Connecticut Looks Before It Leaps on Offshore Wind

In Brief

Connecticut has finally jumped into the offshore wind game with a recently passed target of 2,000 megawatts (MW) by 2030.

Connecticut’s offshore wind push may reflect the sector’s recent successes in other states: Early movers in the space have secured lower power prices from offshore wind developers than were initially expected.

In addition to renewable electricity, 2,000 MW of offshore wind could also generate economic benefits in the form of infrastructure upgrades, new in-state businesses and jobs.

Point Stonington, CT

Point Stonington in Connecticut / JJBers / CC BY 2.0

A new player is entering the fold in New England’s burgeoning offshore wind sector. After years of testing the waters, Connecticut has finally jumped into the offshore wind game with a recently passed target of 2,000 megawatts (MW) by 2030. On June 4, the state legislature approved a bill establishing the offshore wind mandate, and Governor Ned Lamont signed the legislation later that same week.

The explicit carve-out for offshore wind represents a departure from the previous administration’s technology-agnostic approach to clean energy, which was more focused on providing opportunities for renewables to compete with all energy generators, to keep driving prices down. However, as former Department of Energy and Environmental Protection Commissioner Robert Klee noted in an interview with CEFF, the region has a tremendous offshore wind resource, and Connecticut boasts several unique advantages in terms of port access and precision manufacturing experience that could make it a significant player in the industry.

What’s more, ambitious clean energy policy is a growing priority in the state. “This is the future that we see, and a necessary element of a successful climate strategy,” said Klee, now a visiting lecturer at the Yale School of Forestry & Environmental Studies.

Connecticut and other states are increasingly looking to offshore wind as a key part of realizing both their ambitious climate commitments and broader economic development goals.

Offshore Wind Comes to the Constitution State

Connecticut’s offshore wind push may reflect the sector’s recent successes in other states: Early movers in the space have secured lower power prices from offshore wind developers than were initially expected, a factor that may have influenced Connecticut’s embrace of an offshore wind target.

Yet while offshore wind prices are declining, they remain more expensive than both conventional generation and onshore renewables. Thus, Connecticut’s timing in setting its 2,000-MW target may prove strategic: if prices continue to drop with each new project, the future projects it selects will likely be further along the cost curve than those of its neighboring states.

Connecticut regulators will pursue a competitive solicitation process to contract for offshore wind projects and reach their 2,000 MW goal, which would provide enough power to meet about a third of the state’s electricity needs. Notably, the target is a ceiling, not a floor. This structure is a divergence from other East Coast states that dove more ambitiously into the offshore wind industry several years back, and are now ratcheting up or even doubling their initial targets.

Massachusetts, an early leader in the field, established a 1,600 MW legislative mandate in 2016, and has since authorized a second 1,600 MW procurement, putting the state on track for 3.2 gigawatts (GW) of offshore wind by 2035. New Jersey has a 3.5 GW by 2030 target, and New York’s Governor Andrew Cuomo announced a 9 GW offshore wind goal in his 2019 State of the State address. Up and down the East Coast, offshore wind policy targets exceed 12 GW, and developers are moving full steam ahead to enter this new market: as of February 2019, the ISO-New England interconnection queue for new energy generation sources included 10,000 MW of offshore wind capacity. However, these state policy targets and project pipelines are just the beginning of the long, uncertain road to offshore wind development; it remains to be seen how many turbines will enter the water in the coming years, and at what prices they will be able to generate power.

In addition to renewable electricity, 2,000 MW of offshore wind could also generate economic benefits in the form of infrastructure upgrades, new in-state businesses and jobs. For Connecticut, a state without the dense population centers of its neighbors, offshore wind has the potential to make a transformative impact on the broader economy. Competitive pricing and economic development commitments from developers will be two major metrics of success as the state moves forward with this new source of clean energy generation.

In the city of New London, the specifics of developers’ local investments loom large. “We have to be honest about what slice of the pie Connecticut can get out of the offshore wind industry,” said Felix Reyes, director of economic development and planning for New London, which has featured heavily in offshore wind conversations among both developers and state leaders. New London’s port is state-owned, features unobstructed access to the ocean, and will soon benefit from a recently announced $93 million redevelopment.

