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The development of America’s offshore wind energy could diversify and substantially decarbonize the nation’s electric power portfolio and bring a new surge in investment and employment to the country’s working harbors. The U.S. National Renewable Energy Laboratory estimates that America’s maritime and Great Lakes waters encompass the equivalent of 7,203 terawatt hours per year of electricity generation potential, based on 2016 technological capabilities, and excluding important areas such as shipping lanes and marine protected areas.¹ For comparison, the U.S. Energy Information Administration reports that domestic electricity consumption in 2015 totaled 4,087.31 terawatt hours, just 57 percent of the clean wind power available offshore.²

According to the National Renewable Energy Laboratory, the vast majority of this resource—88 percent—occurs seaward of the 3-nautical-mile boundary of most coastal states’ maritime jurisdictions, over the federal waters and the seabed of what is legally referred to as the Outer Continental Shelf. In 2005, Congress passed the Energy Policy Act which authorized the U.S. Interior Department to issue leases and permits for renewable energy development on the Outer Continental Shelf, and in 2009, then Secretary of the Interior Ken Salazar announced finalized regulations for the federal offshore wind energy development program.³

Thanks to tens of billions of dollars in public and private investments in Europe, the economics of offshore wind have evolved rapidly, with dramatic cost declines since 2014 pushing the offshore wind technology toward competitiveness with other zero-carbon energy resources. This in turn has stimulated private-sector demand for offshore wind development rights in U.S. federal waters, by both homegrown American firms, and deep-pocketed international energy companies. Since 2009, the Bureau of Ocean Energy Management (BOEM), the Interior Department’s lead agency for offshore renewable energy, has conducted seven competitive lease auctions for commercial development rights to offshore wind-energy areas under the program established by Secretary Salazar. Comprising more than 1 million acres of U.S. federal waters, these lease sales have generated more than $58 million in winning bids for offshore wind development rights—money that flows into the U.S. Treasury and to American taxpayers.⁴ In December 2016, BOEM completed its most successful offshore wind lease auction yet, awarding a U.S. subsidiary of Norway’s Statoil corporation a 79,350-acre lease off New York for a remarkable $42.47 million winning bid, almost triple the total income from all previous lease sales.⁵

Although these mileposts demonstrate institutional capacity within the federal government to plan offshore wind projects, and growing interest by the private sector to develop offshore wind, these factors have not yet been sufficient for the completion of a commercial offshore wind-generation facility in federal waters. Meanwhile, President Donald Trump’s personal hostility toward renewable energy technology, including offshore wind development near his Scottish golf resort and his administration’s abandonment of U.S. leadership on climate policy, suggest that little additional support beyond the existing leasing and permitting framework can be expected from the federal government in the next four to eight years.⁶

In contrast, the Block Island Wind Farm, a 30-megawatt facility in Rhode Island state waters, began commercial operations in December 2016, becoming the first such power plant in the United States. As explained below, this remarkable accomplishment is due almost entirely to progressive energy policy reforms, marine spatial planning, and focused political leadership within the Rhode Island state government. In other words, state-level policy will continue to play an essential role in the realization of a thriving commercial offshore wind industry and in the realization of the resource’s potential as an economic and environmental asset of national significance.

Three states—Rhode Island, Massachusetts, and New York—have each recently passed or promulgated different policies to stimulate private investment in offshore wind development and harness the resource as a major source of clean energy. There is a strong economic case for their efforts: For example, a 2016 economic study by offshore-wind supply chain specialists found that for the state of Massachusetts, a commitment to developing 2,000 megawatts of offshore energy capacity would drive technological and industrial advances that would more than halve projected costs by 2030, bringing the resource to competitiveness with the state’s other major energy sources.⁷

In each state, the private sector has responded to these states’ policies with significant, concrete investments and actions toward commercial development.

Policymakers in other U.S. coastal states now have a ripe opportunity to provide what may be the final push needed to bring commercial offshore wind development to fruition and begin capturing the industry’s economic and environmental benefits.

