California’s Deepwater Wind Challenge
In late June the California Energy Commission will submit its strategic plan for the development of offshore wind energy to the state’s legislature. The plan is the culmination of two years of efforts by California to jump-start its offshore wind industry and help the state reach its goal of 100% carbon-free electricity by the year 2045.
Yet California’s offshore wind ambitions are also a bet on floating offshore wind technology that is required by the state’s deep ocean waters. The technology has scarcely been applied anywhere in the world, and it presents infrastructure and economic hurdles that could complicate the state’s offshore wind efforts.
Tim Fischer, Executive Director for Global Wind with Ramboll, a Danish offshore wind consultancy and engineering consultant to California effort, and Joe Rand of the Lawrence Berkeley National Laboratory discusses the challenges of quickly scaling floating wind power to meet California’s energy goals. They also consider the challenges of connecting large amounts of renewable energy to the on-shore grid, taking into account the need to balance infrastructure development with community priorities.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. Later this week, the California Energy Commission is due to submit its strategic plan for the development of offshore wind energy to the state’s legislature. The plan is the culmination of several years of efforts by California to jumpstart its offshore wind industry and to help the state reach its goal of 100% carbon-free electricity by the year 2045. Yet California’s offshore wind ambitions are also a bet on floating offshore wind technology that is required by the state’s deep ocean waters. The technology has seen limited global implementation to date, and it presents technological and economic hurdles that could complicate the state’s offshore wind efforts.
On today’s podcast, we’ll dive into the challenges that lie ahead for California offshore wind. My guests are Tim Fischer, Executive Director for Global Wind with Ramboll, a Danish offshore wind consultancy working on the California project. Joe Rand is a Researcher at the Lawrence Berkeley National Laboratory, where he focuses on the challenge of interconnecting clean energy to the grid and the impacts of energy infrastructure on local communities. Tim and Joe, welcome to the podcast.
Joe Rand: Thank you.
Tim Fischer: Thank you, Andy.
Stone: So Tim, you and Ramboll have been deeply involved in some of the East Coast offshore wind projects here in the United States. Now you’re working on California. Tell me a little bit about the project in California and your work with Ramboll.
Fischer: Yes, thanks Andy. Maybe before entering the topic, a bit of background. As you said, the Danish consultancy has headquarters in Copenhagen, but I think it’s fair to say we also have around 130 offices across the United States. While I’ve been involved in the market since K-Wind, since the very early days, then obviously, like many others, that stalled for a while. Then the past five years, we’ve been heavily involved in the U.S. East Coast, West Coast, South Coast, on probably 70% of all of the wind projects on U.S. waters we are currently working on, so we are pretty active in the scene. Most recently — I would say for two years — we’ve been active on the California market. We also have some work on-going in Hawaii. So there are already some activities on the West Coast. Obviously now with the wind lease auctions being held, now it’s even more focused. And I think it is interesting to see another coastline developing besides obviously the East Coast being already a couple of years further ahead.
Stone: And Joe, you work in the Electricity Markets and Policy Group at the Lawrence Berkeley National Lab. Tell us a little bit about the work and your focus there.
Rand: Yes, so our team at Berkeley Lab does a wide variety of analysis on costs, deployment, and market trends for renewable energy across the United States. As a U.S. Department of Energy-funded national laboratory, indeed, we are focused on research in the U.S. and don’t have as much of a global focus. That said, of course, we are keeping track of global trends and do some research that has certainly global impact and global data inputs.
My research personally focuses largely or broadly on what I consider the leading barriers to rapid and widespread deployment of clean energy in the United States. Two of those major barriers, for example, include transmission and interconnection bottlenecks and backlogs, so just the process of getting proposed projects actually connected to the grid. And then another big area of research that our team does is focused on social acceptance and that as a barrier to deploying wind and solar projects. Of course we’re speaking mostly about utility-scale or large-scale wind and solar projects in the U.S.
Stone: Today we’re going to be talking about all these issues within the context of California’s offshore wind development. Its development is based in Assembly Bill 525, which was passed by the state legislature in 2021 and requires the state to establish offshore wind energy goals through the end of this decade and all the way through 2045, which is when the state plans to be net carbon-zero on its grid.
Now offshore wind development has intensified in recent years on the East Coast. Tim, I want to ask you: California’s coastline is fundamentally different from the East Coast. It requires a different type of offshore wind technology, which is floating wind. Can you discuss California’s unique offshore coastline, its geography, and introduce us to the concept of deep water wind?
