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Opportunities and challenges for a floating offshore wind market in

California

PIETER-JAN VANDENBRANDE

Master of Science Thesis Stockholm, Sweden 2017

Opportunities and challenges for a floating offshore wind market in California

Pieter-Jan Vandenbrande

Master of Science Thesis INDEK 2017:71

KTH Industrial Engineering and Management

Industrial Management

SE-100 44 STOCKHOLM

Master of Science Thesis INDEK 2017:71

Opportunities and challenges for a floating offshore wind market in California

Pieter-Jan Vandenbrande

Approved

2017-05-30

Examiner

Terrence Brown Supervisor

Serdar Temiz

Commissioner

n.a. Contact person

n.a.

Abstract

The offshore wind energy industry is a rapidly growing industry as solutions are becoming cost-competitive and there is an increasing need to limit greenhouse gas emissions. New floating offshore wind turbine designs now enable the access to previously inaccessible offshore wind resources. In this research, a comprehensive analysis is made of the different factors influencing the macro environment for a potential floating offshore wind energy market in California. The analysis assesses the relevant political, economic, social, technological, environmental, and legal aspects in California. The outcome of this research shows the opportunities and challenges for a floating wind turbine market in California. It is found that there are many opportunities present due to California's political and economic climate. There is considerable support for offshore wind projects on the state level, demonstrated by the active engagement of the governor and the creation of the California Task Force. The large economy and high electricity prices are promising for future projects. Furthermore, wind resources are vast and the technical infrastructure is present, especially Southern California is well suited. There are technological threats present, but these are common for all renewable energy sources and seem unavoidable with the Renewable Portfolio Standards California has set. The main threats are posed by the complex regulatory environment and the financial uncertainty as a result of the lack of federal support. The Jones Act, for example, can be troublesome as it will likely increase costs and delay projects. Furthermore, the social environment and local willingness for such projects was shown to be very important for their success. The state of California has already been working pro-actively on involving the local members of the public in potential upcoming offshore wind energy projects. The research concludes that California offers many opportunities with surmountable threats. Key-words Floating wind turbines; California; PESTEL analysis; market challenges and opportunities

Acknowledgements

First of all, I would like to thank my thesis supervisor Serdar Temiz, who was inter-ested by my topic and gave me academical direction. Secondly, thanks to HexiconAB for providing me with the great opportunity to learn about the promising fu-ture of floating wind turbines. Special thanks go to Eduard Dyachuk and MauriceJenkens for their willingness to answer my questions and helped me find this in-teresting research topic. Thanks also to Edmundo Lazo and Oxana Casu for helpingme by providing valuable feedback on the research proposal and final thesis. Finally,my eternal gratitude to my girlfriend Mathilde for supporting me at all times.

Contents

1 Introduction 11.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Purpose and Research Question . . . . . . . . . . . . . . . . . . . . . . . 21.3 Delimitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.5 Research Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 Literature Review 42.1 Offshore wind energy overview . . . . . . . . . . . . . . . . . . . . . . . 4

2.1.1 History and current situation . . . . . . . . . . . . . . . . . . . . 42.1.2 Overview of technological, economic and political aspects . . . 6

2.2 Developments in offshore wind . . . . . . . . . . . . . . . . . . . . . . . 102.2.1 Floating wind turbines . . . . . . . . . . . . . . . . . . . . . . . . 10

2.3 Offshore wind in the United States . . . . . . . . . . . . . . . . . . . . . 122.4 Energy Market California . . . . . . . . . . . . . . . . . . . . . . . . . . 14

3 Theoretical Framework 163.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163.2 External Business Environment . . . . . . . . . . . . . . . . . . . . . . . 16

3.2.1 PESTEL Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 163.2.2 Porter’s Five Forces . . . . . . . . . . . . . . . . . . . . . . . . . . 18

3.3 Internal Business Environment . . . . . . . . . . . . . . . . . . . . . . . 193.3.1 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

4 Methodology 204.1 Research Paradigm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204.2 Research Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204.3 Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214.4 Ethical and Sustainability Issues . . . . . . . . . . . . . . . . . . . . . . 21

