Wednesday, March 20, 2013

Maryland Governor Poised To Sign Bill Incentivizing Offshore Wind Power

Maryland Governor Martin O'Malley

By Howard Marano and Michael Conathan

For the moment at least, the U.S. offshore wind industry has a new capital: Annapolis. By an 88 to 48 vote, the Maryland House of delegates handed Governor Martin O'Malley one of his most desired legislative victories - enactment of a bill that would earmark $1.7 billion for development of a wind farm in federal waters off Maryland's coast, with the funding coming from up to a $1.50 monthly surcharge on consumers' electricity bills. The bill, which passed the Senate earlier this month now heads to the Governor's desk for signature into law.

The Maryland Offshore Wind Energy Act of 2013 has been one of O'Malley's top goals for years, as he's sought to take advantage of Maryland's expanse of shallow water, its "outstanding" wind resources, and its existing industrial infrastructure - all of which make Maryland an ideal place for offshore wind.

Despite these prime features, development of offshore wind in Maryland, as in the rest of the country, has been a long time coming. In two previous legislative sessions O'Malley attempted unsuccessfully to shepherd his bill though the legislature, demonstrating the political hurdles standing in the way of development even in an environmentally friendly state. At first, opponents were able to torpedo the bill due to its cost. Then when proponents lowered the price cap to $1.50 in 2012, political wrangling sunk the bill as the clock expired on the legislative session.

Since O'Malley's bill was first introduced in Maryland, the American onshore wind industry has seen tremendous growth. In fact, with the installation of 13,000 megawatts of new capacity, 2012 was a banner year for wind in the U.S. In contrast, not a single wind turbine has been installed off America's coasts in that time. While the offshore wind industry in the U.S. has struggled to overcome financial, political, and bureaucratic hurdles, offshore wind in Europe and Asia has continued to expand. Maryland's Offshore Wind Energy Act is meant to help reverse that trend.

Like its predecessors, the current bill would require that, within Maryland's renewable energy portfolio standard program, a certain percentage of electricity be supplied by offshore wind starting in 2017. In order to protect consumers from excessive rate increases resulting from the higher costs of wind energy production, the bill creates a "window of maximum rate impacts for both residential and nonresidential electric customers." Currently, this would amount to $1.50 per month for a household and a monthly surcharge of 1.5 percent for businesses. The new law is the first of its kind requiring direct subsidies from ratepayers, and was made politically palatable by a 2013 poll showing 72 percent of Maryland residents would be willing to pay $2 more per month for their electricity bills to develop an offshore wind industry.

The benefits of offshore wind in Maryland would still be substantial. The Governor's office estimates the project would create 850 construction jobs and 160 supply and operation and maintenance jobs. According to an analysis completed by the Maryland Department of Business and Economic Development, a 200 megawatt project would create $1.3 billion in economic activity over a five year period, generating $5.6 million in state tax revenue. And data from the National Academy of Sciences suggests Maryland stands to gain $17 million in annual public health benefits as a result of reduced fossil fuel use for electricity production.

The return on investment from any first-in-class offshore wind project will be just the tip of the iceberg. The Center for American Progress released a report in February detailing the overall benefits of developing a commercial scale offshore wind industry in the U.S. The report found that the investment required to develop an offshore wind industry would be far less than the federal government has spent on subsidizing fossil fuel industries, and that the cost to ratepayers could be as low as $0.25 per month.

While passage of the Maryland Offshore Wind Energy Act represents a victory for advocates of offshore wind, substantial obstacles still remain. Concessions made to secure the bill's passage have caused industry analysts to warn that any project will be reliant on additional tax incentives to become profitable. Even Governor O'Malley has recognized this concern at a press conference, saying "I don't believe any one state can do this by itself."

Fortunately, Maryland won't have to act on its own. Under President Obama, the Department of Energy has prioritized offshore wind, pursuing its "Smart from the Start" program that has already identified wind energy areas off the coasts of several northeast and mid-Atlantic states. And just last week, the Bureau of Ocean Energy Management announced the latest step in granting the Commonwealth of Virgina a research lease for a wind energy area off its coast. Even Congress has gotten into the act, passing a one-year extension of key tax credits that move the industry a step closer to offshore wind production.

From Denmark to China, other countries have already realized the benefits of generating electricity from strong, consistent offshore winds and revitalizing sagging coastal economies. O'Malley's legislation is an excellent step forward on both counts for his state and for the country.

Howard Marano is an intern with the Ocean Program and Michael Conathan is Director of Ocean Policy at the Center for American Progress.


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