Fischer: Just one thing before we make a deep dive on California. Let’s also say offshore wind globally has gone through an amazingly rapid expansion the past couple of years. It’s super exciting to see how this industry is developing worldwide and also in the United States, due to fantastic work out of many of the states, the federal government, and a lot of business associations and universities that are pushing it. The reason I am saying this is because I think it is important for the discussion also in California. It is a globally connected market, so when we discuss supply chain, technology development, et cetera, it is important to keep a view on the global market, the global trends, because it will also impact California and vice versa. That was just very, very important to say.
And obviously the East Coast, as I said in the beginning, is a couple of years ahead, so I think therefore the West Coast, of course, now has a good advantage to maybe learn some of the lessons already and make some of the things different. Obviously I think there are a couple of things that are almost the same on both coastlines. Off-take grid connection is a challenge. It’s the whole port on which the infrastructure needs to be established. I think that’s a similar challenge on both sides. Permit is always — I mean it’s a new topic, plus it’s a new type of technology, rather similar even though of course you have local specific habitats. You have also local situations like the Navy. But also generally rather similar to the East Coast, you could say the main differences we will see on the West Coast obviously is technology, because we’re talking about projects 1,000 meters deep — so I mean truly deep water. But also the workforce supply chain will be a little bit different. I mean not different in the way that we will need it, like on the East Coast. There is a 60-year requirement for both workforce and supply chain. I think the major difference is that on the East Coast, you somewhat have the European markets not that far away. They are close by to help, whereas I think California is pretty much on its own. The Pacific Ocean is huge until you can maybe tap into another supply market like Asia. And by the way, Asia is also pretty busy with its own developments, plus of course there also may be some geopolitical reasons.
So California probably has to really solve it from the West Coast, whereas the East Coast can, maybe on the supply chain workforce here and there, still tap into the European market. And that’s probably, besides technology, one of the biggest differences. And the final one, which is also not to be underestimated, on the East Coast, we have a pretty good fit of good wind conditions in the North, with the big consumer centers in the North. But if I now look at the West Coast as a whole, the further north you go, the better the wind, whereas you have the consumers’ interests rather in the south. So it’s a different challenge from an off-take perspective because you may be able to produce electricity, but you may not need it all, so you have to look into maybe alternative ways to get the energy down into the big consumer centers.
Stone: So the grid development we’re going to be getting into is going to be a component of that — obviously an important component. I just wanted to point out that from what I’ve read, about two-thirds of offshore wind potential around the world is actually in waters that are too deep for the fixed platforms, like we’re seeing on the East Coast and in most of the rest of the world. This is an interesting topic, and I was really looking forward to doing this podcast with both of you.
In a prior life, I was a journalist, and about 15 years ago I wrote a story. One of my first clean energy stories was about a Norwegian start-up company. This was around the year 2005, give or take. That company was working on developing deep water floating offshore wind technology. I remember the conversation we had that went into that article — or one of the conversations. They discussed the platforms that are used for floating wind are very similar to what’s used actually in the oil and gas industry for deep water for drilling. The idea was that this is a proven technology. It’s going to be ready to go. And here we are 15 years later, and deep water floating wind is still relatively nascent. Tim, I wonder if you could tell us why has it taken so long to scale deep water wind?
Fischer: I think you explained one good reason. It is actually not the same as oil and gas. That technique was done also 20 years ago in bottom-fixed offshore wind. I think we’re dealing with a rather complex technology. I still remember my professor back at university saying, “Offshore wind is for people who like dynamics.” Because we’re dealing with this super complex technology, and if bottom-fixed is already complex, then floating wind is even more complex because you’re dealing with probably one of the most unstable structures on the planet. I mean, probably a floating wind turbine, the way it is loaded, is super complex. It should operate 20 to 30 years, with hopefully no major mistakes and in super harsh weather conditions.
One thing we also shouldn’t forget is it’s still a rather young technology, right? I myself, I’m now close to 20 years in the offshore wind business. Back in 2006, I had my first work in floating wind. Back then were some of the pioneers from the United States, Jason Jonkman, to mention one of them from NREL. So in 2006, 2007, it started with the first kind of research, and then we saw the first prototype in Norway in 2009, with a rather small turbine from Equinor. Then it took until 2017 to see the first pre-commercial wind farm. There were only five units in Scotland, and since then, a couple of few further small or pre-commercial projects. So it is still a rather young technology in a rather complex technical field. So there is maybe a starting point.
