Executive Summary

As California accelerates its transition to a low-carbon future, one of its challenges is to choose “high-road” policies that not only cut emissions but spur broad-based growth, create quality jobs, and benefit communities. The state and federal governments have recently launched a planning process for one emerging clean energy source with significant high-road potential: offshore wind.

This report analyzes the policy actions needed for offshore wind power to become an important component of California’s energy mix and an economic catalyst. These steps would entail an unusual degree of long-term coordination and commitment by government and industry. Yet such an effort appears to merit serious consideration because of the sector’s potential to create high-wage employment and help balance the state’s power grid at electricity rates competitive with those of similar sources.

California state agencies already provide direct and indirect subsidies to other, much-touted technologies of the future such as battery storage and advanced biofuels. By placing strategic bets on competing clean energy alternatives, these subsidies stimulate a multi-sided development race that will strengthen the state’s climate policy options in the years to come. Offshore wind carries the same inherent risk as the other technologies in this race: the lack of certainty that they will cut their currently-high costs enough to become fully competitive. But offshore wind also has a unique vulnerability that doubles as economic potential: its physical scale and logistical complexity.

Because the ocean floor along California’s coast slopes steeply downward into deep waters, offshore wind turbines must be on floating platforms, instead of being fixed to the ocean floor in shallow waters like those along the East Coast and much of Europe. The floating turbines expected for California will be huge, with heights reaching as much as 700 feet, meaning that each floating turbine is effectively a giant half-ship, half-airplane, with complex manufacturing, logistical, and maintenance needs.

These needs, in turn, require an extensive supply chain. Ensuring that this supply chain takes root in California rather than in Asia or Europe would require major upgrades to California’s infrastructure for ports, transportation, and transmission. The payoff would be creation of a new economic sector that – to a greater or lesser extent, depending on policy decisions – could provide family-supporting wages, health and retirement benefits, and career training opportunities, including for workers from disadvantaged communities.

A necessary factor in developing this supply chain is investor confidence. In-state production of the full range of wind farm components is possible if state and federal planners send clear signals to wind developers that, if they build this manufacturing capacity in California, their investments will find steady markets through a long-term series of offshore projects. Without such signals, it is likely that much of the supply chain would be outsourced, with fewer economic benefits for Californians.

For these reasons, California’s offshore wind is a case study of the challenges and opportunities inherent in a 21st-century industrial policy for the clean energy transition. An entirely new industry is being envisioned, potentially involving major infrastructure requirements and long-term power resource planning. Success will depend on policy decisions and market signals that are only just now beginning to be evaluated by government and non-government stakeholders.

A central finding of this report is that California’s offshore wind planning efforts will soon need to broaden their scope. Since early 2016, the state and federal governments have commissioned research, conducted stakeholder outreach, and mapped out the labyrinth of state, federal, and local permitting. This is important groundwork, much of which involves potential environmental concerns that are outside the purview of this report. But because there are so few U.S. precedents for high-road economic planning, additional attention will be needed to identify and design the appropriate policy tools.

This report analyzes the potential economic and environmental benefits of a California offshore wind industry, the types of policy decisions and public investments needed to maximize this potential, and the not-insignificant challenges that lay ahead. Research for this report included interviews with a wide variety of stakeholders, ranging from those outside the current planning effort such as labor union leaders in California, Massachusetts, and Rhode Island, to policy insiders such as California state officials, wind industry executives, and representatives of environmental organizations. The report’s findings are summarized below.

ROLE OF OFFSHORE WIND IN CALIFORNIA’S LOW-CARBON TRANSITION

• In-state grid balancing: Offshore wind would bridge the daily late-afternoon gap between fast-vanishing solar output and rising residential electricity consumption, thus reducing the state’s need to import wind power from Wyoming or other out-of-state sources. In doing so, it could allow California to develop additional solar power without destabilizing the grid. As an in-state energy source rather than an out-of-state import, offshore wind would be under the purview of the state’s own regulators as well as federal agencies, thus allowing California policymakers to ensure compliance with state policies and interests.
• Economic feasibility: Until only a year or two ago, offshore wind seemed far too expensive to ever be able to compete with California’s other sources of renewable power. But recent technological innovations have sent offshore wind costs plummeting, suggesting that by the mid-2020s, floating wind farms will be close enough to price parity with land-based renewables that they could play a large, complementary role in California’s power mix.

