Offshore Wind Presents Big Challenge for the Electric Grid

Large scale offshore wind development will require a rethink of how America’s electric grid is designed, and paid for.

Over the coming decade, a number of states along the East Coast of the U.S. will deploy massive offshore windfarms in the Atlantic Ocean as part of their efforts to meet clean energy goals and reduce global warming emissions. Planning for the wind farms is well underway, and the first projects sponsored by New York, New Jersey and other coastal states are expected to begin generating electricity by 2025.

Yet reaching long term, aggressive offshore wind power targets presents numerous challenges. The most pressing may be the need to build out the electric grid to reliably and economically deliver vast quantities of offshore wind power to market. This is an issue that the states, offshore wind developers, and operators of the country’s electric grid are now grappling with.  Solutions may require a fundamental reworking of how the electric grid is planned and financed.

Brandon Burke, Policy and Outreach Director with the Business Network for Offshore Wind, discusses the challenge of transforming the electric grid to enable offshore wind power.

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. Over the coming decade, a number of states along the East Coast of the US will deploy massive offshore wind farms in the Atlantic Ocean, as part of their efforts to meet clean energy goals and reduce global warming emissions. Planning for the wind farms is well underway, and the first projects, sponsored by New York, New Jersey and other coastal states, are expected to begin generating electricity by 2025. Yet reaching long-term aggressive offshore wind power targets presents numerous challenges. The most pressing may be the need to build out the electric grid to reliably and economically deliver vast quantities of offshore wind power to market. This is an issue that the states, offshore wind developers, and operators of the country’s electric grid are now grappling with. Solutions may require a fundamental reworking of how the electric grid is planned and financed.

Here to discuss the challenge of building the grid for offshore wind is my guest, Brandon Burke. Brandon is policy and outreach director with the Business Network for Offshore Wind, an organization that focuses on the development of the US offshore wind industry. Brandon is also an attorney, and a graduate of our very own Kleinman Center certificate program in energy management and policy. Brandon, welcome back to the podcast.

Brandon Burke: Well, first off, Andy, thanks very much for having me. And I’d like to thank you and the Kleinman Center for inviting me back as a guest on Energy Policy Now. A lot has changed since we did our last episode of the podcast back in July of 2018. And I’m really glad to be here today with you to talk about what’s going on in the US offshore wind space.

Stone: Hey, you’ve also got your own podcast now, is that right?

Burke: Yes. We call it Offshore Wind Insider. And I encourage everyone listening to subscribe on Apple Podcasts or Spotify. And you can also check that out on our web site, OffshoreWindUS.org.

Stone: Tell us briefly about the Business Network for Offshore Wind.

Burke: Well, Andy, the Business Network is a 501c3 nonprofit, and our sole focus as an organization is to drive the development of the US offshore wind industry. But more specifically, we want to establish and advance a domestic supply chain to support the industry. Really, in our estimation, offshore wind equals onshore jobs. And historically, the network’s lane, so to speak, has been supply chain and workforce development. But we’re continuing to grow our voice in the offshore wind policy conversations that are taking place at the state and the federal levels. And in this policy vein, one of our more recent initiatives, and something that I have been very closely involved with personally for about a year, has been an offshore wind transmission white paper which we just released on October 26th.

And that release was very timely. And the paper and its findings were referenced during the Federal Energy Regulatory Commission’s October 27th Technical Conference, considering how grid operators can integrate large-scale injections of offshore wind capacity. Now, I’m excited we’ll be diving into the transmission question a bit more later in today’s podcast. And to kind of cover what’s going on right now in the US Offshore Wind Space.

Stone: Okay. So we know that offshore wind is about to grow rapidly along the East Coast of the US. Tell us about the scale and time frame of development that we’re likely to see.

Burke: Like you said, Andy, US offshore wind is really positioned for significant growth. And keep in mind that with a handful of exceptions, each one of these US offshore wind projects will have an overall array capacity in the neighborhood of 800 to 1100 megawatts. And Virginia’s Dominion Energy is planning a 2.6 gigawatt project. The turbines that make up these projects have individual capacities ranging from 12 to 14 megawatts. And there’s recently been discussion of a 15 megawatt turbine model. Now, compare that with the average utility skill solar installation. According to the US Energy Information Administration, the majority of utility scale solar facilities in the United States are in the one to five megawatt range.