The other one is if you tap into new technology, there is always the risk on the beauty around it, right? If you go into a new technology, there are, of course, many new options to do things. And we also see that here in floating wind because we see a lot of innovators coming with different types of material, because you could do them in concrete. You could do them with different means of fabrication. You could use that kind of a ship-building type structure. You could maybe also go a little bit in the way oil and gas has fabricated floaters. Maybe you also want to lean into the wind turbine fabrication business.
So all that together, if you look into the floating business, you can probably today find more than a hundred concepts that theoretically could work, but the problem is 90%, or maybe even 95% of them will never make it to market and will disappear again. We may even see hybrids of them finally making it to market, but of course all these vast amounts of options, all tapping into pretty fundamental different technologies, of course, makes it a bit more difficult to bring technology to maturity that we’ll likely see on bottom-fixed, where you basically have only two or three different types of structures on the markets, with monopiles, jackets and some concrete gravity-based structures.
So probably the sheer amount of options the market has at the moment makes it rather difficult for developers, for banks, for insurance companies to also get, of course, trust into the technology and truly commercialize it. And that’s connected with — you said it just a minute ago — of course there is a huge potential for floating wind worldwide, but the reality is also that the current hot offshore wind markets all still have rather well reachable bottom-fixed products, right? Therefore, there’s still a lot of focus on bottom-fixed in most of the markets because it is commercially more attractive and therefore the industry of course is currently focusing first of all on technology they understand, they trust, and also the price level is competitive.
Stone: I’m just curious, the technology that’s going to be used offshore of California — you mentioned that there are many different options for the floating wind technology. Has the technology been decided yet, or is that still to be decided?
Fischer: It’s still to be decided. Just to mention a few things, the floater itself, right? So the structure the wind turbine will be mounted on, as I said, there are currently probably more than a hundred different solutions on the market. In the end, we will see solutions that of course fit to the particular market, in this case California. So the material choice will of course fit to the market also. The type of structure will have to fit the harbor conditions, these types of conditions. But also to mention, you need a substation to collect the electricity offshore, and then you bring it with one big export cable to shore. Bottom-fixed, you typically mount these substations on a big bottom-fixed foundation, but you can’t do that in 1,000 meters. So we’re having to complete new technologies. You either need a huge substation floating, as well, or there are also technologies proposing to put it on the seabed, like you do in oil and gas. So you’re dealing with rather new technology in almost all fields you’re dealing with, and that, of course, brings some exciting challenges. Let’s put it that way.
Stone: This variety of options, then, which sounds like uncertainty, is a good segue conversation to my next question. In December of 2022, the Bureau of Offshore Energy Management held an auction for wind leases offshore of California. There were five winning companies that bid a total of $757 million for the areas. Now, it’s interesting to note that was the size of the California offshore lease. Recently there was an East Coast lease that turned in $4.37 billion in commitments. Does this lower lease sale value on the West Coast reflect or indicate kind of a greater uncertainty and risk that we’re seeing with the development of California’s offshore wind industry?
Fischer: I wouldn’t say so. I think one has to be careful not to put too much science into auction prices in offshore winds these days because these prices are highly influenced by many, many factors. For example, company strategies, right? I mean one day you may find an oil and gas major that suddenly has a new strategy, saying, “I want to decarbonize my business. Let’s enter offshore winds.” Then money isn’t an issue. Then they will just pay whatever they have to pay to get a project. And the next day, they may just change their strategy. You may have followed Shell’s recent announcement of the new company policy strategy that basically says, “Back into oil and gas. Maximize regional shareholders.” Maybe then the appetite for offshore winds will be reduced. So it is closely linked to the strategy of companies. You just mentioned New York. In New York you could also see — I mean the highest prices were paid by developers that were by then not in the U.S. market, present in the Australian market. So basically they were maybe a few years late to the business, therefore they had to pay a premium to get into the business, where more established, maybe, could leverage on existing projects, existing portfolios, existing knowledge. So auction prices these days — it’s very difficult to get a direct link to a risk.
Having said that, of course, there’s some truth to the figures you’re seeing. As previously said, the West Coast is, of course, not an easy territory to develop offshore wind, right? It is basically a completely new offshore wind market, the geography. And though we have the East Coast, it is just fundamentally different from a geographical, geopolitical, from a site condition perspective. So in that sense, of course, there is a risk to it. Therefore, probably developers weren’t willing to pay as much as on the East Coast. But there’s one, I would say, very positive sign here because Equinor, the Norwegian oil and gas major and wind developer, they are the most experienced developers when it comes to floating wind. Equinor in 2009 put in the first prototype offshore, and it was also Equinor then, I think, put in the first two pre-commercial projects into the water in Europe. They have secured a lease in California. I think they wouldn’t have done it if they didn’t believe in the market. So it’s a pretty clear signal that there is a clear belief in that market and that technology, that this is all doable.
