America's Greatest Untapped Natural Resource Saga: The Next Chapter

Source: Walt Musial/ NREL



Although offshore wind projects are under constant development in Europe, the U.S. is still waiting to construct its first wind farm in coastal waters. Are we any closer to seeing turbines dot America's seascapes? Let's take a look at some recent developments.

Going long
The Bureau of Ocean Energy Management, or BOEM, is set to begin a competitive lease process for a 127- square mile site located 11 miles south of Long Beach, NY. Deepwater Wind is likely to be one of the companies vying for the site. If it does express interest, this will be Deepwater Wind's second proposed project off of Long Island's shores. In March, the company announced a proposition to the Long Island Power Authority, or LIPA, to develop an offshore wind project, located approximately 30 miles east of Montauk. With more than 200 MW of capacity, the project, according to Deepwater Wind, would not be visible from Long Island. The company estimates the cost to be $1 billion.

Source: City of Long Beach

The BOEM has already awarded several other commercial leases. Winning two competitive leases, Deepwater Wind won the auctions for two sites, totaling 164,750 acres, located off the shores of Rhode Island and Massachusetts. In a $1.6 million bid, Dominion Virginia Power, a subsidiary of Dominion Resources (NYSE: D  ) won the BOEM's third competitive lease for a 112,800 acre site located off the Virginia coast. Estimating that, when operational, the wind farm will be capable of generating up to 2 GW of electricity, enough to power 500,000 homes, Dominion believes that the installation of the first turbine may occur within the next 10 years. Not limiting itself to Virginia, Dominion is engaged in the initial steps of a future commercial offshore wind leasing project for a site located off the shore of North Carolina.

One wind turbine manufacturer likely to be keeping a close eye on Deepwater Wind's interest in the Long Island projects is Alstom SA (NASDAQOTH: ALSMY  ) . Foregoing a deal that it had initially made with Siemens, Deepwater Wind selected Alstom to supply it with 5 of the 150 6-MW Haliade direct-drive turbines for the 30 MW project Block Island wind farm.

Political pressure
Although there is considerable interest among Long Islanders -- the Association for a Better Long Island, whose members comprise $15 billion worth of commercial, industrial, residential and retail real estate interests, has endorsed the proposed Montauk project -- politicians see things differently. Two weeks ago, the U.S. Senate failed to approve a bill which included a two-year extension of the wind industry-friendly PTC and ITC. Expressing his frustration with the Senate's failure to move the legislation forward, U.S. Sen. Michael Bennet, a democrat from Colorado, said, "This is yet another example of Washington not doing the work that Coloradans and the American people expect us to do." Further expressing his frustration, Bennet said, "This tax extenders bill was approved by the Senate Finance Committee with strong bipartisan support. Coloradans and the American people deserve better."

Adding another wrinkle to the country's treatment of renewable energy projects, the EPA is proposing standards to reduce carbon dioxide emissions 30% by 2030. According to the proposal, states will have a range of ways in which they can meet the standard, including the installation of pollution-control technology, establishment of energy efficiency programs, or the development of renewable energy projects. Approval of the standards would strongly incentivize utilities to develop offshore wind projects like the ones being proposed off Long Island.

A Fool's final take
The U.S. has a number of offshore wind projects, and they all have one thing in common: they're in development -- not yet operational. Nonetheless investors would be wise to not write off the nascent industry.  An inflection point is on the horizon, and although the momentum may ebb and flow, it is inevitable. Dominion is certainly not writing it off, and their foresight, in time, should benefit them. Turbine manufacturers like Alstom, Vestas, and Siemens will surely benefit too.

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