the cheapest renewableenergy source. Conversely, the wind resources of the US are con-centrated in the Great Plains where population densities are low,thus there is ample room for expansion of onshore wind resourceswithout significant conflicts with local populations. US developersinterested in wind development can therefore develop cheaper andless risky projects onshore without the need to go offshore.

It is important to note that the US North Atlantic coast is insome ways similar to Northern Europe. The East coast is also den-sely populated, and it would be difficult to build transmission linesfrom the Mid-west to the North East. The Appalachian Mountainsdo provide one potential for onshore wind development on theeast coast, but this would have significant environmental and so-cial impacts. Therefore, population constraints, coupled with theRPS laws in the North East States (discussed below) may makethe states of the Mid Atlantic and New England relatively suitablefor offshore wind.

In general, the populations of both the US and Western Europehave similar attitudes towards local offshore development. As inthe US, local residents in Europe are willing to pay to keep windfarms out of their viewshed. In the US, Haughton et al. [47] esti-mated the willingness of Cape Cod residents to pay (WTP) for notplacing wind farms in their area to be $75 per person, while Laden-burg and Dubgaard [48] estimated a similar value at approximately120 Euros ($190) for Danes.3 Krueger (2007) found similar resultsamong a population of Delaware residents [49]. Although the re-sults are not directly comparable, they do suggest that in bothplaces citizens place a premium on viewsheds unobstructed bywind turbines.

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5.5. Commercial interests

Europe is home to some of the largest producers of wind tur-bines including Siemens, Enercon, Gamesa, Vestas and Repower[50]. Similarly, Europe is the primary source for submarine trans-mission cables used in offshore wind farms [51] and has a well-developed offshore construction industry associated with theNorth Sea oil and gas industry. As a result, each offshore winddevelopment has a cascading impact on jobs throughout the Euro-pean economy providing jobs in the offshore construction, turbine,and cable industries, as well as the companies that support thoseindustries, especially banks and steel manufacturers. Conversely,in the US offshore turbines may or may not be made in the USand the marine cable almost certainly will not be [51]. Thus, thenumber of jobs created per MW of offshore wind capacity will belower in the US than in Europe. This reduces the incentive for leg-islators to heavily incentivize the offshore wind industry.

4 Similarly, as of March 2008 the price of carbon credits on the European ClimateExchange (a mandatory EU market) was seven times higher than the price of creditson the Chicago Climate Exchange (a voluntary market; see www.chicagoclimatex.comand www.europeanclimateexchange.com).

6. Potential policies for increasing offshore wind in the US

There are a number of policies which could be adopted by theUS that could stimulate the offshore wind industry [52]. Here, wediscuss the potential impacts of four policies on offshore wind en-ergy. We discuss the effects of a federal renewable portfolio stan-dard, an extension of the production tax credit, and the adoptionof a cap-and-trade program. All of these have recently been de-bated by Congress, and a cap-and-trade program is believed tobe most cost-effective [53]. We also discuss the creation of nationaloffshore wind capacity goals, something that is common in Europe.There are other state-level methods of alternative energy promo-tion, but these are thought to be less effective [54,55]. We do notintend this discussion to offer support or condemnation of thesepolicies, only to discuss their likely impacts on offshore winddevelopment.

6.1. The production tax credit

The PTC is similar to the tax credits in some European countriesand is similar to a feed-in tariff [56]. However, in European nations,the tax credits are generally exemptions from carbon taxes, whichdo not exist in the US. Among the most likely ways for the federalgovernment to stimulate offshore wind energy would be throughan extension or expansion of the PTC. The PTC is a reasonable stim-ulant for the onshore wind industry, but due to the long planningneeded for offshore wind projects it is a poor stimulant for the off-shore wind energy [57].

The PTC has expired three times in the past decade and exten-sions of the PTC have been for only 1 or 2 years at a time. In late2008, the PTC for wind energy was extended until December 31,2009 and in the economic stimulus bill the PTC was extendedthrough 2012 [58]. This nearly 4 year extension of the PTC is per-haps the minimum reasonable length necessary to stimulate off-shore wind development. A project in the planning stages in2009 would not be operational until about 2012 and a project thatonly began planning in 2010 would not be able to count on the PTC.In order to be useful for offshore wind farms, a PTC commitment onthe order of a decade is needed. Recently, the PTC was extended for8 years for solar power and a similar PTC exists for nuclear projectsonline before 2021. A similar commitment for offshore wind wouldlikely be stimulating to the industry. A 10 year PTC is not necessaryfor the projects already in the planning stages; however, a 10 yearPTC would allow for future developments that a shorter, 5 year PTCmight not.