Now in terms of development timelines, right now this question is heavily-influenced by the pace of the federal permitting process. So just for some background, the federal government, through the Bureau of Ocean Energy Management, often referred to as BOEM, which is part of the Department of the Interior— it’s responsible for the offshore wind lease area identification and sale process as well as the permitting for site assessment and construction, operations, and decommissioning. In fact, the federal government is expected to make a permitting-related announcement this week, on November 13th, regarding the Vineyard Wind offshore wind project, which is currently the project that is farthest along in its development and permitting timeline. Now, subject to this federal permitting process, we anticipate several thousand megawatts of offshore wind generation capacity to be under construction in US waters by the mid-2020s. And we anticipate a minimum of 10,000 megawatts to be operating or under construction by 2030 with local component manufacturing having been establishment. And we’re already seeing port investments that are totally more than half a billion— yes, billion with a B—to prepare for this build out.

Stone: So that Vineyard Wind project that you just mentioned. That was originally intended to go online, or scheduled to go online, in 2022. I know there were some issues that delayed that. So is this announcement going to tell us specifically when that project is supposed to go online?

Burke: So, this permitting decision  is related to the environmental impact statement— in fact, a supplement to the environmental impact statement that was prepared for the Vineyard Wind project. Certainly it doesn’t say when it will come online. That is up to the developer. But it will determine the developer’s ability to move forward with those execution plans.

Stone: Okay. That’s exciting stuff, because that is one of the first major projects, as you said, that’s scheduled to go online. So let me ask you this. So, why is the offshore wind market picking up so much now? There’s been a lot of talk over the last decade. A lot of hope and expectation. Didn’t necessarily always pan out. But now, we’re suddenly seeing all of this activity. Why is that?

Burke: So, I’m going to start with the global context, and work our way back home. Globally, offshore wind is truly booming. According to an August 2020 report by the Global Wind Energy Council, 2019 was the best year ever for the global offshore wind industry, with 6.1 gigawatts installed, and China alone installing a record 2.4 gigawatts during that single year. That success has continued during 2020, with China again adding 1.4 gigawatts during the first half of this year. And now, just within the past few weeks, the UK, which is currently the global offshore wind leader in terms of operational capacity, raised its offshore wind target to 40 gigawatts by 2030. So it’s really important to keep in mind that while the global offshore wind industry is definitely paying close attention to what’s going on here in the US, the US does not operate in a vacuum in the offshore wind space.

So with that in mind, one thing that I want to point out here is that in the American context, when we say “offshore wind market” we’re really talking about a demand that’s largely been created by state-level offshore wind capacity procurement targets. And these have been set forth— you know, either in the legislation, or by governor-issued executive orders. These state-level commitments have ramped up dramatically over the past three years.

But why have they ramped up? The primary factor that’s driving this ever-increasing interest— and this should really come as a surprise to no one— is price. And owing to technological innovations, primarily expanding individual turbine capacities as well as investments in installation techniques and predictive operations and maintenance, mature offshore wind markets have seen plummeting project prices over the past several years, particularly in Europe. And that declining trend has been replicated here in the US.

Consider, for example, the Block Island Wind Farm, which was a 30 megawatt pilot project made up of five turbines that were installed in state waters off the coast of Block Island, Rhode Island. That project has a per-megawatt hour price of $244. Now, by contrast, the Mayflower Wind project, an 804 megawatt utility-scale project that was procured by the state of Massachusetts, has a price of approximately $58 per megawatt hour. Now, in combination with other factors that we’ll touch on momentarily, it’s really been these declining prices that have caused state governments along the East Coast that are seeking to decarbonize their electricity supplies, to view offshore wind as an unparalleled clean energy opportunity. And really, the fact that the projects also have the potential to drive significant economic development is really just an added bonus.

Stone: And just to put that in context—so the average price of wholesale electricity generally on the US grid is $30 to $40 a megawatt, a megawatt hour. So that’s getting close. So it’s becoming more competitive. Offshore wind is. But what else is making this so attractive to the coastal states?

