On March 29, the Biden Administration unveiled the broad strokes of a comprehensive, multi-agency plan to “accelerate and deploy offshore wind energy and jobs” in furtherance of President Biden’s twin priorities of fighting climate change and rebuilding America’s infrastructure. The ambitious plan aims to deploy 30 gigawatts (30,000 megawatts) of offshore wind generation capacity by 2030. Utilizing a “whole of government” approach, the plan involves coordinated action by the Departments of Interior, Energy and Commerce to open new lease sales on the continental shelf while protecting biodiversity and promoting co-use.
Combined with the adoption of a new 30% investment tax credit to qualifying offshore wind projects in the December 2020 stimulus bill, and the IRS’ extension of the continuity requirement of the production tax credit from four years to ten for offshore wind projects, the plan creates significant growth opportunities for both established developers and developers involved in the offshore wind energy research and development space. Development of the target generation capacity is expected to power up to 10 million homes and avoid 78 million metric tons of carbon dioxide emissions, while spurring more than $12 billion per year of new capital investment and creating 77,000 new jobs in the offshore wind industry and supporting communities by 2030.
Charting the Course
The plan provides a number of specific, coordinated action items that will be implemented by the relevant Departments to achieve the 30 GW goal. Among them:
Scanning the Horizon
Offshore wind in the U.S. has been attracting significant investment since the Obama Administration. However, it has faced numerous headwinds including an inefficient regulatory process at BOEM, lack of federal subsidies needed to help the industry achieve scale, opposition from fisherman and other stakeholders concerned about interference with their traditional activities, and various legal and logistical obstacles such as the lack of Jones Act compliant vessels available for installation of offshore wind components. Much of the progress that had been taking place stalled under the Trump Administration, with Vineyard Wind’s NEPA review held back for a programmatic review of cumulative industry impacts, ultimately leading Vineyard Wind to withdraw its application and then resubmit it after President Biden’s election.
With the recent adoption of the investment tax credit for offshore wind and the significant regulatory, financial, and of course political support established with this new coordinated, comprehensive plan, many of the most significant obstacles that have kept commercial-scale offshore wind projects stuck in drydock have now been alleviated or soon will be. In addition, the plan should help clear the way for the many state-lead offshore wind initiatives, in particular NYSERDA’s Offshore Wind Master Plan, which will benefit from the creation of the New York Bight Wind Energy Area as we discuss in a companion Quick Study to follow.
Of course, as with any plan that involves regulatory action by multiple federal agencies, it remains to be seen whether DOI, DOE, DOC and the other relevant agencies will be able to get their ducks in a row such that the backlog of projects can actually begin moving through the process and into construction. In addition to the regulatory uncertainties, there are certain to be challenges from the fishing industry and other stakeholders concerned about their own interests. Although the plan includes $1 million in grant funding to better understand the impacts of offshore wind on fisheries, fishing interests will likely consider that amount paltry in comparison to the incentives provided for wind turbine construction and financing. Litigation over components of the plan, individual projects, or both is virtually assured. Nevertheless, the plan represents a bold step by the Biden Administration that shows it is serious about achieving President Biden’s climate change and infrastructure goals.
Locke Lord has been involved in the permitting and financing of some of the earliest offshore wind projects in the U.S. For further information regarding these issues, please contact the authors.
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