This report provides an overview of the case for state government action to foster the fledgling domestic offshore wind energy industry and surveys the origin, implementation, and impact of offshore wind policy in three states—Rhode Island, Massachusetts, and New York. These states serve as exemplary cases for other coastal states endowed with access to this abundant, climate-safe, renewable resource.

This report concludes with a list of policy options for other coastal states also considering pursuit of the strategic benefits of offshore wind energy, based on the key elements underpinning the success of the three states highlighted. When considered together, these elements comprise a policy toolkit that could be of value to other coastal states seeking to capitalize on their offshore wind resources. These policies include:

• Strong renewable energy requirements: Renewable energy mandates, which require states’ utilities to supply at least a certain minimum proportion of electricity generated from renewable sources, underpin all three states whose offshore wind energy industries are rapidly progressing. In all three states, policymakers have increased these renewable energy standards over time.
• Legislation that guarantees demand for offshore wind: Laws that guarantee demand for offshore wind energy—often called offshore wind “carve-outs”—played a critical role in the realization of the Block Island Wind Farm and the influx of investor and developer interest in Massachusetts’ offshore wind industry.
• Comprehensive ocean planning: Rhode Island and Massachusetts both completed comprehensive ocean plans in advance of offshore wind development. This planning was vital for Rhode Island to become home to the nation’s first commercial wind farm, suggesting that it may be essential to accommodate a major new offshore industry without harming existing ocean users, degrading the environment, or provoking conflict and litigation with coastal stakeholders.
• Fair consideration of costs: Rhode Island and Massachusetts have passed legislation that sets the terms for public utilities commissions to evaluate offshore wind project proposals. These allow a given proposal’s advantages and costs to be properly and transparently accounted for, without being unfairly compared with the costs of obsolete or carbon-intensive energy sources.
• Focus on market development: While supportive policies are needed in the short term, states should simultaneously structure their offshore wind programs to foster market development. Massachusetts’ competitive bidding process already appears to be delivering valuable market impacts, with world-leading developers competing on price and additional benefits such as in-state supply chain development and deployment of battery-based storage.⁸
• Require long-term contracts for competitive proposals: Rhode Island and Massachusetts passed laws that require utilities to enter into long-term contracts, known as power purchase agreements, with offshore wind projects assessed to be competitive and reasonable. Such contracts incentivize developers to compete, provide developers access to private sector finance to complete approved projects, and can support long-term price stability for ratepayers.
• Investment in infrastructure: The state of Massachusetts made significant public investments in needed port infrastructure in the city of New Bedford, with the goals of spurring offshore wind development in the state and capturing the employment and other economic benefits of supply chain development. Recent moves by industry to locate in New Bedford indicate that developers took notice.
• Executive leadership, which can drive significant progress: New York, unlike Rhode Island and Massachusetts, has stimulated significant private-sector investment and activity without dedicated legislation, instead relying on a comprehensive strategy, public investments in planning, and the formalization of policy through regulatory action—all executed by the state’s executive branch. In Rhode Island, strong executive branch leadership played an essential role in the establishment of key policies and in the completion of the nation’s first commercial wind farm.

Offshore wind presents coastal state policymakers with profound opportunities to capitalize on an abundant clean energy resource and fill the leadership vacuum that now exists at the federal level for facing the global climate crisis. By studying, formulating, and implementing policies such as those identified in this report, coastal and Great Lakes states may be able to replicate the remarkable progress in the development of offshore wind achieved by Rhode Island, New York, and Massachusetts and begin reaping the economic and environmental dividends. 

