Is California Next in Line for Offshore Wind?

Environmental attorneys Cherise Gaffney and Tim Taylor and energy development attorney Chad Marriott authored an article for Windpower Engineering & Development titled “Is California next in line for offshore wind?,” published July 31, 2019. The article discusses some of the challenges that will face developers in the nascent offshore wind industry on the West Coast.

The first wave of development of offshore wind resources was focused in the East Coast of the U.S., but California’s large economy, power-hungry populace, extensive coastline and progressive politics make the state a likely place to lead the next round of development in offshore wind installations.

Challenges for developers include:

• The need to approach the federal and state permitting process strategically, requiring an “an in-depth consideration and understanding of how potential resource impacts and regulatory approvals and conditions may affect project planning, development, and timing.”
• The necessity to work with federal agencies to win approvals for leases, easements, and rights-of-way for renewable energy development activities, or to confirm that the construction and operation of a project are unlikely to jeopardize species listed under the Endangered Species Act or destroy or adversely modify critical habitat.
• The need also to work with California agencies that govern in such areas as development within the state’s coastal zone, development and other operations over its submerged public trust lands, and administration of the California Endangered Species Act.

The authors point out that companies in the industry will need to cope with changes in the way that offshore wind projects are financed: “For example, the production tax credit (PTC) and the investment tax credit (ITC) will have expired — possibly, without renewal. For now, the safe assumption is that California offshore wind will be unable to rely on the same federal tax credits that have accounted for a substantial portion (typically 40 to 50%) of terrestrial wind financing. If they are, it’s unclear whether the credits would represent a comparable percentage of the capital stack.

“Without the PTC or ITC, the gap fillers will likely be term debt and equity partnerships akin to some of the recently announced joint ventures, such as Engie-EDP and EnBW North America-Trident Winds.”