5 Analysis California 235.1 Political . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235.2 Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265.3 Social . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325.4 Technological . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

5.5 Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375.6 Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

6 Discussion 446.1 Opportunities and Threats . . . . . . . . . . . . . . . . . . . . . . . . . . 44

7 Conclusion 47

A PESTEL Analysis Summary 49

B Opportunities and Threats Summary 56

Bibliography 58

List of Figures

2.1 Installed offshore wind capacity per country . . . . . . . . . . . . . . . 52.2 Cumulative and annual installed offshore wind capacity in Europe . . 52.3 Evolution of European wind turbines over time . . . . . . . . . . . . . 72.4 Life cycle of offshore wind farms in Europe . . . . . . . . . . . . . . . . 82.5 Levelised Cost of Electricty (LCOE) of power generation technologies

in Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.6 Technologies for floating offshore wind . . . . . . . . . . . . . . . . . . 112.7 Offshore wind projects development in the US as of June 2016 . . . . . 122.8 Total electricity generation from renewable sources in California . . . . 152.9 Total installed capacity of renewable sources (2016) . . . . . . . . . . . 15

5.1 Impact of PTC on annual installed wind energy capacity in the US . . . 275.2 Visualization of California’s industry . . . . . . . . . . . . . . . . . . . . 285.3 Average electricity prices in the US in 2014 . . . . . . . . . . . . . . . . 305.4 California Cap-and-Trade market visualization . . . . . . . . . . . . . . 305.5 Employment rate in California and the US . . . . . . . . . . . . . . . . . 315.6 Question to locals in California: Would you support or oppose off-

shore wind energy in Santa Barbara County . . . . . . . . . . . . . . . . 335.7 Map of offshore wind farm sites selected by NREL with the ports and

transmission lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355.8 Power characteristic for an average 2016 March day in California . . . 365.9 Offshore wind resources at 90m in the United States . . . . . . . . . . . 395.10 Water depths in the US . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395.11 Technological potential of offshore wind in the United States . . . . . . 40

List of Abbreviations

BOEM Bureau of Ocean Energy ManagementCAA Clean Air ActCAISO California Independent System OperatorCEC California Energy CommissionCEQA California Environmental Quality ActCMSP Coastal and Marine Spatial PlanningCPP Clean Power PlanCPUC California Public Utilities CommissionCWA Clean Water ActCZMA Coastal Zone Management ActDOI Department of the InteriorEPA Environmental Protection AgencyEU-ETS European Union Emissions Trading SystemGDP Gross Domestic ProductGDP Gross Domestic ProductGE General ElectricGW GigawattIOU Investor Owned UtilityITC Investment Tax CreditkW KilowattkWh Kilowatt-hourLCOE Levelised Cost Of ElectricityMW MegawattNEPA National Environmental Policy ActNIMBY Not In My BackyardNREL National Renewable Energy LaboratoryNREL National Renewable Energy LaboratoryO&M Operations and MaintenancePCPI Per Capita Personal IncomePG&E Pacific Gas and ElectricPPA Power Purchase AgreementPTC Production Tax CreditPTC Production Tax CreditR&D Research and DevelopmentREC Renewable Energy CreditRPS Renewable Portfolio StandardSCE Southern California EdisonSCOE Society’s Cost Of ElectricitySDG&E San Diego Gas and ElectricTW TerrawattUS United StatesUSDOE United States Department Of Energy

1

1 Introduction

1.1 Background

The topic of energy is becoming more important than ever, and rapid economic andtechnological developments cause an ever increasing energy demand. According toa report from the Energy Information Administration, the world energy consump-tion is projected to increase by 48% between 2012 and 2048 (Doman, 2016). However,energy production comes at a cost. Fossil fuels are still one of the primary ways ofgenerating energy. The consequences of this excessive use of fossil fuels are now be-coming more apparent as the climate of our planet is changing. As the environmen-tal state deteriorates, and energy crisis becomes more pressing, people, companiesand governments are searching for ways to alleviate this pressure and protect theplanet from further harm.