How much will that redevelopment extend beyond the port and into the streets of New London? Reyes is hopeful that bringing this new industry to the city will create long-term, high-quality jobs, and the associated economic ripple effects. However, uncertainties remain, and Reyes sees the city as more of a supporting player with the potential to become a hub. Whether or not that potential is realized will depend on many factors and decisions that are beyond the city’s control. Additionally, communities up and down the East Coast are undertaking similar efforts to position themselves as offshore wind hubs, discussed in further detail in the Yale Center for Business and the Environment white paper "The Onshore Benefits of Offshore Wind." These rival sites may compete with New London and Connecticut for offshore wind supply chain industries and maintenance services.

The future of the U.S. offshore wind industry remains unwritten, but local leaders are looking to the European experience to gain insights into how the industry could revitalize port cities up and down the coast. Success stories from places like the U.K. port of Hull give planners like Reyes reason for optimism.

Price Breakthroughs

Connecticut recently began the solicitation process for its third offshore wind contract, which kicked off two weeks after the new bill’s signature in early June. The state’s first offshore wind procurement, announced last summer, piggy-backed on the requests for proposals of its neighbors, Massachusetts and Rhode Island: Connecticut contracted with Deepwater Wind for 200 MW of their Revolution Wind effort, which is also providing 400 MW of power to Rhode Island. Because they were part of a larger project, the state was able to secure a good deal on the price of that contract, according to Deepwater Wind VP Matt Morrissey.

Later that year, Danish offshore wind giant Ørsted acquired Deepwater Wind, and Connecticut regulators at the state’s Public Utilities Regulatory Authority approved Ørsted’s 20-year power purchase agreement (PPA) with state utilities. While the terms of the PPA were not disclosed, Ørsted has publicly committed to investing at least $15 million in the port of New London, paving the way for offshore wind construction, development activity and boat-building to take place on the Connecticut coast. In its next clean energy procurement, Connecticut added another 100 MW of power from the same Revolution Wind project, for even lower prices.

As Connecticut moves forward with its future procurements, it will be closely monitoring the prices of neighboring states’ contracts, to the extent they are publicly available. Vineyard Wind’s 800 MW project for Massachusetts, for example, boasts an average price of 8.9 cents/kWh for the two phases of the project –– a far cry from the first U.S. offshore wind project, Rhode Island’s 30 MW Block Island farm, with its starting price of 24 cents/kWh and a 3.5% annual escalator.

In comparison, onshore wind and utility-scale solar average around 4.2 cents/kWh according to Lazard levelized cost of energy estimates, and combined cycle natural gas plants range from 4.1 to 7.4 cents/kWh. To accelerate the price decline of offshore wind, Massachusetts law dictates that developer bids for future offshore wind projects must be lower than the price ceiling set by the previous contract.

Recent PPA prices in Europe and the United States bode well for development in Connecticut. They indicate that the cost of offshore wind is indeed dropping, and at an impressive clip. In early June, for example, a French offshore wind auction saw prices cheaper than onshore wind, at 50 euros/MWh. On the U.S. side, a National Renewable Energy Laboratory analysis of the full 20-year price schedule for the Vineyard Wind project concluded that the price and cost premiums in this emerging offshore wind market may be far less pronounced than expected. The analysis credited technology transfer, larger projects, investor confidence and increases in turbine capacity for the speed with which U.S. projects appear to be reaching price parity with Europe. However, it remains to be seen whether or not the Vineyard Wind pricing is an outlier or a harbinger of continuing competitively priced contracts in the United States.

Benefits and Costs

As Connecticut moves forward in procuring new offshore wind capacity, the state will have to balance its climate and clean energy goals with the impact they could have on energy bills. Importantly, however, offshore wind offers more than just environmental benefits: as a local source of energy, it carries the promise of associated economic development along the coast; as a winter peaking resource, it has the potential to alleviate the natural gas constraints and price spikes that plague the New England region in wintertime; and as a zero-emission generation source, it will help reduce the public health costs associated with fossil fuel generation.

Nevertheless, “you always have to be careful doing broad economic or environmental policy through mechanisms that will impact ratepayers,” said Klee. Connecticut’s offshore wind deployment strategy is working to avoid any undue energy burden on low-income residents or other businesses in the state. How well they succeed in ensuring equity — and on development efforts more broadly — will be critical in informing offshore wind’s trajectory into U.S. waters.

“Ultimately,” Klee said, “the goal is to deploy zero carbon energy as much as we can, as fast as we can, as cheaply as we can.”

For more on the economic impacts of offshore wind in New England, see the Yale Center for Business and the Environment white paper "The Onshore Benefits of Offshore Wind: How Coastal New England Cities are Harnessing the Power of the Emerging Offshore Wind Industry to Promote Local Economic Development."

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