Stone: Joe, I want to jump to you here for a moment. The California Energy Commission is due to submit its strategic plan by the end of this month to the state legislature, with its offshore wind targets. And I believe those targets are two to five gigawatts by the end of this decade, and 25 gigawatts by 2045. That’s a lot of wind that needs to be interconnected, and as Tim mentioned a few moments ago, transmission issues are really at the top of the list of challenges to be addressed. You have worked extensively on this issue. How ready is California’s grid for offshore wind, and what work needs to be done?
Rand: I would say we’ve got quite a bit of work to do in order to ready California’s grid for interconnecting the volume of offshore wind that is being discussed here. So just as an example, I’ll talk briefly about the Humboldt Call Area, which is in Northern California. This is essentially one of the more rural parts of California. There is not a huge amount of local load or electricity demand right in Humboldt County, near where the offshore wind lease area is. So it just can’t absorb a whole lot of electricity coming from that project.
Recent studies have shown, for example, that if we were to build essentially a pilot-scale or kind of small commercial scale or offshore wind facility off the coast of Humboldt County, maybe the local area could absorb a 150 or 170 megawatt project with the current transmission export capacity. But really that area is looking at upwards of 1,500 or 1,800 megawatts of potential offshore wind capacity. So that’s a 10x increase in potential offshore wind capacity at that call area, from what is actually able to be currently interconnected and absorbed. And I should say that that 150 or 170 megawatts that could be absorbed assumes that that would be what’s called an “energy-only resource” for interconnection, not a network resource — which basically means that that project would face curtailment risks when the transmission lines are congested.
So suffice it to say it’s really clear that transmission upgrades are needed. Certainly the CPUC recognizes that, and the California independent system operator recognizes that, as well. I’ll also quickly mention CAISO, California Independent System Operator just last month released their 2022-2023 transmission plan that essentially identified 45 large transmission projects that CAISO was advancing to be built in the state, representing, I think, $7 billion of investment in transmission, or something like that.
Stone: And I assume those integrate the offshore wind, as well, right?
Rand: Well, that’s what is really interesting, actually, Andy. That was really designed to integrate a lot more solar, land-based wind resources and wind resources from other states that surround California. But actually CAISO said because of this AB 525 report due at the end of this month that we’ve been talking about, and because there are other steps in offshore wind development that are underway, including supply chain and developing harbors. I think they’re identifying that as sort of a little further off, so they’re not recommending approval of transmission in this planning cycle, meaning the 2022-2023 transmission plan for these big offshore wind transmission investments that we know we need. But CAISO says they’re going to look at advancing those upgrades in the next planning cycle, which would come out — I think we expect April or May of 2024.
So certainly it’s in the works. CAISO has a 20-year transmission outlook that’s not really the same as a plan. And that identifies $30 billion of transmission investments needed to meet these 2045 targets. And certainly those big offshore trunk lines are included in that 20-year outlook. But the plan that was just released last month doesn’t actually include those needed upgrades for offshore winds, so they’re kind of punting that to next year.
Stone: It’s interesting, just to jump back on the Humboldt lease, which is the Northern California lease. As I understand, and I think as you explained as well, it’s a bit remote, at least in terms of transmission infrastructure. Somewhere I was reading that maybe if the transmission infrastructure isn’t adequate or at some point in the future isn’t built to handle all of the energy coming in from that offshore development, that maybe it’s used to run electrolyzers locally to produce green hydrogen. Is that a possibility?
Rand: Yes, I could see that as a possibility. I think this all comes down to what’s the cost-benefit analysis and the trade-offs, and what’s going to be the most useful for meeting our targets here. Like you said, the Humboldt area, I think it’s got a couple of 115-kilovolt lines running east-west, and a 60-kilovolt line running north-south. And just not a whole lot of export capacity. So upgrading that would be a substantial investment in order to absorb on the order of gigawatts of export power coming through.
The alternative that I’ve heard as well is thinking instead of upgrading those existing lines that run east-west over the central corridor, kind of in the Central Valley of California — instead considering maybe a subsea cable, going from Humboldt, just again in Northern California, down to sort of the Bay Area, where certainly you would have plenty of load to be absorbed there. Yes, I could imagine a scenario in which electrolyzers and green hydrogen seem like a viable alternative, instead of all those expensive transmission upgrades.