Burke: Great question, Andy. And before I dive in, I just want to make sure that right now, I’m talking about the East Coast states that are involved in offshore wind. Which are Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Maryland and Virginia. The situation on the West Coast is a bit different because of how deep the water gets, a fairly distanced offshore, and for a couple other reasons.

But really, four factors. Land constraints, proximity to load centers, the excellent offshore wind resource, and a buildable sub-C environment make the use of offshore wind for electricity generation very attractive to East Coast states. Now keep in mind, these are states that are taking concerted action to combat the threat of climate change by radically overhauling their respective in-state electricity generation fleets. But most of these same states are land-constrained. In other words, there’s simply not enough available land to build renewable generation capacity to meet the state’s self-imposed renewable portfolio standards requirements. These land constraints are partially due to the fact that these particular states often have large load centers, which require significant quantities of electricity in close proximity to the coast. New York City and Boston, major cities that are close to the coast, are very prime examples of this.

So you have massive electricity needs. You want to decarbonize your electricity system. But you don’t have sufficient land within your state to build the solar, onshore wind, and other renewable facilities that are necessary to meet that need. So what do you do? You look offshore. And it just so happens that the Eastern seaboard of the US has really great offshore wind resources in terms of the average annual wind speeds, which can lead to capacity factors over 40 percent. And those resources are, in many cases, situated relatively close to those load centers that I just mentioned.

But you need to be able to construct your offshore wind projects in a manner that’s economical. And this factor is really closely tied to water depth, among other things. And once again, the East Coast is really lucky in this respect, as it has a wide and gently-sloping outer continental shelf. And that portion of the sea floor has a soil composition that’s ideal for construction of fixed-bottom offshore wind facilities.

Stone: So that’s very different that what we’re seeing on the West Coast, I understand, of the United States, right? Where the shelf drops off very quickly, making this more of a challenge.

Burke: Right. Because you have to go to a floating foundation, as opposed to a fixed bottom structure.

Stone: Okay. So all of this offshore wind power needs to be connected to the onshore transmission grid. And in the recent white paper that you spoke about earlier, you characterized transmission issues as, and I will quote from that paper right here, “an existential constraint upon the ability of the offshore wind industry to reach its full potential in the US market.” Tell us about the challenge of interconnecting offshore power to the onshore grid.

Burke: As of right now, November 2020, East Coast states have committed to bring online just under 30,000 megawatts, or 30 gigawatts of offshore wind capacity, by 2035. And that’s barely 15 years from now. Now, keep in mind that it took absolutely 29 years for Europe to proceed kind of from the outset, the inception of the offshore wind industry, to its currently deployed capacity around 22 gigawatts. And as we sit here, we have just over 9000 megawatts of offshore wind projects that have received a financial offtake mechanism from a state government. Now, this figures about 1/3 of the way to the current 2035 collective goal, and we’re already seeing the optimal onshore interconnection points becoming scarcer and scarcer. And one reason for this is, with the exception of some coastal power plants, the electricity transmission infrastructure in many coastal regions, in its current state at least, really can’t handle these massive injection of power that states need to be able to integrate into the onshore grid if they intend to meet their offshore wind targets and overall decarbonization goals. Now, there are also policy challenges to the transmission issue, particularly in terms of how costs and benefits of transmission upgrades are allocated. Like many other questions, as more and more stakeholders get involved, it just becomes increasingly complicated to resolve those questions.

Stone: So, let’s break this down into two parts here for just a moment. There are two parts to the grid question as it relates to offshore wind projects. There’s the offshore component, and then there’s the onshore piece. Let’s look at the offshore piece first. There are two basic models for how you’d plan and build transmission lines to get your power from the turbine to land. What are they, and which are we going to see here first?

Burke: So, the two basic offshore wind transmission system models— or we sometimes call them topologies— are generator tie-line— also called generator lead line— or a shared or network transmission approach. So in the generator tie-line approach, each individual offshore wind facility has its own dedicated grid connection infrastructure. In other words, the offshore substations and export cables.