Additionally, unlike tax credits in Europe, the PTC is designed toapply only for the first 10 years of operation. However, the cost of

energy is unlikely to decline for already established offshore windprojects over that time. Instead, the costs to an offshore producerwill not decline until they have paid off the loan used to cover theircapital costs. The term of these loans is unlikely to be less than20 years. Thus, a company may be able to profitably produce elec-tricity for the first 10 years of operation, but be unable to cover itsoperating expenses after it is no longer covered by the PTC.

Critics of the PTC argue that it was originally designed to pro-vide an incentive to the developing renewable energy industryand it should now be allowed to expire [37]. However, unlikeEuropean feed-in policies, the PTC treats all renewable energytechnologies equally. Thus, while onshore wind is now profitableand likely does not need the PTC in order to compete with coaland natural gas fired power, offshore wind power is a newly devel-oping industry and cannot compete on price with conventionalelectricity. Thus, the PTC could reasonably be extended for10 years for new offshore wind projects without defying its origi-nal purpose.

In addition to extending the PTC, Congress could increase it.Again this could be done either for alternative energy in general,or some subset of technologies. If the PTC is meant to make renew-able energy at least temporarily competitive with conventionalelectricity it would need to be set to a the level at which it wouldequal the difference between the cost of conventional energy andthe cost of renewable energy. In the case of offshore wind energy,the cost of production varies dramatically depending on site spe-cific factors, but it may average about 10–12 cents per kWh inthe US [34,35,59]. The average wholesale price of electricity in2007 was 6 c/kWh, while the average price at the NEPOOL hub inNew England (the hub that may be most impacted by offshorewind power) was 7.7 cents per kWh. Thus, if we assume that off-shore wind costs 10 c/kWh to produce (a conservative assump-tion), that it can be sold for 7.7 c/kWh, then the PTC might needto be set to at least 3 cents/kWh in order to make it competitivewith more traditional power sources. This does not take into ac-count the value of RECs or the lower value of wind power relativeto conventional power.

Each 1000 MW of offshore wind capacity would cost the gov-ernment 61 million dollars per year (with a 2 c/kWh PTC, $92 mil-lion with a 3 c/kWh PTC; assuming 35% capacity factor). If Congresswere to extend the PTC for offshore wind for 10 years, it seemsprobable that no more than 2500–5000 MW of capacity could bebuilt. This would suggest a maximum subsidy by the federal gov-ernment of $152–$305 million per year with a 2 c/kWh PTC. Thisis less than one ten-thousandth of the federal budget.

6.2. Greenhouse gas legislation

The Lieberman–Warner bill was voted out of committee forconsideration by the full Senate in December 2007 but failed topass the Senate in June of 2008. It called for the establishment ofa cap-and-trade program which would cap greenhouse gas emis-sions but would allow emitters to purchase offsets to satisfy upto 15% of their obligation. It would establish a national mandatorycarbon market which would replace or supplement the voluntarymarket already in place. In the REC market the price of credits incompliance markets is often higher than the price of credits inthe voluntary market.4 It seems likely that the imposition of acap-and-trade program would therefore boost the price of carboncredits which would increase the costs of conventional electricityand increase the profitability of any renewable energy project.

1854 B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856

The Lieberman–Warner bill failed to pass in the 110th Congress,however, given that both of the 2008 US presidential candidatessupported some cap-and-trade program (suggesting that climatechange legislation may be more bipartisan than in the past) itseems likely that some cap-and-trade system will eventually beenacted.

Carbon taxes have also been suggested as a means for combat-ing climate change and are used in Europe. In the 110th Congress,two bills were introduced into the House of Representatives thatproposed carbon taxes of $2.7 or $15 per ton of CO2 with incremen-tal increases. A carbon tax would function to make non-renewableenergy more expensive, thereby giving offshore wind power acompetitive advantage. In the US, there are about 0.91 metric tonesof CO2 emitted per MWh of coal fired electricity and 0.59 metrictones of CO2 emitted per MWh of natural gas fired electricity[60,61]. Thus, a $10 per ton CO2 tax would increase electricityprices by about 0.6–0.9 c/kWh. This is not enough to have anappreciable effect on the profitability of offshore wind power. Car-bon taxes also do not seem to be as popular with lawmakers as arecap-and-trade programs.

6.3. Renewable portfolio standards

Twenty-seven states and the District of Columbia have RPSs[38]. This includes almost all of the states in which offshore windis a realistic possibility (excepting Louisiana and Georgia). The USCongress has considered the establishment of a national RPS [62].In 2007 the House and Senate debated bills that would set an RPStarget of 15% renewable energy by 2020. The Senate has passedsimilar bills three times. The most recent bills also contained annu-ally increasing goals between 2010 and 2020 and included tradingschemes, penalties and caps for the prices of RECs. Opponents ofthe federal RPS argued that the system would be unfair to theSouth and Mid-west regions of the US because of the unequal dis-tribution of renewable energy potential and that it would cost con-sumers billions of dollars.