The United States is the biggest consumer of energy per capita in the world. Thetotal electricity consumption in 2015 was over 3.9 TWh (U.S. Energy InformationAdministration, 2017). The electricity sources are coal (33%), natural gas (33%), nu-clear (20%) and renewables (13%) (US Energy Information Administration, 2016).Wind power makes up 35% of the renewables and is currently responsible for al-most 5% of the total electricity generation. All wind power is located on-land withTexas, known as the oil state, being a surprising leader, followed by Iowa, Okla-homa and California, and the onshore wind power capacity is still growing rapidly(AWEA, 2016). However, offshore wind parks can have considerable advantagesover onshore wind for some states. The total available offshore wind resources arefar larger than the onshore wind resources for the coastal states and some coastalstates do not have the correct topography for land-based wind power (Musial andRam, 2010). Additionally, the interest in offshore wind parks is high as the optimalonshore wind park sites are in locations where relatively few people live, whereasthe optimal offshore sites are near the East and West Coast, where the majority of thepopulation lives (Small, Beirne, and Gutin, 2016). Offshore wind turbines also avoidmany of the social problems such as noise and visual complaints and the “Not In MyBackyard” (NIMBY) phenomenon. However, the offshore wind energy industry isrelatively new and only present at large scale in Northwestern Europe (Hendersonand Witcher, 2010). The reason for this is because the current fixed-bottom tech-nology, where turbines are planted into the seabed, makes the deployment of wind

Chapter 1. Introduction 2

turbines only economically feasible in shallow waters. The sites available in the USfor fixed-bottom offshore wind turbines are very limited due to the deep ocean wa-ters (US Department of Energy, 2016). Recently, floating turbine technology has beendeveloped, enabling offshore wind power where it was previously too expensive ortoo difficult to install fixed-bottom offshore wind turbines (“Floating offshore windmarket outlook”). These floating concepts are now being tested and have revivedmany of the coastal states’ interest in offshore wind energy.

California is driven to reduce its environmental impact and has set ambitious re-newable energy goals with its Renewable Portfolio Standard (RPS). The CalifornianRPS requires that utilities provide a certain percentage of their energy as renewableenergy (Musial et al., 2016). California is one of the leading states concerning greenenergy production with around 29% of the states’ electricity coming from renewablesources. The RPS goal has been set at 33% by 2020, and 50% by 2030 (Pyper, 2015).If California is to succeed in its renewable energy targets, it will need to make useof its vast untapped offshore wind resources (Dlouhy, 2016), which could fulfill thestate’s energy demand many times over (Schwartz, Heimiller, and Haymes, 2010).

1.2 Purpose and Research Question

While the use of floating offshore wind turbines seems promising, there are manyenvironmental factors that influence the introduction of floating turbines. This paperanalyses the readiness of California for an offshore floating wind turbine market bylooking at political, economic, social, technological, legal and environmental factors.The research that has been conducted on these topics is mostly done by governmentorganizations. The general industry and technology trends are described and fore-casted on a large time-scale in which recommendations are given to the governmentso that they can prepare the industry and change policies (Anderson, 2013; DOE,2016; Smith, Stehly, and Musial, 2015; US Department of Energy, 2016). This re-search takes a different approach as it analyses the current situation in Californiaand its suitability for a floating offshore wind market. As such, the market opportu-nity is considered not only from an economic or technological perspective but froman overall analysis, and is analysed in the current time period.

This leads to the following research question:

What are the challenges and opportunities for a floating offshore wind market inCalifornia?

Chapter 1. Introduction 3

1.3 Delimitations

This research is limited to an analysis of the market environment for floating off-shore wind energy in California. The readiness of other states for floating offshorewind solutions may be equally interesting but a choice has to be made due to timeconstraints. California is chosen because of its excellent offshore wind resources andvery deep waters, even close to the shore. As such, the state is a good candidatefor floating wind parks (Musial et al., 2016). The scope of the research is to give anoverall view of the market and situation in California from various angles (political,economic, social, technological, legal and environmental) in order to get a picturethat is as complete as possible. The research will not focus in-depth on each of theseaspects as this exceeds the scope of this thesis, however more detailed research willoften be referred to.

