August 24, 2018

John Warren

Director, Virginia Department of Mines, Minerals and Energy

Washington Building

1100 Bank Street, 8th floor

Richmond, Virginia 23219

 

Subject: Ørsted comments for Governor Ralph Northam’s 2018 Virginia Energy Plan

 

Director Warren,

Ørsted appreciates the opportunity to submit comments to the Virginia Department of Mines, Minerals and Energy on Governor Ralph Northam’s 2018 Virginia Energy Plan.  We applaud Governor Northam for his efforts in soliciting input from Virginia’s citizens and interested and affected stakeholders on how the Commonwealth can move toward a 21st century energy economy.  Ørsted is proud of our work in helping to power the world entirely on green energy.[1] 

The offshore wind industry is a significant economic and decarbonizing driver in Europe today.  There is 15,800MW of offshore wind installed in Europe.  Ørsted has been central to the growth of this industry, accounting for over 25% of the world’s installed offshore wind capacity. 

While the United States only has 30MW of offshore wind installed, the industry is on the cusp of a major boom that could see the U.S. become one of the largest offshore wind markets in the world.  There are currently at least between 8GW – 10GW of market opportunity, based strictly on announced, state procurement commitments over the next dozen years that can spur an entirely new industry while contributing to the reduction of carbon emissions. This is a small fraction of the estimated 86 GW of technical potential for offshore wind identified in the federal government’s most recent National Offshore Wind Strategy document.[2]

Virginia is well positioned to take a leading role in this new industry boom, but it must be aggressive and forward-thinking in its policymaking in the coming years.  Below are a set of policy recommendations that we believe Virginia can implement to fully build-out the Virginia Wind Energy Area and position itself as a hub for offshore wind in the mid-Atlantic and possibly east coast. 

CLEAR COMMITMENT TO THE DEVELOPMENT OF OFFSHORE WIND IN VIRGINIA

Investment decisions by businesses in all industries entails risk. The offshore wind industry will be looking at the states that can provide stable, long-term policy and regulatory frameworks to evaluate and manage risk.  If implemented, the recommendations in this section sends a message that Virginia understands these needs and will make the Commonwealth an attractive location for the offshore wind industry. 

The Governor should make a commitment to the deployment of at least 2,000MW of offshore wind by 2028

This commitment aligns well with the recent stated ambitions in the Grid Transformation and Securities Act of 2018, which lays out a goal of developing 5,000MW of solar and wind over the next decade.  This commitment would:

• Provide a goal around which a strategy can be developed and successfully implemented. 
• Signal to the market that the Governor recognizes the potential the industry has for the creation of good paying jobs and significant capital investment.
• Ensure that Virginia continues to diversify its fuel mix using high capacity factor, predictable, and load following renewable resources.

Increase state government clean energy procurement target from 8% by 2020 to 30% by 2030

Governor Northam has shown tremendous leadership in driving the deployment of clean energy in Virginia, including significant expansion of solar, strong support for the Coastal Virginia Offshore Wind demonstration project, planning for a statewide electric vehicle charging network, and robust renewable energy goals. Now is the time to cement that leadership by significantly increasing the state clean energy procurement goal from 8% by 2020 to 30% by 2030.  State government, including Virginia’s public higher education institutions and community colleges, is one of Virginia’s largest non-jurisdictional customers.  This target would:

• Align with the goal of Virginia’s draft carbon regulations to reduce carbon emissions from the utility sector by 30% by 2030. 
• Play an important role in reducing the state’s carbon emissions.
• Send a strong message to Virginia’s other electricity consumers that the Governor is willing to act as a partner in facing the important issue of reducing carbon emissions.

Create the Office of Offshore Wind within the Division of Energy

In the previous administration, a commitment to increasing the resources of the Division of Energy within DMME led to the creation of positions that focused on energy efficiency financing, solar energy, and the Virginia utility regulatory structure.  These positions have been important in implementing the successful VASAVES efficiency financing program, expanding the focus of the Solar Energy Development and Storage Authority, and heightening the value of the Division as a resource for citizens and stakeholders to better understand the energy economy in Virginia.  Certainly, similar successes could be achieved with the creation of Office of Offshore Wind, which would:

• Act as the primary coordinating office among state and local governments to maintain a broad and coordinated effort to deploying offshore wind off the Virginia coast and attracting the supply chain. 
• Provide consistency and continuity between administrations that will help develop and implement policies to achieve a viable, sustainable, and productive offshore wind industry in Virginia.
• Create a dedicated staffing resource to the Virginia Offshore Wind Development Authority (VOWDA) that can help the Authority reach its full potential.
• Focus additional resources on expanding the scope of the Governor’s current offshore wind strategic analysis.