Now, keep in mind that depending on its size, a single offshore wind facility might likely have multiple export cables to shore. But these cables will only connect that single facility to the onshore grid, and thus are generator tie-lines. Now, right now, all of the just over 9000 megawatts of offshore wind projects that I mentioned just a moment ago that have received off-take, all of them currently plan to connect to the onshore grid via generator lead line approach, so we’ll definitely see that first. Now, this approach has the benefit of being able to move forward faster, because it’s sort of the status quo. But it may result in a suboptimal transmission configuration, particularly once second or third round offshore wind projects begin to interconnect. And those projects are being solicited and procured by the state governments as we speak now.

Now, on the other hand, you have a shared or planned transmission network approach. And in this approach, you have multiple offshore wind facilities that are connected to shore via one or more shared offshore substations and the associated export cables. These networks can be laid out as a backbone, sort of like a point to point, or in a grid configuration, which could have more of a modular approach, or multiple different landing points. A shared transmission approach can better optimize the utilization of limited onshore interconnection points, but it also requires much more planning and coordination across multiple layers of government, as well as other stakeholders.

Stone: So my understanding is, again, I think as you’ve said, these early projects are going more for the single generator lead line approach. Is that right? That there’s less risk to that, and it’s quicker to build?

Burke: Correct in both accounts, yes.

Stone: Okay. So let’s go onto the onshore challenges. And in fact, the onshore challenges, even though we’re talking about offshore wind, the onshore challenges may actually be the biggest of them all. So, at its most fundamental, the onshore grid wasn’t really built to handle huge quantities of electric power coming from the ocean. In this case, coming from the East, where there is no land, onto line. Right? There’s no grid that’s already in that place. And as the amount of offshore wind grows, the onshore grid will need to be reinforced and adapted to handle thousands of megawatts of new offshore wind generating capacity. Tell us about this onshore infrastructure challenge.

Burke: As you said, Andy, offshore wind integration will require significant changes to the flow of power in virtually all of the grid operators that are considering the injection of offshore wind capacity. For example, in PJM, the prevailing flow of power is from West to East. Whereas the grid integration of offshore wind generation is going to require power to flow in the opposite direction. From East, or offshore, toward West. Towards the inland areas.

Now, looking to New York, the predominant flow of power there is currently from upstate areas to downstate, mainly to serve that large demand for power in the greater New York City area. And because the upstate area has the land necessary to site onshore renewables, in large capacity. However, New York’s significant offshore wind target, which is 9000 megawatts by 2035, will significantly change the flow of power across the NYISO footprint— because, you know, once those facilities are online, power generated offshore will be injected into the grid and pushed inland. Now, I’m no power systems engineer. As you mentioned at the top of the show, I’m an attorney. But it is clear to me that changes of this magnitude are going to require considerable investments to not only upgrade the existing coastal transmission infrastructure, but also to reinforce the onshore transmission system further inland, to be able to transmit power to the areas where it is needed, even though they may not be right on the coastline.

Stone: So, as you mentioned a few minutes ago, we’re looking at 30 gigawatts of offshore wind capacity being built by the middle 2030s. And we’re going to need a more flexibly and capable grid to handle all of that. One of the big questions, or one of the big uncertainties is, who would plan and pay for this more robust system? The status quo on both of these issues will have to change. Tell us what’s going on.

Burke: One thing we need to keep in mind here is that offshore wind developers are already required to navigate a uniquely complex labyrinth of state and federal regulatory processes. I mean, think about it for a moment. Offshore wind developers must secure site control from the federal government, through the BOEM leasing process, a power offtake mechanism from a state government, project financing, and they also must demonstrate how they’re going to satisfy all permitting requirements.

And then in parallel, they must also navigate the interconnection queue process with the grid operators like PJM, NYISO, or ISONE. And really, one of the biggest challenges we see here is the project-by-project generator interconnection queue process that is currently used by the grid operators. The interconnection queue process is the way that the grid operators study the system impacts of generation projects that are seeking interconnection. In other words, seeking to inject power into that particular area of the onshore grid. But these upgrade costs to accommodate those injections can be highly variable, particularly if projects earlier in the queue withdrawal, which then requires already-performed system studies to be reexamined and costs to be shifted around. So there’s great uncertainty in terms of that queue process.

