A report co-released with Energy and Environmental Economics, Inc. (E3)

Executive Summary

This report presents research findings on offshore wind development, pursuant to a Proposition 84 Sea Grant from the California Ocean Protection Council to the UC Berkeley Labor Center and Energy & Environmental Economics (E3). Our study addresses two separate but complementary questions for California in the years and decades ahead: 1) what benefits would the emergence of a major offshore wind power sector create for California workers and communities, and what policies might optimize these impacts; and 2) would offshore wind power be a competitive source of renewable energy in comparison to other clean energy sources? These questions are discussed in two sections: Workforce Needs and Policies for Offshore Wind (Chapters 1-6) and Integrating Offshore Wind in California’s Grid: An Assessment of Economic Value (Chapters 7-11).

The urgency of these questions derives from the fact that recent studies by the California Energy Commission (CEC) and California Public Utilities Commission (CPUC) indicate that the state will require two to six times more renewables capacity by 2045 than is installed today.[1] However, California’s planning processes have only recently begun to consider offshore wind as a component of this future energy supply.

The exponential development of offshore wind power around the world and its projected growth on the East Coast of the United States shows that offshore wind could serve an important role in California’s clean energy supply. Globally, offshore wind capacity now tops 22 gigawatts (GW), a tenfold increase over the past decade, with about 20 percent of that installed in 2018 alone.^[2] This total is projected to reach between 154 GW and 193 GW by 2030, with at least half expected to be in Europe and much of the rest in China.^[3] In the United States, several Northeastern states have made offshore wind a cornerstone of their future clean energy portfolios, with about 22 GW of new capacity mandated by 2035.

California differs from the East Coast and much of Europe in that the state’s deep coastal waters will require its wind turbines to be on floating platforms rather than on structures fixed to the seabed. This floating technology has been successfully demonstrated in multiple locations worldwide, with larger-scale commercial projects being planned and contracted for deployment in the near future. While the cost of floating offshore wind today is higher than fixed-bottom offshore wind, the technology is well understood and its cost is expected to decline rapidly with commercialization and greater scale of deployment.

Our chief findings are the following:

Workforce needs and policy

• The results from offshore wind planning and deployment in Europe and the U.S. East Coast show that offshore wind could be a high-road industry that not only helps the state achieve its climate policy goals for emissions reductions, but also spurs broad-based growth, creates quality jobs, and benefits communities. Yet, the benefits could prove less than significant unless the state commits to develop the offshore wind sector with defined goals and sustained support.
• The largest economic benefits from the offshore wind industry would occur if an in-state supply chain were developed for the primary components of wind turbine generators—blades, nacelles (hubs), and towers—as well as the floating platforms, thus creating thousands of manufacturing and construction jobs. But the offshore wind industry is highly globalized, with its supply chain centered in Europe, and by the mid-2020s, China is likely to become a major exporter of wind components. In the absence of trade barriers imposed by the U.S. federal government for national security reasons,^[4] California would need to plan strategically to compete for offshore wind supply chain jobs.
• As a first step, state policymakers should set a clear goal for offshore wind as part of the long-term renewable energy planning process (for example, a mandate for at least 8 GW over a decade). If the offshore wind planning process were to evolve in a more piecemeal basis, without strategic direction or fixed targets, wind developers and manufacturers would lack incentive to make major California investments, with the likely result being wind farms built with primarily imported inputs, relatively insignificant economic benefits, and potentially less cost reduction. ^[5]
• The first major supply chain component to locate in California is likely to be the floating platforms because their bulk makes them hard to transport. But the platform designs expected to dominate the California market in the 2020s could vary significantly in their employment impacts, and the state should carefully analyze these differences. While the U.S. Bureau of Ocean Energy Management (BOEM) selects offshore wind developers via an auction process in which bid price is the chief criterion, the state could leverage its control over permitting, the upgrading of ports, and other regulatory pressure points to influence the developers’ selection of platform suppliers.
• The state would benefit from taking a proactive stance in working with industry to identify and develop possible port locations—possibly a multi-site network including Humboldt Bay—and to support development of other infrastructure such as long-distance transmission lines.
• Although the state has a strong workforce training system, including the construction industry’s state-certified apprenticeships, skills gaps are likely to be a challenge for offshore wind on the North Coast. The state should consider creating a High-Road Training Partnership (HRTP) for offshore wind to fill these gaps and broaden community access to offshore wind jobs. HRTPs are a new state program of industry‐specific training programs that prioritize job quality, equity, and environmental sustainability.^[6]

