The Obama administration has made no secret of its support for renewable energy, but in the case of the offshore wind there's a question of whether the administration has enough tools at its disposal to get the industry--which still doesn't really exist in the US--off the ground.
A big part of the problem is that offshore wind, like most renewables, is a policy-dependant industry dealing with a dysfunctional Congress.
Federal energy policy is still largely where it was 18 months ago, after the fiery, multi-car pileup that marked the demise of cap-and-trade. Greens are still furiously working the Jaws of Life to see what bodies may be able to be pulled from the wreckage, but ambitious policy efforts remain on life support, at best.
Few observers think anything like the ambitious "clean energy standard" President Obama called for in his last State of the Union will have a chance of becoming law anytime before 2013. And an effort to price CO2 emissions, which could go a long way toward establishing parity between fossil fuels and renewables, is even further on the horizon.
In the meantime, renewable advocates are focusing virtually all of their lobbying might on convincing Congress to extend temporary tax breaks for the industry. Although those incentives don't expire until the end of next year, concern that they may not be renewed already is causing shortfalls in the project pipeline for traditional wind and solar projects.
Of course, offshore wind doesn't even really have much of a project pipeline to speak of yet, and it is in this environment that the handful of companies hoping to build a new industry in the US is struggling to find supportive officials wherever they can.
The Obama administration is using what tools it has--aiming to streamline environmental reviews of offshore wind leases, for example--but much of the heavy lifting has been left to states, which can create demand with renewable energy mandates and incentives targeted to offshore wind producers.
That bifurcation creates the dreaded "policy uncertainty" that industry representatives and analysts across the spectrum say can spell doom for a business's bottom line.
Developers are trying to maintain a positive outlook, but it gets more difficult the longer it takes for projects to be built, or even authorized.
Case in point: the American Wind Energy Association's annual conference focused on offshore generation. In 2010, the conference drew more than 1,700 people, ranging from developers to environmentalists to state and federal regulators, and it featured the landmark announcement that the offshore, groundbreaking Cape Wind project would win its needed approval from the federal government. This year, attendance at the trade show fell to around 1,400, and Interior Secretary Ken Salazar's keynote speech was notably devoid of major news.
As for Cape Wind, which aims to be the first utility-scale wind farm constructed in federal waters, there is still no "steel in the water" today, despite the company having its approval in hand for more than a year.
Cape Wind has said it plans to begin construction by the end of 2012, but the company's timeline has slipped before. And even to get started by next year, the company will need at least a bit of good luck. It needs the Federal Aviation Administration to re-certify that the planned turbines will not obstruct flight paths, after an earlier certification was thrown out in court. And it needs to prevail in several other state and federal lawsuits challenging environmental reviews of the project, its power purchase agreement and other aspects of the wind farm.
On top of all that, the company last year lost the opportunity for a loan guarantee from the Energy Department. It only has a power purchase agreement in place for 50% of the 420 MW that would be generated, and still has not inked an agreement to finance the project.
Perhaps most frustrating to US offshore wind developers is that they can look across the Atlantic to find a thriving industry. More than 1,200 turbines and installed at 49 wind farms across nine European countries, generating nearly 3,300 MW, according to the European Wind Energy Association. And a total of 150 GW of offshore projects are in various planning stages.
Aside from Cape Wind and the 200-MW project Bluewater Wind planned for offshore Delaware, the US project pipeline is much more speculative. To be sure, the interest in offshore wind development is there. Eleven companies said they would be interested in leases offshore New Jersey, as did 10 for leases offshore Massachusetts and eight each for leases offshore Maryland and Rhode Island.
Salazar has said he hopes to have as many as five leases with offshore developers signed in the next year. The Bureau of Ocean Energy Management is mulling several proposals for how to conduct competitive auctions, based on how much developers would be willing to pay as a cash bonus to win leases.
While BOEM is considering offering discounts of up to 25% for developers who meet criteria such as having a power purchase agreement in hand, several companies are worried that won't be enough to exclude malicious participants from the auction.
"There are very deep-pocketed opponents we will be battling over the next many years out there that don't care how much they spend" to stop offshore wind projects, said Robert Gibbs, of Garden State Offshore Energy, at a leasing workshop last week.
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