The other challenge is that the generator interconnection process, from a planning perspective, does not adequately capture the full benefits of transmission. And it really creates a free rider problem. So in PJM, for example, proposed transmission projects are inefficiently siloed into these different categories, whether they’re economic upgrades that reduce transmission congestion, they’re reliability enhancements that help meet NERC criteria, they’re public policy projects that help the states meet their renewable portfolio standards requirements, or utilizing this generator interconnection categories. And you know, from our perspective, a more efficient transmission planning approach at the grid operator level would consider the multiple values that a proposed transmission project could provide.

Stone: Okay. So I want to point out that the challenges that we’re talking about right now aren’t altogether unique. Onshore wind developments, for example, tend to be built in remote locations where there may be little transmission infrastructure already in place. Texas, for example, has done a good job in integrating a lot of terrestrial wind development. Can the Texas model— first, can you explain that Texas model? And can that model be applied to offshore wind?

Burke: So, conceptually, yes. And sort of just in broad brush strokes, we would call the Texas approach, “If you build it, they will come.” The Texas approach created a competitive  renewable energy zone, or CREZ. And it’s a prime example of one potential solution for this chicken and egg problem of transmission and generation expansion that we’re encountering. And what I mean by that—the chicken and egg problem is a timing mismatch where renewable generators are not built because transmission does not exist. And transmission is not built because generators are not yet constructed.

Now, Texas solved this problem by directing the grid operator, ERCOT, the Electricity Reliability Council of Texas, to identify high-quality wind resource zones and proactively plan the transmission lines needed for wind generation to occur in those areas. And this is possible because we know with fairly high certainty where good wind resources are, and where they will continue to be optimal, both on and offshore. And that applies also to other renewable resources like solar.

Now the CREZ model is one potential way that a single state could approach the offshore wind transmission question. The challenge is that it does require stakeholder support from the grid operator to FERC, the Federal Energy Regulatory Commission. And it also requires support from FERC to approve it. And securing this stakeholder buy-in and the questions of cost allocations, they implicate that free rider problem that I mentioned before. And they can be really challenging in multi-state grid operators like ISONE and PJM. And PJM in particular is pretty complicated, because it has numerous inland states that really have no discernable interest in offshore wind— and why would they— versus ISONE. With the exception of Vermont, every state in that grid operator is pursuing plans for offshore wind development.

Stone: So Brandon, you mentioned the free rider problem. Can you talk about that a little bit more in the transmission context?

Burke: So, Andy, the free rider problem is something that we’re very familiars with in terms of, you know, uncompensated for externalities in the climate context. But it’s a little bit different here in the transmission context. And let’s take two states, for example. Pennsylvania, and New Jersey. Because they’re both in PJM. And New Jersey has an offshore wind goal of 7500 megawatts, whereas Pennsylvania doesn’t have a coastline, and therefore at this time doesn’t have an offshore wind goal.

Now, New Jersey wants to proceed towards the grid integration of its 7500 megawatts by 2035. And those transmission upgrades may be assigned to New Jersey by PJM because PJM contends that New Jersey is the only one who is benefitting from those offshore wind transmission upgrades. However, because New Jersey and Pennsylvania are both part of the PJM footprint, and electrons are fungible— in other words, we’re not counting individual electrons, so offshore wind-generated electrons may be injected in New Jersey but may be ending up used in Pennsylvania— you then have rate-payers in Pennsylvania benefitting from the transmission upgrades that have been solely financed by the state of New Jersey. And you’ve seen some of that conversation and back and forth between the New Jersey BPU and PJM over the past several  years.

Obviously, as I mentioned earlier, when you have other PJM states that are even further from the coast, they have even less interest in what New Jersey is doing in terms of its offshore wind ambitions. But they may, nonetheless, be benefitting, because there are enhanced reliability benefits associated with having a large injection of offshore-generated power that’s flowing from the East, and creating a diversity of resource that are both flowing from West and East and other directions. These free rider problems can be a little bit easier to resolve, perhaps, in ISONE, because every state there, with the exception of Vermont, is interested in offshore wind. But at the same time, we’re still seeing those states within ISONE contending with similar issues in terms of who pays for what upgrades. And ultimately, if everyone refuses to pay for upgrades and one state is saying, “Hey, look, I’m on the hook for all of these upgrades even though everyone around me is benefitting,” those projects may well not happen. And so that’s that chicken or egg, or that’s that free rider problem, really, that is inherent in this current transmission planning process.