Offshore wind is a resource that could provide a large proportion of the electric power needs of many coastal states, without emissions of pollutants that degrade human health, worsen ocean acidification, and exacerbate global warming. In many cases, coastal states have readily available offshore wind resources of a magnitude multiple times that of their total fossil fuel-powered electricity generation.⁹ As a result, commercial development of offshore wind could help individual states comply with their established renewable portfolio standards or greenhouse gas-emission reduction targets, as well as federal clean air and pollution-reduction requirements.¹⁰

Furthermore, offshore wind energy development would also advance the efforts of American states and cities that are seizing the mantle of U.S. global climate leadership. After the Trump administration announced its intention to withdraw the United States from the Paris Agreement, myriad state and local leaders have coalesced to sustain the U.S. commitment made by the Obama administration—a 26 percent to 28 percent reduction in greenhouse gas emissions from 2005 levels by 2025.¹¹ For example, more than 200 cities and 9 states, including North Carolina, have joined businesses and universities across the country to form We Are Still In, the largest national coalition in support of the Paris Agreement.¹² Meanwhile, Govs. Jerry Brown (D-CA), Jay Inslee (D-WA), and Andrew Cuomo (D-NY) launched the U.S. Climate Alliance, which now has 13 member states plus Puerto Rico.¹³ Because 12 of the 14 Climate Alliance members lie along Pacific, Atlantic, or Great Lakes coasts, offshore wind could represent a major component of the group’s efforts to achieve substantial greenhouse gas emissions reductions.

The establishment of a domestic offshore wind industry would provide a multitude of additional valuable benefits to coastal states and energy consumers. These include reduced water use by the electric-power sector, reduced exposure to the price volatility of fossil fuels used in thermal generation plants for electric power producers and consumers, and strategic diversification of states’ electric power supplies at a time when many large coal and nuclear power plants are being decommissioned, leaving looming gaps in state supply portfolios.¹⁴ Offshore wind also offers benefits to grid management because the resource is widely available near coastal urban centers, while major land-based sources of renewable energy are often either widely distributed or located hundreds of miles inland from coastal cities, requiring significant investment in new overland transmission.¹⁵ Recent data also shows that offshore winds track well with daily demand patterns, particularly early evening surges,¹⁶ reducing the need for natural gas-based back-up generation capacity that is sometimes required in areas with significant solar and onshore wind energy supplies.¹⁷

Finally, mounting evidence indicates that offshore wind is rapidly becoming economically competitive in major urban electricity markets. Offshore wind is overcoming once prohibitive capital costs that were long considered the foremost obstacle to development in the United States.

At the heart of these cost reductions are the industrial advancements made through the dramatic growth of Europe’s approximately 15-year-old, 3,344-turbine, 11,538-megawatt offshore wind industry.¹⁸ Beginning in the early 2000s, the European Union set successive binding goals for renewable energy production for its members, and several coastal EU countries concluded that offshore wind energy was a resource with significant potential to reduce carbon pollution emissions without engendering land use conflicts. Accordingly, countries such as the United Kingdom, Germany, the Netherlands, Denmark, and Belgium began providing offshore wind developers with generous subsidies and other supports, including long-term power purchase contracts and guaranteed dispatch of electricity output over the grid. By ensuring steady demand for wind farm output, developers in turn have been able to access private capital markets to finance construction.¹⁹

These measures were extremely effective. Over 10 years between 2004 and 2014, Europe’s installed offshore wind generation capacity grew almost twelvefold, from 622 megawatts of generation capacity to 8,008 megawatts.²⁰ Counterintuitively, costs per unit of capacity steadily rose until 2014, as developers quickly completed large projects in available nearshore areas and pushed further offshore into deeper, more difficult waters in which to build and operate, while simultaneously developing the specialized technologies required to ensure the long-term durability and performance of maritime wind turbines.²¹

Nevertheless, efficiencies and industrial learning accrued within the sector, and growing construction capacity and turbines that roughly doubled in generation capacity pushed it toward meaningful economies of scale, countervailing the increasing difficulty of construction further offshore.²² For example, as state-of-the-art turbines grew from 2 megawatts to 6 megawatts in generation capacity over the past 10 years, developers were able to dramatically reduce the number of expensive seabed foundations and the quantity of transmission lines needed to complete a project of a given capacity. In January 2017, a partnership between leading wind turbine manufacturers Vestas and Mitsubishi Heavy Industries Ltd. announced that its prototype 9-megawatt offshore turbine—at a gargantuan 722 feet tall with 38-ton blades that measure 263 feet in length—was successfully producing electric power, illustrating that the economics of turbine installation continue to improve at a significant rate.²³