Stone: Tim, I want to jump back to something that you mentioned a little earlier in our conversation. You talked about the supporting infrastructure for offshore wind on the East Coast, which is being developed now. And I think also you alluded to the West Coast, where none of this really exists yet. I wanted to get a little bit more of a sense. What types of supporting infrastructure and industries are we looking at that need to be developed in California for equipment, et cetera, infrastructure that can’t be brought in from elsewhere? What’s going to need to be developed in California to make the floating wind industry work here?
Fischer: Yes, maybe let me put that into perspective first of all. If we talk about 5 gigawatts of installed floating wind capacity, just to mention a couple of components. We’re talking probably around a thousand miles of mooring lines, just to mention one other thing, quite a high number. We’re probably talking 200 to 250 floating substructures, each 5 to 20,000 metric tons heavy. And you could put each of them into a football stadium, right?
So it’s a huge technology we’re talking about. I think it’s probably interesting to look at related industries. I just checked the other day FPSO units, so floating production units for oil and gas. I think that currently worldwide, they’re producing 30, 40, 50 per year at the moment, which is not, of course, the exact same technology, but it’s a floating sea structure with mooring lines, et cetera, et cetera. They’re producing 30 to 50 or 60 per year. So that is probably at the moment, we have a global supply chain for around about the gigawatts, floating off the wind, if you would tap into the oil and gas supply chain.
So there are major technology and supply chain shifts that are necessary. And again, back to my initial statement, the U.S. is not alone. Obviously there are also other markets that tap into that technology and therefore it requires a lot of investments. I think many things could be solved on a temporary basis, if you bring them in from overseas, bring them in from nearby states — wind turbines typically. There are ways to solve it. I wouldn’t consider the wind turbine itself as the biggest issue. Same with cables. Again, yes, you need a lot of them, but typically it is solvable. Mooring lines are a bit of a challenge, but probably also if the industry gets the perspective, the investments will come. The technology is there. Probably the biggest challenge will be the floater, the floating structure itself, because it will be so big that you will have to fabricate or assemble it at least locally. And this, of course, will require significant port upgrades, significant local infrastructure upgrades, not least of course — I mean all the surrounding supply chain. If it is steel, of course you need to bring all the steel products. If it is concrete, I mean there is a lot of material that you would use and need.
So I think it’s primarily the floating structure because that is certainly nothing you would probably bring from overseas. That is probably what the market has to first focus on. The issue again is what I said just a few minutes ago. There are at the moment so many technology options on the market. It’s very difficult to make the right choice now. So what port — I mean, even if I talk about the Port of L.A., I think it’s a great announcement, the investments that will be made.
But again, just the depth in the port may already decide on the type of floating structure it can use or it cannot use.
Stone: You mean the depth of the California port?
Fischer: Exactly. The channel in the port. If it isn’t deep enough, then maybe certain floating structure types already are not doable again. So it is all interconnected, and that all connects, still, with insecurity on what will be the final technology that will be used on these projects, and therefore that is probably the most important thing to clarify — first from the developer perspective, and then obviously we need the investments, primarily into the substructure. I think that’s probably the biggest gap we’re seeing.
Stone: So physical infrastructure is a big step for it. Also, there’s a human infrastructure question, as well. Manpower to support the scaled development of floating wind. Tell us where California stands with that.
Fischer: Yes, that is often forgotten, right? And then people say, “Yeah, we need to accelerate programs at universities,” and of course we need well educated engineers and business people. But we also need people in the production facilities. We need many of them. For the sea structures, you need welders. If it is concrete, you’ll probably need people who can deal with precast concrete structures. And that takes time to develop such capabilities.
Stone: Are these transferable skills from existing industries, or do they have to be built up specific to offshore wind?
Fischer: It depends a bit on the final technology pick, but I think depending if it is more like a ship-build type or a bit of an oil and gas-type of structure, I think they are transferable from other industries. Certainly they are. So I think that is possible, but of course California is at the moment maybe not the state with the largest oil and gas and ship-building facilities. So therefore you will have to do some transferring and of course education programs, et cetera, et cetera. We need to focus on that.
Transferring a couple of engineers , and I’m one myself — that’s maybe a bit of an easier job. But really transferring — I mean in the U.K, just to step a bit — The U.K. also had many, many years back, said, “Well, we want local content.” But the U.K. has then forgotten that — I mean most of the steel industry has left the country for decades already, due to many reasons. Then they wanted local supply, but there were basically very few welders you could hire.
So then the industry said, “So how can we do it? There’s basically no workforce available that should do what we are supposed to do.” And it took, of course, now quite some time to reinvest and retrain. And now slowly it is picking up, but it also took them many, many years to get there.