Costs and grid integration

• This study identifies approximately 20 GW of viable offshore wind resources in California with estimated capacity factors ranging from 46 percent to 55 percent. These wind resources comprise five distinct zones: the three proposed BOEM lease areas (Morro Bay, Diablo Canyon, Humboldt Bay) and two additional zones in Northern California (Cape Mendocino and Del Norte). Together, these resource zones represent more than three times California’s current onshore wind capacity and, if developed to their maximum potential, could provide approximately 25 percent of the state’s future electricity needs.
• Offshore wind may be economically competitive with other resources in California by the late 2020s, once it is commercialized and available at scale. E3’s analysis indicates that offshore wind constructed in 2030 would offer approximately $80/MWh in average lifetime avoided costs relative to competing grid resources, which would primarily be a combination of solar photovoltaics (PV), battery storage, and natural gas. For comparison, the latest forecasts from the National Renewable Energy Laboratory (NREL) suggest that the levelized cost of floating offshore wind may fall to $65–$80/MWh by the late 2020s, which would make offshore wind economically competitive compared to the abovementioned alternatives.^[7]
• The avoided costs of offshore wind increase over time in every modeled scenario. This cost increase reflects the growing value of offshore wind over time as more and more greenhouse-gas-free energy is required to meet state policy goals and alternative sources become more expensive. For example, the results presented in this study show that if 8 GW of total offshore wind capacity is deployed across the state, annual avoided costs would range from $73/MWh in the early 2030s to almost $88/MWh by 2045. At the same time, the cost of offshore wind is projected to fall dramatically over the next two decades, making offshore wind increasingly cost competitive beyond 2030.
• Offshore wind’s value differs slightly among the studied zones, with Humboldt Bay, Cape Mendocino, and Del Norte offering the most valuable wind resources in the longer term. When avoided cost is compared with estimated development costs and transmission availability, Morro Bay appears to be the most economic zone for development. The following table summarizes average avoided grid costs (levelized avoided cost of energy, LACE) and lifetime costs (levelized cost of energy, LCOE) associated with each site, as well as the expected onshore transmission capacity available for offshore wind interconnection in the late 2020s.

• Unlike solar PV, which offers more rapidly diminishing value to the grid at larger scales of deployment, offshore wind maintains a similar level of avoided costs at increased scale, providing approximately $80/MWh in lifetime average value for up to 8 GW in total capacity installed in 2030. The average avoided cost of offshore wind may still exceed $70/MWh, even if all the studied resource zones (representing about 20 GW of capacity) were developed.
• Offshore wind would be even more economically competitive if future land use for solar were constrained by environmental protections or if the state aimed to achieve its greenhouse gas (GHG) goals at an accelerated pace. Sensitivity scenarios highlight the value of offshore wind in deep GHG-reduction scenarios in the future, especially when onshore resources are constrained.
• Offshore wind remains cost competitive under our modeling, even if alternative out-of-state wind resources were developed or solar and storage costs fell faster than expected. If 10 GW of out-of-state wind were added or if solar and storage costs fell more rapidly, the average value of offshore wind might fall by 5 percent, suggesting there is limited long-term downside risk to offshore wind development, even if alternative resources were available at low cost.
• Though offshore wind’s value appears robust across all scenarios considered, the emergence of new competing technologies in the distant future is a potential downside risk that was not captured in the model. Offshore wind’s value is driven primarily by its renewable attributes and a generation profile that coincides well with the grid’s evening and winter energy needs, when emissions from remaining gas plants are projected to be highest. Few scalable resources today can offer the same benefits. However, if future technologies and/or resources with similar attributes (e.g., storage, geothermal, modular nuclear, or carbon capture and sequestration) became available at more competitive costs in the future, offshore wind’s value to the grid may be reduced.
• This study does not make recommendations regarding the prioritization of offshore wind resource zones for development, which would require more detailed study of resource costs and transmission constraints. For example, limited transmission capacity on the North Coast may cap the amount of offshore wind that can be deployed without significant costs to deliver it onshore. The state would be well advised to carefully examine solutions for resolving this transmission bottleneck.

Endnotes

^[1] California Public Utilities Commission, “Proposed IRP Portfolios for the 2019-20 CAISO Transmission Planning Process,” 2019, https://www.cpuc.ca.gov/; California Energy Commission, “Deep Decarbonization in a High Renewables Future,” 2018, https://www.ethree.com/wp-content/uploads/2018/06/Deep_Decarbonization_in_a_High_Renewables_Future_CEC-500-2018-012-1.pdf.
^[2] Walter Musial et al., “2018 Offshore Wind Technologies Market Report” (U.S. Department of Energy, August 2019), https://www.energy.gov/sites/prod/files/2019/08/f65/2018%20Offshore%20Wind%20Market%20Report.pdf.
^[3] Musial et al.
^[4] Akin Gump Strauss Hauer & Feld LLP, “New CFIUS Law: Key Issues Affecting the Energy Sector,” September 28, 2018, https://www.akingump.com/en/news-insights/new-cfius-law-key-issues-affectingthe-energy-sector.html.
^[5] Stephanie A McClellan, “New York Offshore Wind Cost Reduction Study” (University of Delaware Special Initiative on Offshore Wind, February 2015), https://www.ceoe.udel.edu/File%20Library/About/SIOW/071516-New-York-Offshore-Wind-Cost-Reduction-Study-ff8.pdf.
^[6] California Workforce Development Board, “High Road Training Partnerships,” accessed October 12, 2018, https://cwdb.ca.gov/initiatives/high-road-training-partnerships/.
^[7] NREL (National Renewable Energy Laboratory), 2019 Annual Technology Baseline. Golden, CO: National Renewable Energy Laboratory, 2019, https://atb.nrel.gov/electricity/2019.