1.4 Limitations

This research is primarily limited by time, for this reason only secondary data is usedand no primary data on the subject is collected. Another limitation is the quicklychanging business landscape in the United States for renewable energy projects andoffshore wind energy projects in particular. This means that sections of this researchneed to be updated frequently. Care is taken so that the sources used in this work areas recent as possible. Furthermore, the floating wind turbine technology discussedin this paper is still in its infancy but is expected to reach a commercial stage in thecoming years.

1.5 Research Structure

The second chapter of this thesis is a literature review on offshore wind energy andits recent developments. Furthermore, it informs about offshore wind projects thatare currently being set up in the United States, and also explains what the energymarket in California looks like. Chapter 3 introduces the theoretical frameworksthat will be used to assess the external business environment. The methodology inChapter 4 explains more in detail how the research will be carried out. The analy-sis of the external business environment for floating wind solutions in California ismade in Chapter 5. Next, Chapter 6 discusses the opportunities and threats in theCalifornian environment for floating wind projects based on the analysis of the var-ious environmental factors. Finally, a conclusion is made on the market situation inCalifornia for floating offshore wind turbines.

4

2 Literature Review

The literature review gives more information on the wind energy industry. The firstpart is focused on describing the current offshore wind energy industry and how it isevolving. It includes a short overview of the different main technological, economicand political aspects. The recent developments in the offshore wind industry aredescribed in which the role of floating wind turbines is further explained. Finally, ashort overview is given on the recent offshore wind activities in the US, and insightis given into the energy market in California.

2.1 Offshore wind energy overview

This section gives an overview of the global offshore wind energy industry and someof the recent developments that are taking place. Europe has the most developedoffshore wind energy industry, with more than 91% of the total installed offshore ca-pacity (Global Wind Energy Council, 2015). Therefore, the history and current statusof the European industry is very relevant, especially so as most of the technologicaldevelopments are happening in Europe and will be exported to emerging markets.

2.1.1 History and current situation

The first offshore wind power was installed as early as 1991. The wind turbines witha capacity of 4.95 MW were installed in a water depth ranging from 2.5 m to 5 m atthe Danish coast (Rock and Parsons, 2010). Since then the offshore wind industryhas evolved steadily to the situation today. The installed offshore wind capacity percountry in 2015 is shown in Figure 2.1. In 2016, Europe was leading the offshorewind energy industry with a total installed capacity of over 12 GW (EWEA, 2016).The main countries that are involved in offshore wind are the UK, Germany, Den-mark, China, Belgium, Netherlands, Sweden, Japan, Finland, and Ireland. The USonly has a marginal amount of installed offshore capacity. The UK is leading theindustry with 40.8% of the total installed offshore wind capacity. Next is Germanywith 32.5% of the share. In 2016, most capacity was added in Germany (813 MW), theNetherlands (691 MW) and the UK (56 MW). The majority of the total European off-shore capacity is installed in the North Sea (96.4%), the remaining capacity is locatedin the Irish Sea. Figure 2.2 shows the cumulative and annual installed offshore wind

Chapter 2. Literature Review 5

capacity in Europe, and demonstrates the steady increase in the annual amount ofinstalled capacity. There are several factors that have caused the recent increase inpopularity and growth of offshore wind energy.

FIGURE 2.1: Installed offshore wind capacity per country (Data fromGlobal Wind Energy Council, 2015)

FIGURE 2.2: Cumulative and annual installed offshore wind capacityin Europe (MW)(WindEurope, 2017)