Stone: Let me ask you a follow-on question here, Tim, about getting this all ready. And again, the target that California has set for 2030 for its floating wind industry is to have 2 to 5 gigawatts of wind in place. Now it’s interesting, we’ve talked about some of the physical infrastructure, the human infrastructure challenges. There are also environmental reviews, which I understand can take up to five to six years to complete. You’ve got one to two years for construction once the project gets underway. Given these hurdles and related challenges, is the 2030 goal, in your view, for 2 to 5 gigawatts of floating wind realistic?
Fischer: I think it is. We will not achieve it exactly. Everyone is pretty clear on that. If you just look at a typical development timeline, it is not doable, not to that scale. But I also do not see that as a big problem because I think first of all it is important to have a strong commitment and have a clear path of what we want to develop. And that is now — has been given by both Biden saying 15 gigawatts floating by ’35, and also the State of California making clear commitments. So I think in that sense it is another problem if you do not meet it exactly.
I think it is more important that we do it right and not quick, right? Because we have seen that before. What we should avoid is temporary quick fixes, like I’m sorry to say we have seen on some projects on the East Coast. They had a pure interest in bringing their own project into the water, and you talk about temporary fabrication facilities, all such things that after the projects will disappear again. That is not what we want. We want to build a long-term, a long-lasting, local new industry along the West Coast, and that takes time. And then rather give it a few more years and make it real and right, instead of making our quick fixes and bringing things from overseas. And once the products are built, everyone stays away again.
So I think in that sense, I would say it isn’t a big problem if you do not meet it exactly. It is important that we get it started, because as you said, it takes time. If you just take a port development in the United States, just the permit of it takes you already a couple of years, then the investment and the construction. And we’re not even talking about the actual wind products themselves, so it will take some time.
But we also need that time because we have to develop all the surrounding factors, right? And I think it is important that we, as an industry, talk openly about it. I also mean challenge it. I think we also need the politicians to understand that we need realistic targets. We don’t want to work with the wrong data points because we all don’t want that surprise in seven years, where suddenly everyone says, “Well, where are the projects?” And therefore it is important, I think just to be transparent on it and realistic. By the way, also goals for the prices we will see, in terms of levelized cost of energy. I think there we also need a realistic and open discussion of whether this is really possible because we will require a lot of investments on the West Coast. And depending on the way these project developments are set up, the developers have to carry quite a lot of these investments.
So when I read about $45 by 2035, floating wind energy prices in the U.S., I think we have to be a little bit careful with that. Today we’re probably talking about $150 to $180, the price as of today. This industry is here to stay. It’s a generation project you could say, to bring it up and running on the West Coast.
Stone: You just mentioned a couple of numbers, $45 per megawatt hour by the year 2035. That’s the goal of the Department of Energy’s Floating Offshore Wind Shot, which was announced a few months ago. And Joe, I want to jump to you on this one. So Tim just mentioned the levelized cost of energy. How competitive is the floating offshore wind at this point? What does it need to be?
Rand: I agree, $45 per megawatt hour is pretty ambitious by 2035 in the U.S. Like Time said, I think right now we’re looking at probably more like $150 per megawatt hour, in that range. We’ve conducted some analysis where we surveyed and interviewed a bunch of global experts on wind energy costs around the world. We did this back in 2015, and they estimated that floating offshore wind in 2020 might cost around a median of $165 a megawatt hour.
So actually these experts were pretty good at their estimating back then for what floating offshore wind costs might be. And then we did the same study again in 2020, and they’re estimating that by 2025, those costs might decline to maybe $96 a megawatt hour, and by 2035, the global median — these experts were estimating $63 a megawatt hour.
So I think if you were to ask the global wind energy expert community, they would certainly estimate higher costs in 2035 than what the DOE goal has established. And I want to also emphasize, Andy, to your question that these costs certainly are considerably higher than what you would compare to land-based wind or of course fixed-bottom offshore wind, as well. So land-based wind unsubsidized in the U.S., I think we’re seeing coming in around $30 to $35 a megawatt hour in the U.S. right now. And fixed-bottom offshore wind might be more like $80 a megawatt hour.
So certainly floating offshore wind is more expensive and will remain more expensive. I think what we need to be thinking about in this conversation is the flip side of the economic conversation, where we’re talking a lot about levelized costs of energy in terms of dollars per megawatt hour. But there’s also a value to the grid system of these projects.