Stone: Is any progress being made in resolving that?

Burke: Well, I think the discussions that have been convened due in part to our efforts through this offshore wind transmission white paper process—and, you know, it was highlighted during the FERC Technical Conference on October 27th, where these questions are being hashed out. But let’s be realistic. You know, we have started down the road towards a more optimized and integrated solution. But those conversations are just beginning. Just at the October 27th technical conference, it’s like, everyone is finally getting on the same page in terms of the generator interconnection individual project-by-project basis is not the optimal way forward. Just getting to that level of agreement has been great, but that’s only the first step in a long journey. But we’re excited to move the ball forward. And it’s great to see that the conversation is taking place.

Stone: Final question for you here. Are you optimistic that we’ll get the changes we need in time to reach the big offshore wind goals that the states have met? Are we going to get these planning changes, the way that the cost allocation has to be managed. All this to reach those ambitious 30 gigawatt goals by the 2030s.

Burke: Yes. I’m going to go ahead and say yes, we’re optimistic. And certainly, as I mentioned before, the first round of projects— those are going to be integrated on a generator lead-line approach, that’s going to be individual. But as we go forward, from our perspective, that optimal transmission framework utilizes a more integrated approach that accounts for all of those benefits that I mentioned earlier, that can be provided by potential transmission projects like economic upgrades, reliability enhancements, public policy projects, or that generator interconnection need. The transmission planning process should also consider state offshore wind goals to be mandates that must be accounted for as part of the grid operator transmission planning processes. And they’re not now. This planning should also be proactive, which solves that chicken and egg issue. And it should account for a longer time horizon that takes into account the longer, 40-plus year time lifespan of transmission assets.

And finally, the interregional planning— in other words, planning between grid operators— should be better synchronized. And the mechanisms for that are continuing to be developed. But because offshore wind capacity is procured on a state-by-state basis, sometimes states are only focused on their own projects. But there are important seams issues that need to be considered for offshore wind power injections, particularly as injections into PJM and northern New Jersey do have impacts in NYISO, across the seam, and vice versa. And these decisions made by one state have impacts upon other states.

And, you know, in a perfect world, this inter-regional planning could result at some point in the future in a multiregional offshore grid that is capable of shifting large quantities of electricity generated offshore to the locations here it is needed most. There’s a lot of coordination that’s required, that may be a little bit overly optimistic. But one thing to think about that I kind of like to view this transmission question, is like the way that the interstate highway system was built out, where the federal government could really provide significant leadership and funding, in terms of driving towards a system that serves multiple grid operators and therefore spreads the cost allocation across the most users possible. That keeps it cheaper for everyone. Because face it, everyone likes to use electricity.

And now one other interesting point to consider on the West Coast. We’ve seen a lot of wildfires over the past year, which is emblematic of the increasing climate risks that we’re going to have to deal with in the future. And think about the fact that in the Western context, we could really see some significant, easily-quantifiable financial benefits of a sub-C transmission cable. Because face it. A transmission cable like that is not quite as subject to wildfire, I would say, given that it’s on the bottom of the ocean. But in any event, I definitely encourage everyone to check out the Offshore Wind Transmission white paper for greater detail about all the issues that Andy and I have discussed today, and much more. And that can be found at the Business Network for Offshore Winds website, which is OffshoreWindUs.org.

Stone: Brandon, it’s been great having you back on the show. Thanks for talking.

Burke: Andy, thanks for having me.


Brandon Burke

Policy Director, Business Network for Offshore Wind
Brandon Burke is a former graduate research assistant at the Kleinman Center and an attorney and Policy and Outreach Dire. He graduated from the University of Pennsylvania’s Master of Environmental Studies program, with a Certificate in Energy Management

Andy Stone

Energy Policy Now Host and Producer
Andy Stone is producer and host of Energy Policy Now, the Kleinman Center’s podcast series. He previously worked in business planning with PJM Interconnection and was a senior energy reporter at Forbes Magazine.