The combination of the federal PTC and state RPS has stimulatedwind energy development [63] with modest (less than 1% [57,64])impacts on electricity prices. It is reasonable to expect that a fed-eral RPS would similarly stimulate the offshore wind industry[65]. However, there are also reasons to doubt the efficacy of a fed-eral RPS program for offshore wind. The 15% standard in the mostrecent legislation is below almost all state RPS goals. While federallegislation will only set a minimum RPS which states may exceed,most of the coastal states already exceed the proposed federal RPS.Thus, the only way that a federal RPS would be beneficial for off-shore wind would be if it caused the prices of all RECs to increase.This may occur since a federal RPS would increase demand forRECs.

Interestingly, if, following the passage of a federal RPS, a stateallowed an electricity producer to purchase RECs to meet the fed-eral RPS from outside the state, this might lower the price of RECs.For example, utilities in Massachusetts are required to supply 15%of their electricity from renewable sources by 2020, but they cur-rently must purchase expensive Massachusetts RECs to offset gapsin production. If federal legislation passed, Massachusetts electric-ity retailers might be able to purchase RECs on a national market.While this new national market would have stronger demand thana regional market, its supply would also be much different. In astate market like that in Massachusetts, the production costs ofRECs can be quite high because of limited renewable energy poten-tials. On a national market, RECs are likely to be dominated by on-shore wind production which is already profitable without RECsand the supply of which would vastly outweigh RECs from offshorewind power. As a result, this could depress the price of RECs inmany markets. Whether or not states could buy national RECs to

meet state goals would likely depend on the wording of a federalRPS law.

6.4. National goals for offshore wind power

Governments in Europe and more recently US States have usednational goals as instruments of policy. For example, Denmark set agoal of producing 15% of its energy from wind power by 2005. Ithas been argued that the establishment of this goal sent a signalto the wind industry that the national government was seriousabout the future of wind power and Denmark met this goal 3 yearsearly [66]. Similarly, the Dutch have set a goal of 6000 MW of off-shore capacity by 2020 [67]. Goals can be purely aspirational, orthey could be mandatory, as in state RPS standards. A national goalfor offshore wind power in the US could occur in the context of alarger goal for wind power or ocean energy in general.

In May 2008 the US Department of Energy released a reportentitled ‘‘20% Wind Energy by 2030”. The report does not specifi-cally advocate for generating 20% of US electricity consumptionwith wind power by 2030, instead it is meant to discuss the feasi-bility of such a goal. The report concludes that this goal is ambi-tious but feasible and that it would have numerous benefits. TheDOE report assumes that offshore wind power capacity is about50 GW in 2030, about 15% of overall 2030 wind capacity.

A relatively modest but achievable goal might be to have 5 GWof capacity (roughly 10 to 12 Cape Wind sized developments) by2020. Total nameplate US electrical capacity in 2006 was1075 GW, so this commitment would only account for one-halfof one percent of capacity. The goal described in the 2008 DOE re-port of 50 GW by 2030 would require at least 100 Cape Wind sizedprojects. Given the limited shallow-water offshore wind resourcesof most of the continental US and the user conflicts that wouldlikely be associated with near-shore development, this goal wouldseem difficult to achieve without deep-water technology which iscurrently under development.

The effects of a goal would differ markedly depending on if thegoal were part of a national technology specific RPS program (andthus a mandate) or an aspirational goal. Several states specify theproportions of certain technologies that must be used to meetRPS standards. The federal government could follow this example,however, this seems unlikely. A voluntary goal would not changethe underlying economics of offshore wind and it therefore seemsunlikely that it would have significant impacts on the developmentof the industry.

6.5. State policies

Action by the states may be the most effective way to stimulatethe offshore wind industry. In Texas, WEST approached the GeneralLand Office (GLO) about leasing offshore lands, and the GLO, eagerto boost revenues, readily agreed. Similarly, the projects in NewJersey and Rhode Island that are currently being planned haveexperienced significant early progress. This is in contrast to theCape Wind project in which the government of Massachusetts isnot directly involved due to Cape Wind’s location in federal waters.