To put that clearly, we’ve been talking a lot about California, which has a very high penetration of solar currently. What that means is that with increasing penetration of solar, we’re seeing decreasing grid system value of solar energy in the state, meaning essentially the wholesale market price of electricity declines substantially in the middle of the day when we’ve got all these solar plants just cranking out electrons.
Wind, especially in California, offshore wind has a very complementary daily or diurnal profile in the sense that it can produce more electricity typically in the late evening and nighttime hours, when we’re not getting power from solar. Again, I don’t want to focus solely on the levelized costs. We also need to think that many of these floating offshore wind projects that are proposed bring a lot of grid system value, in the sense that they will provide clean electricity in the hours that we need them most.
Stone: What’s interesting is you just mentioned obviously the grid stability issue, right? That’s such a big issue, as California has an increasing level penetration of renewables. Tim, jumping back to you, you started this conversation on cost a few minutes ago. Obviously the costs will be high, and Joe just discussed some of the additional benefits that will come from the offshore wind development that are maybe considerations in addition to simple LCOE. But are there models of where governments have successfully faced this challenge of needing a new type of resource? It is a new resource. It is high-cost. What have governments done in the past? Have we seen some successful examples that might be replicated in California?
Fischer: Yes, I think first of all, as for every new offshore wind market, local government, the states here have to decide what they want, right? Do they want to push for lowest possible price from the start? This could be a strategy. Or do they want to also push for maximizing local content? And both things will trigger different paths. From the start, pushing for both at the same time. The local content was the lowest possible price. We currently see on the East Coast how it cannot work, where we see a lot of projects being stopped. I think they do that.
A hybrid is possible, I think. In my opinion also, what we should strive for, because of costs, we have to be somewhat competitive on the price. But we also have to find mechanisms and ORECs auctions later on that kind of moderate also but can say so the supply chain into the state.
A good example is Taiwan. Taiwan, after Fukushima decided, “Well, we are fully based on nuclear. What if something similar happens here? We need to build our offshore wind. We want to attract local manufacturing.” So they allowed very high prices from the start, which of course had as a condition that you set up local fabrication facility. And it has worked.
Another example is maybe the Dutch market in the Netherlands, where the government has solved many of the risks around the transmission infrastructures, so the developers had a really clear pathway of — They basically know already three years or a couple of years in advance when they connect their wind farm to the grid. So you take away some big hurdles. Such kinds of mechanisms, I think, could help the industry, but basically it is all around finding also smart what I would call “auction mechanisms.” The next thing we will talk about is ORECs, and they have to be framed in a way that they actually support the business. We shouldn’t forget one thing here. We have five leases now, owned by five different developers. Each of them individually, they cannot really drive that establishment of the supply chain alone. So we have to close the ranks here as an industry. These five developers have to join forces. I think the state has to join these developers.
One of the developers the other day told me we first of all have to build the stadium all together, to make it possible. Once the stadium is there, we can start to compete. But first of all, we have to build the stadium. It was actually in a session in the stadium of Berkeley University. It was a good fit there. But there is a lot of truth to it, right? Because it is a tremendous effort, I think, that we have to do as an industry, and I think we have to join forces. I think that’s the only way to attract local content in its own effort.
I know it’s difficult in the United States, but I have to keep on stating that, as a European, consider the West Coast as a whole. Maybe it’s the best to fabricate wind turbines in the State of Washington, because you have the aircraft industry up there. Maybe towers you could procure from the interstates. Assembly — maybe there are certain ports in California that are best suited for it.
I think you have to maybe even look at the broader, because we will not be able to develop an industry now close to every project along the whole West Coast. Oregon’s lease auctions are coming next, so that also needs to be somewhat considered. That’s maybe the last thing to consider. Can we even look at the West Coast states as a whole and make a joint supply chain strategy?
Stone: Joe, I want to, before we finish up, jump to one other issue that was briefly mentioned earlier. It’s very important. We haven’t gotten to it yet, and I want to spend some time on it here. And that is that equity, as well as environmental stewardship, are going to be very important for these projects, so they have the social license to move forward. And this is an issue that’s going to be addressed in the Offshore Strategic Plan that will be submitted later this week.
You’ve done a lot of work in this area. Tell us about the impacts that you see of the project, the opportunities. What are the impacts going to be on the local communities? What are the opportunities for the communities, as well?
Rand: Certainly these proposed projects bring a ton of proposed opportunities in terms of economic development, jobs, and so forth. But you speak with local communities and residents, specifically maybe fishermen and tribal groups. You also hear a lot of concerns and apprehension. They just obviously want things done the right way. So there has been a ton of research on this subject for land-based wind. Our team at Berkeley Lab has led a lot of that work, and we found some kind of key drivers of social acceptance and improving outcomes for local communities. It’s got to include really starting it early on in the planning process to engage the local communities as key participants in the planning process and making sure that plans don’t just run over the local community without meaningful input.
