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June 8, 2017

Maryland Approves Two Offshore Wind Farms

June 8, 2017
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Maryland utility regulators have approved two wind farms off the coast of Ocean City—a seaside resort community. If built, these wind farms would be the largest of their kind in this country. The wind farms will receive subsidies funded through increases in residential and commercial utility bills. The projects, however, still need to obtain federal permits—a process that is expected to begin around December. If the plans are approved, one of the wind farms could be operational by 2020.

But residents of Maryland’s Eastern Shore region are worried about the wind farms’ 600-foot towers obstructing views and suppressing property values. Ocean City’s mayor, Rick Meehan, indicated that the town’s elected officials will continue to express their concerns as the permitting process moves forward to the federal level.[i]

The only offshore wind farm currently operating in the United States is located off of Block Island, Rhode Island, and it has just five turbines. Block Island is a unique situation in which wind is displacing diesel generators at a similar cost for electricity. More on the Block Island wind farm can be read here.

Maryland Offshore Wind Projects

The project owners, U.S. Wind and Skipjack Offshore Energy, will build a combined 77 wind turbines with a capacity of 368 megawatts between 12 and 21 nautical miles off the coast of Ocean City, Maryland. The projects are expected to cost residential ratepayers about $1.40 a month and commercial and industrial customers about 1.4 percent a year. The companies can sell renewable-energy credits at a price of $132 for each megawatt hour they produce for 20 years, which will help to cover the $2.1 billion estimated cost of building the two projects.

Utilities and other electricity suppliers are required to buy enough of the credits annually for Maryland to meet its goal of having 25 percent of its electricity generated by renewable sources by 2020. It is estimated that at least 2.5 percent will need to come from offshore wind.

The Maryland public utility commission is requiring the companies to create almost 5,000 direct jobs during the development, construction and operating phases of these projects; pass 80 percent of any construction cost savings to ratepayers; and invest $76 million in a Maryland steel plant, $39.6 million toward port upgrades at a shipyard near Baltimore and $12 million to the state’s Offshore Wind Business Development Fund. The projects, however, will each employ only 30 to 50 permanent, full-time employees.

U.S. Wind will receive incentives for 62 turbines, which it plans to build 12 to 15 miles off the coast of Ocean City at a cost of almost $1.4 billion. The wind farm is expected to be operational in early 2020. U.S. Wind plans to construct future phases, eventually raising the number of turbines to up to 187. U.S. Wind is a subsidiary of the Italian firm Toto Holdings SpA.

Skipjack Offshore Energy will construct 15 turbines, 17 to 21 miles off the coast of Ocean City at a cost of $720 million. The wind farm is expected to be operational towards the end of 2022. Skipjack is a subsidiary of Rhode Island-based Deepwater Wind Holdings LLC.

The Ocean City Town Council is worried about how these wind farms will affect tourism, particularly the views from high-rise condominiums. Each mile the project gets moved away from Maryland’s coast would cost another $1 million. To deal with the council’s concerns, the commission indicated that U.S. Wind is required to locate its project as far to the east (away from the shoreline) of the designated wind energy area as practical. And, both developers must use “best commercially available technology” to conceal the structures during the day and night.[ii]

The Eastern Shore of Maryland houses marshlands and a state and national park at Assateague Island, which are abundant with wildlife. Researchers are studying the potential impacts these wind farms could have on wildlife, tracking migration patterns of birds such as red-throated loons to see how much they intersect with the wind farms.[iii]

The Costs Offshore Wind Projects

According to the Energy Information Administration (EIA), offshore wind turbines are the second most expensive generating technology that the agency considers in its Annual Energy Outlook, behind only solar thermal. The agency estimates that the levelized generating cost of an offshore wind turbine coming on-line in 2022 would be 15.7 cents per kilowatt-hour in 2016 dollars—almost 3 times more than a natural gas combined cycle plant and more than twice as much as onshore wind.[iv] As a result of its high cost, the agency expects no offshore wind farm to be built in the next 40 years in the United States.

Other countries, especially in northern Europe where wind resources are strong, have constructed offshore wind farms. Denmark has installed a large number of offshore wind turbines and exports the excess power to Norway and Sweden—countries that can use their hydroelectric facilities to store the power, much of which is produced at night. Germany also has invested in offshore wind farms.

But electricity prices in these European countries are very steep—residential electricity prices are triple the prices we see in the United States. These high prices push more of their citizens into energy poverty, where energy costs are above 10 percent of their income. Even in these countries, however, the wind industry is heavily subsidized.

As EIA’s forecasts show, it is more economical for the United States to build onshore wind turbines than offshore wind turbines. Unlike northern Europe, the United States has vast open areas where onshore wind farms can be constructed much more economically than offshore wind farms. In fact, the large expense of offshore wind and lack of potential customers put the kibosh on Cape Wind–a wind farm proposed off Nantucket Sound in Massachusetts.

Conclusion

Maryland electricity consumers and taxpayers will be paying more for electricity produced from these offshore wind farms due to their higher cost and subsidization. The state seems to want to lead the way in this industry despite the higher cost and the Cape Wind failure.


[i] Washington Post, Maryland regulators greenlight two major offshore wind projects, May 12, 2017, https://www.washingtonpost.com/local/md-politics/maryland-regulators-greenlight-two-major-offshore-wind-projects/2017/05/12/38f045c8-3712-11e7-b373-418f6849a004_story.html?utm_term=.eaf5834bc3da

[ii] Delmarva Now, Largest offshore wind farms in U.S. OK’d over OC sight concerns, May 11, 2017, http://www.delmarvanow.com/story/news/local/maryland/2017/05/11/maryland-approves-both-offshore-wind-projects-near-ocean-city/317689001/

[iii] Baltimore Sun, PSC ruling means Maryland could be home to nation’s second and third offshore wind farms, May 11, 2017, http://www.baltimoresun.com/news/maryland/environment/bs-md-offshore-wind-licenses-20170511-story.html

[iv] Energy Information Administration, April 2017, https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf

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  • rborlick

    The Maryland Offshore Wind projects are an expensive fraud perpetrated on the state’s electricity consumers. They were approved because of political pressure to create jobs and stimulate Maryland’s economy. However the cost of job creation is insanely high; together the projects are projected to create about 10,000 full time equivalent jobs over their 20-year lifespans at a cost to electricity consumers of about $2.1 billion dollars. So each job will cost the state more than $200,000 per job per year! How much sense does that make?

    Even worse, these projects will INCREASE CO2 emissions, thereby contributing to climate change. So not only are they fiscally irresponsible investments, they are also environmentally destructive.

    What’s not to not like?

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