HIGH-ROAD STRATEGIES

• Jobs potential: An April 2016 analysis (Speer et al.) by the National Renewable Energy Laboratory (NREL) of development scenarios for California offshore wind concluded that an economically feasible build-out of 16 GW would create steadily increasing employment totaling an annual average of 13,620 full-time jobs in construction, installation, and manufacturing by 2040-2050, and 4,330 full-time, long-term jobs in operations and maintenance, plus thousands more service-sector jobs in the broader economy. If the construction and installation contracts were governed by project labor agreements, and if manufacturers and wind farm owners could be encouraged to adopt similar arrangements, the offshore wind sector as a whole could act as catalyst of a high-road industrial workforce strategy statewide.
• Manufacturing supply chain: California’s first offshore wind project or two are likely to be done with imported turbines and other parts. But if state policymakers send clear signals that a multi-year sequence of many contracts is in the offing, private manufacturers and investors are more likely to build factories and other facilities in California for turbines, blades, towers, and foundations. This, in turn, could lower costs and make the electricity produced more competitive with other power sources.
• Port infrastructure: A full supply chain presupposes the availability of suitable port facilities for manufacturing and assembly. Two alternatives appear potentially viable: either a multi-site approach, with different functions carried out at a variety of ports, or a single multi-use hub at Eureka, where the Port of Humboldt Bay has vast expanses of vacant industrial land at a deep-water harbor but also has major challenges for highway and rail transport as well as grid interconnection. Either solution would require considerable additional research and planning.
• Transition for PG&E nuclear workforce: California’s initial offshore wind farms are likely to be either in waters near the Diablo Canyon nuclear plant, whose reactors are slated to close in 2024 and 2025, or offshore Humboldt and Del Norte counties, near a long-closed nuclear plant that is currently undergoing its decommissioning process. In either case, the result could be retraining and re-employment for some of the nuclear plant workers.

STATE POLICY SUPPORT

A recurring theme from interviews with policymakers and other stakeholders, both outside and inside California, is that the state and federal governments need to send unambiguous signals to wind companies and investors that offshore wind can play a significant role in California’s energy markets. These actions would not entail unconditional support for offshore wind. But by enabling further exploration of its high-road potential, they would complement the state’s strategic backing for other emerging technologies. A logical sequence of policy actions would include the following:

• 2017-18, Air Resources Board: Inclusion of offshore wind as a potential supply of renewable energy in its Scoping Plan, which provides non-binding, strategic guidance about resource planning.
• 2017-18, Public Utilities Commission: Guidance to utilities – especially PG&E but also Community Choice providers – to include offshore wind in their Integrated Resource Plans for 2030.
• 2018-19, Bureau of Ocean Energy Management: Decision on size and scope of the initial project(s) – most likely a relatively small pilot of 30-50 MW.
• 2018-19, Legislature and/or Public Utilities Commission: Legislation and/or rulemaking authorizing utilities to purchase power from the initial offshore wind farm(s) with full cost recovery.
• 2019-25+, State and local elected officials: Coordination with labor advocates and wind companies to encourage project labor agreements, community benefits agreements, and other measures to ensure favorable outcomes for workers and communities.
• 2021-25+, Legislature and/or Public Utilities Commission:Legislation and/or rulemaking authorizing subsequent offshore wind projects and providing support to upgrade electric transmission capacity, port facilities, and rail connections.

These steps would not be easy to execute. They would require the kind of coordinated industrial planning that has been rare in the United States in recent decades. Nevertheless, if California is to transition to renewable energy via the economic high road, policymakers and stakeholders should give serious consideration to offshore wind.

View the full report.