In Delaware, the contract between Delmarva Power and Blue-water Wind was stimulated in part by the actions of the DelawareGeneral Assembly which ordered Delmarva Power to contract forthe purchase of power from a new power facility inside the Stateof Delaware. As contract negotiations between Delmarva Powerand Bluewater Wind stalled, the legislature took an active role infacilitating negotiations. Furthermore, the final price paid to Blue-water in the power purchase agreement is significantly higher thanthe average price paid by Delaware consumers (approximately14 c/kWh to Bluewater compared to 10.1 c/kWh on average). Thehigh price, facilitated by the State’s RPS policy and the actions of

B. Snyder, M.J. Kaiser / Applied Energy 86 (2009) 1845–1856 1855

the Legislature, acts as a subsidy for offshore wind. Similarly, inNew Jersey the Governor has set an aspirational goal of1000 MW of capacity by 2020 and has a program that will reim-burse developers for the costs of meteorological towers.

State planning could be particularly important in the Mid-Atlantic and North Eastern states. These states have RPS goals, ac-cess to the best offshore wind resources, and few alternative meansof meeting RPS goals. These states are densely populated with rel-atively low onshore wind resources. They also lack the largeamounts of farm derived biomass of the Mid-west, and the solarresources of the southwest.

7. Conclusions

The development of the offshore wind industry in Europe hasbeen largely driven by government policies and financial incen-tives. The types and scale of financial incentives used in Europemay be unlikely in the US (at least on a federal level) since theUS has no international obligation to limit carbon emissions andgenerally seems to prefer ‘‘market-driven” solutions like cap-and-trade or renewable energy credit programs over either carbontaxes or feed-in prices. This makes it unsurprising that the offshorewind industry has developed outside the US.

The US does have sites that are amenable to offshore wind en-ergy, but if policymakers hope to see offshore wind development inthe US commensurate with that of Europe, they will have to in-crease subsidies. In the absence of government intervention, off-shore wind power will have a difficult time competing on pricewith conventional energy sources over the near term (barring largeincreases in gas or coal prices) and is likely to be limited to a locallyimportant but nationally insignificant role (on the scale of 10 GWof capacity, or approximately 1% of electricity generation).

From the perspective of offshore wind development, a longterm extensions the recent of the PTC for wind projects is likelynecessary to stimulate and offshore wind industry. Equally criticalis the involvement of state government. Both WEST and the Blue-water Wind project have experienced significant recent success inlarge part due to the states with which they are working.

A further development which could significantly change theoutlook for offshore wind power is a major increase in the priceof conventional power. Coal and natural gas prices increased dra-matically in 2008 (natural gas prices have since collapsed) and itwould not be unreasonable to expect the price of conventionalelectricity to increase significantly in the coming years.

The ambitious plans of small start-up companies might worrysome stakeholders interested in the development of a viable off-shore wind industry since they are quite different from the devel-opment of the European industry. It is not clear that all of thedevelopers interested in offshore wind in the US have the requisiteinfrastructure and institutional capacity to develop a new commer-cial offshore industry. However, if these companies can financetheir projects and use the marine construction experience of theoffshore oil and gas industry or other marine construction indus-tries, then they may be able to rapidly develop a commercial off-shore wind industry and skip over the long slow period ofexperimental development that occurred in Europe.

Onshore wind development is experiencing rapid growth in theUS; in 2007 wind power was the second largest source of newcapacity additions behind natural gas [32] while in 2008 the on-shore wind industry added 8300 MW of capacity. If this growthcontinues, at some point onshore will resources will no longer bereadily available, increasing the costs of onshore wind due to thecosts of leasing land, and making offshore wind more attractive.In 2007, over 5000 MW of new capacity was added. Assuming aturbine density of 5 MW per km2, then over 1000 km2 were con-

verted to wind farms in 2007 [68]. Presumably, the sites with thehighest wind speeds, lowest land lease or purchase costs and bestaccess to transmission are developed first. When these sites are nolonger readily available, offshore development may expand.

Even if the first offshore wind developments in the US are suc-cessful and the profitability of offshore wind farms in the US is in-creased through increased government subsidies, the differentwind conditions and population densities in Europe and the US willensure that offshore wind is more common in Europe than the USThe fact that onshore wind resource sites are still widely availablein the US and that the onshore environment is inherently lesscostly and risky may cause offshore wind to be a small contributorto electricity production in the US over the near term. The mostrealistic chances for a successful offshore wind in the US is likelyin the North East where offshore winds, population densities andstate policies are all relatively favorable for the development ofthe industry.

Acknowledgements

We thank one anonymous reviewer for helpful comments. Thispaper was prepared on behalf of the US Department of the Interior,Minerals Management Service, Gulf of Mexico OCS region, and hasnot been technically reviewed by the MMS. The opinions, findings,conclusions, or recommendations expressed in this paper are thoseof the authors, and do not necessarily reflect the views of the Min-erals Management Service. Funding for this research was providedthrough the US Department of the Interior, Minerals ManagementService.

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