Following greater than three years of planning and evaluation, California has established an offshore wind objective of seven,600 MW, with procurements beginning as early as 2027. By way of its central procurement efforts, California intends to carry a few “market transformation” to assist scale back the prices of specific applied sciences, like offshore wind, permitting them to be developed at scale with aggressive pricing.
California’s Offshore Wind Coverage
Meeting Invoice 1373 (AB 1373), enacted in 2023, authorizes the California Public Utilities Fee (CPUC) to order the procurement of assets by electrical firms, electrical service suppliers, and neighborhood alternative aggregators as a part of its Built-in Useful resource Planning (IRP) course of. The identical invoice additionally permits the CPUC to establish the necessity to procure lengthy lead-time assets by a central planning course of wherein the CPUC could request that the California Division of Water Sources (DWR) procure lengthy lead-time assets on behalf of entities included within the CPUC’s IRP. AB 1373 requires the CPUC to make an preliminary “want dedication” earlier than procurements can start by the centralized procurement mechanism.
CPUC’s Want Dedication
On Aug. 22, 2024, the CPUC authorized its “Choice Figuring out Want For Centralized Procurement Of Lengthy Lead-Time Sources,” setting out the state’s technique for procuring lengthy lead-time assets, together with 7,600 MW of offshore wind vitality. Per AB 1373, this determination consists of the preliminary want dedication and recommends that the DWR conduct at the least three rounds of offshore wind procurements beginning in 2027. The CPUC acknowledges that the assets recognized within the determination, together with geothermal and long-duration storage assets, could have increased prices than present assets. Nonetheless, it observes that these assets are steadily chosen as a part of the state’s least-cost planning evaluation for attaining its clear vitality targets. On this foundation, the choice is meant to create alternatives for these assets and ship the sturdy market indicators wanted to assist the related investments.
COMMENTARY
The 7,600-MW offshore wind procurement objective is meant to stability the state’s wants and the utmost lease house obtainable to develop offshore wind initiatives. Eligible initiatives should make the primary energy deliveries between June 1, 2031 and June 1, 2037. The prices and advantages of the offshore wind procurements shall be allotted yearly based mostly on the forecasted annual vitality load share decided in essentially the most not too long ago adopted Built-in Power Coverage report of the California Power Fee. Load-serving entities are usually not permitted to decide out of their share of the centralized procurement, and publicly-owned utilities could decide in to permit their prospects to entry the procured vitality.
As for the subsequent steps, the CPUC could subject an off-the-cuff request to the DWR inside six months of the choice, requesting that the DWR provoke procurement actions. The CPUC and DWR workers will work intently to design and conduct the solicitations. The DWR will submit the initiatives chosen and the related contracts to the CPUC for a overview of the procurement course of, choice determination, price restoration, and a dedication from the CPUC that the procurement is simply and affordable. Though topic to modification, the choice outlines the next advisable procurement schedule.
Pre-Bid Actions Solicitation Open Contracts Submitted to CPUC
- Solicitation 1 – Early 2027 Late 2027 Mid 2028
- Solicitation 2 – Early 2029 Late 2029 Mid 2030
- Solicitation 3 – Late 2029 Early 2030 Late 2030
Financial Advantages Related to Offshore Wind Improvement
Past securing renewable energy, many East Coast states have used their solicitation processes to safe further financial advantages related to growing offshore wind initiatives. These advantages embody the port infrastructure and manufacturing amenities, workforce improvement and coaching alternatives, and native content material necessities. In some states, these concerns are applied by the solicitation course of as specific eligibility necessities or analysis standards. It stays to be seen if and the way California will hyperlink these concerns to the procurement course of.
Nonetheless, California is equally poised to seize these financial advantages by its procurement course of. By 2045, the state estimates offshore wind will generate over $5 billion in state-level gross home product, with an extra $1.2 billion in labor revenue, and $385 million in fiscal income. These quantities are projected to extend by 20 p.c if the state adopts insurance policies incentivizing in-state provide chain capability.
Moreover, the state has shortlisted the Ports of Humboldt, Lengthy Seashore, and Los Angeles as essentially the most acceptable places for staging and integration, with Humboldt and Lengthy Seashore actively working to satisfy the speedy wants of the business. In complete, $11 to $12 billion of funding in port infrastructure upgrades is required to accommodate the state’s 2045 targets. For the Port of Humboldt alone, the state estimates a rise of 500 annual short-term jobs by 2030 and 14,000 annual long-term jobs by 2045 from vital port infrastructure investments and workforce improvement.
Lastly, vital transmission upgrades are essential to ship the procured energy to load facilities. The state has outlined a regional transmission method leveraging overland transmission, subsea transmission, excessive voltage alternating present and direct present choices to satisfy these growing transmission wants. In furtherance of those efforts, in December 2022, the varied state companies entered right into a memorandum of understanding with California Unbiased System Operation (CAISO) to extra intently coordinate renewable era and transmission planning. Moreover, on Could 23, 2024, CAISO authorized a 2023-2024 Transmission Plan that included roughly $4.6 billion in new transmission initiatives essential to carry North Coast offshore wind improvement to load.
Taken collectively, California is proactively defining a path to marketplace for offshore wind. Nonetheless, it stays to be seen how the State will construction solicitations and if the State can preserve its bold tempo of market transformation.
—Ty Johnson is a companion within the Seattle, Washington, workplace of the Bracewell regulation agency, the place he advises offshore wind builders and traders relating to the Bureau of Ocean Power Administration’s leasing and allowing processes, the Nationwide Environmental Coverage Act (NEPA) course of and associated litigation. His offshore wind expertise spans each the Atlantic and Pacific coasts of the U.S. Josh Robichaud is an affiliate within the Washington, D.C., workplace of the Bracewell regulation agency, the place he represents shoppers in issues associated to federal and state regulatory insurance policies, laws and guidelines relevant to the renewable energy and broader electrical business. His expertise consists of acquiring Federal Power Regulatory Fee (FERC) and state authorizations for main initiatives and transactions and on transmission, fee tariff and refund issues.