So this is typically referred to as “procedural justice,” so making sure that the planning process itself is not just streamlined. We’ve talked a lot today about trying to hit a 2030 target, and that there are constraints and hurdles and barriers to that. But I think in many ways, it can be counterproductive to consider the local communities and social opposition merely as a barrier that we must overcome. I think if we want to think about the long-term health of this industry, we need to learn from the lessons of the land-based wind industry, in which I think in the U.S., we were able to develop a lot of projects, pick off the low-hanging fruit. But increasingly, even as the economics of land-based wind were plummeting, and it seemed like the industry should be taking off, we were facing challenges that were no longer economic or technological in nature, but increasingly were kind of social and procedural and institutional in nature. So I think pivoting to thinking about the long-term health and prosperity of offshore wind along the West Coast, we’re still in that stage where the economic and technological questions are paramount, but we can’t lose that long-term vision. In order for this industry to thrive and for us to meet these targets and goals, we need to have communities have a seat at the table — so specifically again, referring to fishermen and tribes.
Let me give you one more example. Just earlier this year, there was a partnership formed between Cal Poly Humboldt, which is the university up in Humboldt County, along with a community college, the College of the Redwoods, and also a tribal group, the Yurok tribe. They had a memorandum of agreement to train the workforce to provide all the skills and knowledge needed to develop offshore wind in Humboldt County. And really that enabled, I think, in particular that native tribe the opportunity to participate fully in the economic prosperity that these projects can bring.
So things like that, I think are kind of a critical step to bring all the affected communities to the table. And we just can’t lose sight of that and focus solely again on the economics and technology side of this.
Stone: Just as a follow-on, I ran across something. This is from CalMatters.org. It was an article that I found. It says, “Companies that develop offshore wind projects in California will also be required to enter into labor agreements and work with the Native American tribes before beginning construction.” So it sounds like that is worked into the plan.
Rand: Yes, and I think that’s just an excellent approach. It’s needed. I think historically, of course, these communities have been marginalized in more than one sense. But I would just say through the history of U.S. energy development, those at the frontlines of energy development and the impacts of energy development have often had little political and economic influence. I think we have an opportunity to reenvision that a little bit.
Stone: Tim, let me jump to you for a final question here on the next steps for development in California. What are the next steps in the project development? What is your role and Ramboll’s role going to be?
Fischer: We are committed to grow a local team, and we already have an established offshore wind team in L.A. now. As I said before, I think it is required. We need local people. We need local experts, someone who truly understands the local market, the society. That’s coupled, of course, with our global knowledge in transferring knowledge from Europe to the West Coast. I think that is one direct commitment we have been given.
And secondly, if you look at our company strategy, we consider ourselves as the partner for sustainable change. That means we have the chance here to build a new industry, and we want to do it in the most sustainable way. I think that is also something we can bring to the market, and what would that mean to us? We have to develop solutions that certainly protect the biodiversity we are having, and maybe even increase it. There are now developments, Equinor developments that maybe even create artificial reefs. So that’s been an industry that not only supports the California state goals in renewables, but also is our main support on the public side of biodiversity. I think talking about even topics like embedded carbon, circularity around projects is key. Again, we’re building a new industry. Let’s have it on the radar from the start. I think it even is a nice trigger for local content, because if you really look into embedded carbon, you will probably not bring structures from all around the world. You will probably fabricate them in California.
Then last but not least, I also think to what Joe just said — long-term impact for solutions for the society. That is what we are needing. Of course mainly jobs, but of course also other technology impacts we may see. So I think there’s a lot we can bring from the global market to California and that aspect to really make it also a truly sustainable solution.
And maybe let me close with a bit of a positive note, because we’ve talked a lot about challenges here. But it is a once-in-a-lifetime opportunity we’re having in California with the floating wind. And yes, it may not fully happen by 2030 with the exact goals, but I think that the path is right, and the path has started now. The goals for the industry are set, and I’m sure even if we are maybe a little bit delayed from the start, we’ll pick it up later once the industry is established. And then the momentum will be there.
Stone: Tim and Joe, thanks very much for talking.
Rand: Thank you.
Fischer: Thank you very much.
Stone: Today’s guests have been Tim Fischer of Ramboll and Joe Rand of the Lawrence Berkeley National Laboratory. Visit the Kleinman Center for Energy Policy website for more energy policy research and insights.