In 2014, European offshore wind reached a tipping point, and since then, costs have fallen sharply. Private analysts in early 2016 foresaw reductions in the levelized cost of offshore wind energy—the production cost per unit of energy over the lifetime of a given wind farm—of around 30 percent to 33 percent by 2030, relative to a median baseline of $169 per megawatt-hour in 2014.²⁴ However, evidence from several countries suggests an even steeper decline in production costs is already being realized.

In the United Kingdom, levelized costs at new offshore wind farms peaked five years ago and have declined 11 percent since then.²⁵ During the latter half of 2016, multiple European projects proposed through competitive bidding processes secured bids from developers at costs dramatically lower than the industry had ever previously reported and well ahead of independent projections. In July 2016, DONG Energy, the Danish corporation known as the world’s largest offshore wind developer, won two projects amounting to a combined 1,400 megawatts of capacity at a levelized cost of around 82 euros per megawatt-hour, around half the median cost in 2014.²⁶

Swedish utility and electric power producer Vattenfall recently won rights from the government of Denmark to construct a 600-megawatt facility in the country’s Baltic Sea maritime territory with a bid of 49.90 euros, approximately $53.40, per MWh.²⁷ The project will supply the equivalent of 23 percent of Denmark’s household electric power demand at a cost that Vattenfall asserted is 60 percent below the country’s legally mandated production cost cap.²⁸

Similarly, on December 12, 2016, a consortium led by Royal Dutch Shell won a concession for a huge 700-megawatt project in the Dutch waters of the North Sea with the Netherlands’ lowest-ever contract price of 54.50 euros, around $57.70, per MWh.²⁹

In 2014, the European offshore wind industry supported 75,000 jobs,³⁰ and based on current trends in industry growth, it is expected to support between 170,000 and 204,000 jobs by 2030.³¹

For comparison with common existing U.S. energy sources, the U.S. Energy Information Administration estimates that for domestic commercial projects developed for completion in 2022, average production costs before federal tax credits will average $55.80 per MWh for onshore wind and $66.30 per MWh for solar photovoltaic.³² Conventional combined-cycle natural gas power plants are projected to produce electricity for $58.60 per MWh by 2022.³³ Although European and American offshore wind development costs can certainly be expected to differ, particularly while the U.S. industry builds up the necessary port infrastructure needed to stage offshore-wind turbine installation, the European industry today is demonstrating that offshore wind energy can compete on economic terms with other major energy sources, even without accounting for the other strategic benefits that it can provide.

In recognition of these benefits, the governments of several Northeastern states are taking major steps to make offshore wind part of their clean energy portfolios. Rhode Island, New York, and Massachusetts have each pursued distinct policy pathways to spur private-sector investment in commercial offshore wind energy development, with growing evidence of success. A survey of these approaches may help other coastal state governments formulate their own strategies in pursuit of the benefits of offshore wind energy.

Rhode Island

On December 12, 2016, Deepwater Wind LLC’s five-turbine, 30-megawatt, $290 million Block Island Wind Farm offshore of Rhode Island officially completed post-construction testing and validation and commenced commercial electricity delivery to the state’s power grid, becoming the first such facility in the United States.³⁴ The project’s commencement ended decades of highly polluting and expensive diesel-powered generation within the community on Block Island and rewarded Rhode Island’s policymakers for years of work to make their state the U.S. offshore wind power leader.

Three state policies embody those efforts: the Renewable Energy Standard (RES), which established clean energy use requirements; the Ocean Special Area Management Plan (SAMP), which produced a comprehensive ocean plan protecting existing resources and uses of the ocean areas under the state’s jurisdiction; and the Long-Term Contracting Standard for Renewable Energy, which mandates power purchase agreements with clean energy developers and creates specific mechanisms for offshore wind. The establishment of each policy required significant leadership and sustained political will from Rhode Island’s executive and legislative branches of government, which together formed a three-part policy foundation for Rhode Island to launch its new offshore renewable energy industry.

