Shepherd Advisors

Many Great Lakes manufacturers have entered, or are looking to enter, the onshore wind industry. But what opportunities lie offshore? A combination of factors -- new estimates of offshore wind potential, the region's inherent resources, and a flurry of real project activity -- suggests that Great Lakes manufacturers should take notice.

The Department of Energy (DOE) recently released new estimates of offshore wind potential for the U.S. -- 4,150 gigawatts (GW). What to make of this? Is this something worth thinking about? After all, onshore wind is plenty to digest -- is offshore wind just a distraction?

In contrast to Europe, where 43 offshore wind farms totaling 2.4 GW were operating as of mid-year, none have ever been constructed in U.S. waters. Is offshore wind too far in the future to warrant time and resources? Is this a real opportunity, or just a dream?

Well, here are three reasons it's now time to start paying attention:

• This is a big number, no matter how you slice it;
• Offshore wind plays to the strengths of the Great Lakes region;
• "Real" projects are now underway in the Great Lakes.

This is Big. 4,150 is a lot of gigawatts. To put this number in perspective, 4,150 GW represents:

• Four times thetotal U.S. installed generating capacity of 1,050 GW, as of year-end 2008. That's total -- coal-fired, gas-fired, nuclear, renewable -- everything.
• 118 times the U.S. wind installed base of 35 GW, and 26 times the global wind installed base of about 160 GW (cumulative as of year-end 2009).
• More than 1 million wind turbines assuming typical size of 4 MW for offshore, or more than 400,000 turbines assuming the 10 MW offshore turbines in development.
• About $10.8 trillion at the DOE's target installed cost of $2,600/kW.

Keep in mind the DOE estimates are "gross" potential. The realizable potential will be smaller after factoring in reductions/exclusions for construction feasibility, environmental constraints, commerce (e.g. shipping lanes), recreation, historical preservation, political maneuvering, etc. But even if the realizable potential is just 5% of the gross, that's still 210 GW, or about 21 times the record 10 GW of onshore wind generating capacity installed in the U.S. in 2009, nearly 6 times the current U.S. installed base, and about $500 billion in potential investment.

The DOE sees the opportunity. Concurrent with the new estimates of U.S. offshore wind potential, the DOE issued a "call to action" and released its Draft Strategic Work Plan for creating an offshore wind industry in the U.S. The plan lays out a roadmap for achieving 54 GW of offshore wind by 2030, at a target cost of energy of 7-9 cents/kWh (a 70% cost reduction). In FY 2011, the DOE will initiate the Offshore Wind Innovation and Demonstration (OSWinD) Initiative to promote and accelerate responsible commercial offshore wind development in the U.S., guided by the Strategic Work Plan.

Plays to the Strengths of Great Lakes. The Great Lakes states have a truly unique resource -- wide expanses of open water. Over these expanses blow some of the strongest winds in the U.S. Consider:

• According to DOE, the combined offshore wind potential of the Great Lakes states is more than 700 GW, or nearly 17% of the national total.
• Benefitting from four of the five lakes, Michigan has more than 37,300 square miles of water surface area with winds greater than 7 meters/second (15.7 mph) at a height of 90 meters. That's third only to Hawaii (49,200 sq mi) and California (45,400 sq mi).
• For Michigan, this translates to a gross potential of 483 GW, or almost 12% of the U.S. total. Again, Michigan ranks third.
• Many major electrical load centers (i.e., big cities and metro areas) are located on or near the Great Lakes shoreline. By tapping abundant wind over nearby waters, we can reduce the need to build transmission lines from the windy Great Plains states.
• Wind is a "home grown," free fuel. Maximizing its use can reduce our dependence on imported coal and natural gas, which is significant. For example, coal produced 60% of Michigan's electricity in 2008; all of that coal was imported, at a cost of $1.36 billion. (Union of Concerned Scientists, 2010)

Along with this tremendous wind resource, the Great Lakes states boast unparalleled industrial and technological resources to support offshore wind turbine production:

• A manufacturing base second to none, already proving to be instrumental to the U.S. in the production of wind turbines for onshore applications
• Numerous deep-water ports capable of supporting transport of large wind turbine components
• World-class colleges and universities with programs focused on renewable and more specifically wind energy.

Real Projects Underway. At the Great Lakes Wind Collaborative annual meeting in Cleveland in September, three initiatives were showcased as real projects that are moving forward:

• Ohio. Lake Erie Energy Development Corp (LEEDCo) is leading an effort to deploy a 20 MW demonstration project in Lake Erie near Cleveland. LEEDCo has chosen a consortium comprised of Bechtel, Cavallo Energy and Great Lakes Wind Energy LLC to design, finance and construct the project; General Electric will supply five 4 MW turbines. Construction is slated to begin in late 2012. Beyond the pilot, LEEDCo anticipates installation of 1000 MW in Lake Erie by 2020.
• New York. The New York Power Authority (NYPA) issued an RFP and is now reviewing five proposals for wind farm projects on Lake Erie and Lake Ontario. Projects range in size from 120 MW to 500 MW. NYPA expects to select a developer by early 2011, and its goal is to have the project built by 2015.
• Ontario. In April the Ontario Power Authority awarded a 20 year feed-in-tariff contract to Windstream Wolf Island Shoals Inc., a subsidiary of Windstream Energy LLC, to develop Canada's first offshore wind site. The 300 MW site is located west of Wolf Island (near Kingston) in Lake Ontario, on about 48,000 acres of shallow water shoals. The target date for operation is 2016.

Other states are engaging in anticipation of projects. For example, Michigan has been proactive in laying the foundation for offshore wind. The Michigan Great Lakes Wind Council, appointed by Governor Granholm, has issued a report identifying the most favorable areas to lease for offshore wind development. In addition, the Council has recommended legislative and rule changes to help guide the development of offshore wind energy -- facilitating the permitting, leasing, construction, and monitoring of offshore wind projects while protecting natural resources.

Everybody has seen and heard the arguments against offshore wind -- it's too expensive; it takes too long to develop; it impacts our views of the lakes. All of these are valid concerns that must be addressed responsibly. But for many reasons, offshore wind may represent the best opportunity for the Great Lakes region to "win" in clean energy.

DOE estimates of U.S. offshore wind potential:
http://www.nrel.gov/news/press/2010/885.html
DOE Call to Action and Strategic Work Plan for the offshore wind industry:
http://www.windpoweringamerica.gov/filter_detail.asp?itemid=2817
Recap of Great Lakes Wind Collaborative annual meeting:
http://www.glc.org/announce/10/09glwc.html