Prioritize the offshore wind industry in both the workforce development strategy and the Governor’s economic development strategic plans 

Development of a robust and mature offshore wind industry has cross-cutting benefits for the Virginia economy.  Coordination among different areas of expertise within state government is vital to delivering a comprehensive strategy for industry development.  Including offshore wind in the Governor’s workforce development and economic development strategic plans would:

• Bring to bear the significant resources of the Commonwealth to realize the potential of the offshore wind industry. 
• Align all aspects of the Governor’s economic development strategy toward the goal of making Virginia an offshore wind hub. 
• Send a signal to localities that the Governor recognizes the cross-cutting value that the industry can bring to the Commonwealth. 

Initiate regional collaboration with neighboring states

Regional collaboration can provide greater certainty for the industry as it looks to establish a long-term project pipeline.  Regional collaboration would:

• Reduce regulatory and administrative burdens if states have consistent policies.
• Create a larger, more certain landscape for companies to make investment decisions. 
• Provide a steady, stable, and predictable pipeline that avoids “boom and bust” cycles.

 

CREATE A PRO-OFFSHORE WIND BUSINESS ENVIRONMENT

Create additional incentives to increase the development of in-state renewable energy, including accelerated deployment of offshore wind

Virginia has demonstrated its leadership in attracting and supporting various state industries by implementing tax credits such as, but not limited to, the Port Volume Increase, Barge and Rail Usage, Major Business Facility Job, Green Job Creation, Worker Retraining, and Coalfield Employment Enhancement credits. Virginia could model a tax credit on the Coalfield Employment Enhancement tax credit to target offshore wind.  Such a tax credit would:

• Allow 100% refunds for previously paid taxes imposed by the Commonwealth of Virginia that are associated to specific components of the offshore wind supply chain – component manufacturing, harbor staging, construction infrastructure and installation expertise, vessel construction and maintenance, and wind farm operations and maintenance.
• Reduce the cost of a project while spurring job creating and capital investment activity.
• Provide a beneficial environment for the supply chain to offer a cost competitive product to developers.

Develop incentives to increase the procurement of clean energy, including offshore wind, by existing and prospective large volume electricity consumers

Virginia has become an attractive location for large-volume electricity consumers.  While there are existing mechanisms that allow utilities to offer competitive electric rates to certain economic development prospects, Virginia could create tools which further incentive the usage of renewable energy.  Such incentives would:

• Provide a tax credit for large-volume electric consumers who locate new operations or expand existing operations powered by renewable energy systems.
• Provide a tax credit for the selling of electricity generated from in-state renewable energy projects, including electricity from offshore wind.

Develop a model ordinance for the Green Development Zone Incentive that can be easily modified and adopted by local jurisdictions

This local option incentive can be an important tool for localities in Hampton Roads to better market their jurisdiction as being ready to host the offshore wind industry.  The Governor can assist these and other localities in Virginia by developing a model ordinance that can be easily adopted to help attract clean energy businesses.  This initiative would:

• Reduce the administrative and educational burden on localities that want to attract clean energy businesses, but have constrained resources.
• Create a more welcoming landscape to clean energy companies that may view Virginia as a proactive partner in driving renewable innovation. 

Invest in preparing Virginia’s port infrastructure (public and/or private) for the offshore wind industry

Virginia has some of the most advantageous port characteristics to attract developers for staging activities, as well as manufacturing components of the supply chain that could serve the mid-Atlantic and broader global offshore wind industry.  With significant investments having been made to increase the Port of Virginia’s container capacity and deepen Virginia’s channels to 55 feet, the Port is in a unique position to focus on diversification of port operations.  The offshore wind industry could provide a long-term diversification strategy if appropriate investments are made.  These investments would:

• Reduce the costs of locating offshore wind activities such as blade manufacturing, foundation fabrication, or construction staging for installation. 
• Insulate the Port of Virginia and the Commonwealth from any potential reduction in cargo container volume due to economic hardship or other external factors. 

 

DEVELOP AN OFFSHORE WIND WORKFORCE DEVELOPMENT STRATEGY

Collaborate with offshore wind industry stakeholders and develop a strategy

Virginia should evaluate what the workforce needs are for various aspects of the supply chain and develop a plan to eliminate existing gaps in skills development programs and enhance competencies that are attractive to the industry. This plan would:

• Make Virginia’s skills development programs more nimble and ready to train the workers needed for the industry.
• Identify existing industries that have similar skills development needs and align recruitment efforts that expand the pool of potential talent that is needed by multiple industries.

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[1] The Ørsted vision is a world that runs entirely on green energy. Ørsted develops, constructs and operates offshore wind farms, bioenergy plants and innovative waste-to-energy solutions and provides smart energy products to its customers. Headquartered in Denmark, Ørsted employs 5,600 people. Ørsted’s shares are listed on Nasdaq Copenhagen [Orsted]. In 2016, the company’s revenue was DKK 61 billion (EUR 8.2 billion).

[2] National Offshore Wind Strategy: Facilitating the Development of the Offshore Wind Industry in the United States, U.S. Department of Energy and U.S. Department of the Interior, 2016, https://www.boem.gov/National-Offshore-Wind-Strategy/