Renewable Energy Standard

Originally enacted in 2004 and reauthorized and extended in 2016, the Renewable Energy Standard mandates that Rhode Island’s utilities supply an incrementally larger percentage of their retail electricity from renewable sources—including solar, wind, and hydroelectric—each year. By 2035, the state’s retail electricity supply is required to be at least 38.5 percent renewably powered.³⁵

Following the original enactment of the RES, the state’s Office of Energy Resources assessed Rhode Island’s renewable energy resources to facilitate and chart out how utilities could best fulfill the new mandate.³⁶ In 2007, the agency published findings showing that 95 percent of the state’s wind energy opportunity lay offshore,³⁷ making offshore wind development “the only feasible method for the state to meet the legislative goal,” as the executive director of Rhode Island’s Coastal Resources Management Council put it.³⁸

Following the publication of this wind assessment report, the governor’s office held several stakeholder meetings to discuss siting possibilities for an offshore wind project.³⁹ Based on the input from local citizens, nonprofit organizations, and a wide array of industry representatives, the state selected areas south of Block Island for a pilot offshore wind project, concluding that those areas would be “the most cost effective locations for offshore wind [in state waters], on a dollars to per megawatt-hour basis, and large enough to meet the [Renewable Energy Standard] supply goal.”⁴⁰

The state also identified the uniquely favorable economics of the site, noting that it “could have the additional benefit of bringing economical power to Block Island residents, who are presently supplied by on-island diesel generators” rather than the statewide grid.⁴¹

On April 3, 2008, Rhode Island’s Office of Energy Resources issued a request for proposals for the Block Island project.⁴² Seven separate developers bid and Deepwater Wind was selected as the state’s preferred developer. On January 2, 2009, the state and Deepwater signed a joint development agreement, with Rhode Island committing to help Deepwater Wind negotiate the permitting process and Deepwater Wind committing to develop the Block Island project.⁴³

Ocean Special Area Management Plan

Rhode Island leaders recognized that in order to capitalize on their offshore wind resource and fulfill their agreement with Deepwater Wind, they had to bring coherence and order to the daunting thicket of state, federal, and tribal jurisdictional authorities that exist offshore. Simultaneously, they had to respect and incorporate the perspectives of myriad, sometimes antagonistic, ocean stakeholders, including conservationists, fishermen, shippers, coastal-property owners, and the Narragansett Indian Tribe.⁴⁴ Between 2008 and 2010, empowered by supportive leadership from the governor, the state’s Coastal Resources Management Council led a formal marine spatial planning process to comprehensively map Rhode Island’s offshore wind resource, along with marine ecosystem features and assets and all other major ocean uses. To ensure the maximum level of accuracy and political buy-in for the process, the management council completed the initiative in close collaboration with the above-noted array of governmental and private stakeholders.⁴⁵ The resulting Rhode Island Ocean SAMP helped identify a narrow area southeast of Block Island as the best bet for a pilot wind farm. Specifically, the site allowed for access to the state’s strongest, steadiest wind resources identified in earlier assessments while avoiding conflicts with traditional uses such as fishing, recreation, and conservation.⁴⁶ The careful siting and wealth of accessible scientific data afforded by the Ocean SAMP was particularly important because state and federal law required that Deepwater Wind receive approvals from at least 10 distinct state and federal agencies.⁴⁷

According to Deepwater Wind officials, the Ocean SAMP accelerated project development and minimized opposition from other ocean stakeholders that lived and worked around the project area.⁴⁸ The Ocean SAMP also laid the groundwork for future offshore wind development on the federal Outer Continental Shelf beyond the state waters of both Rhode Island and Massachusetts; this is discussed in the following section on Massachusetts state policy.

Long-Term Contracting Standard

In 2009, in parallel with t