Onshore wind technology has been around since the 1970s, and the first commercialwind farms were built in the 1980s in California (Bilgili, Yasar, and Simsek, 2011).Throughout the years, the technological advancements in wind turbine technologyhave caused the cost of wind turbines to fall, making wind energy increasingly at-tractive. Nowadays, onshore wind is cost-competitive with many of the conven-tional power generation sources, especially when taking the environmental advan-tages into account (Henderson et al., 2003). Yet, the potential for onshore wind en-ergy capacity is limited. Installing onshore wind farms requires sites with good


wind resources and the availability of space. Due to public and political resistance,the amount of available onshore sites is becoming increasingly small. This public re-sistance is mostly a consequence of the Not-In-My-Backyard (NIMBY) phenomenon,where people are enthusiast about renewable energy, until the solution is offered intheir backyard. Offshore wind farms, however, have several advantages over on-shore farms. Firstly, there are large free areas in the sea that are suitable for windfarms (Esteban et al., 2011). The wind speeds in the sea are higher on average andmore stable. This is an important factor to consider as the power produced by a windturbine scales with the cube of wind speed. The higher wind speeds increase the ef-ficiency of the wind turbines, and makes fluctuating power supply less of an issue.Because they are installed offshore, the visual and noise pollution is very limited.This largely resolves the NIMBY problem. The characteristics of the air flow aboveoutstretched water allows for other optimisations in the wind turbine design. How-ever, there are many technological, economical and political challenges that slowdown the progress of the offshore wind energy industry.

2.1.2 Overview of technological, economic and political aspects

There are various aspects that influence the development of the offshore wind en-ergy industry. Some of the technological, economic and political aspects and trendsthat are deemed most relevant to understanding the offshore wind energy industryare briefly discussed here.

Technological As wind energy technology evolves, so does the size of the turbines.The state-of-the-art technology in 1982 was a wind turbine with a 15m rotor diam-eter and a capacity of 55 kW (Bilgili, Yasar, and Simsek, 2011). Nowadays, turbineswith a capacity of 5 MW and a rotor diameter of 126 m are not uncommon. The im-pressive evolution of European wind turbines is shown in Figure 2.3. Offshore windturbines are usually larger than onshore turbines. The reason for this is that onshoreturbines are limited by the transportation of the turbine parts such as the blades andtower. At sea this is not an issue, making higher cost reductions due to economiesof scale possible. Also, offshore wind turbines do not have to consider visual andnoise pollution as much as its onshore variant. Currently, the wind turbines that areused in offshore wind parks are based on the same technology as the onshore windturbines.

There are a number of technological challenges that are presented when buildingoffshore wind parks. The different parts in the lifecycle of an offshore wind park,as built in Europe, are shown in Figure 2.4, the duration of the different phases ismade based on the existing European offshore wind parks. Just like many other re-newable sources of energy, wind energy suffers from a non-consistent power output.The output is dependent on the wind and can not always be precisely predicted. The


FIGURE 2.3: Evolution of European wind turbines over time (Bilgili,Yasar, and Simsek, 2011)

.

capacity factor is a measure of this. The capacity factor is the ratio of actual powergeneration over a time period divided by the installed capacity (Ozgur, 2013). Thecapacity factor of different forms of energy generation is given in Table 2.1. The ca-pacity factor for offshore wind energy is higher than for onshore wind energy, withvalues of 31% and 27% respectively (Green and Vasilakos, 2011). However, the in-termittent power generation still poses problems for both the transmission networkand the energy market price. Storage solutions and backup systems are required todeal with the fluctuating power generation.

Generation Type Capacity Factor

Solar Panels 10-25%Wind Turbines 25%Hydroelectric Power Stations 40%Coal Fired Power Plants 70%Nuclear Power Plants 89%Combined Cycle Gas Turbine 38%

TABLE 2.1: Capacity factor for different energy sources (Ozgur, 2013)

The paper on offshore wind farm development by Perveen, Kishor, and Mohanty(2014) highlights the most important technological challenges. In order for offshorewind farms to be connected to the energy network, large transmission and distribu-tion systems have to be designed in order to be able to carry and efficiently distributethe energy from the many interconnected turbines. These transmission systems arehighly costly, since the energy has to be carried across distances greater than 50 km.Also, as more wind turbines are connected to the electricity grid, their influence in-creases. Currently new solutions are sought to be able to manage the grid in a smartway.

The conditions in which offshore wind turbines have to operate are a lot harsherthan the onshore conditions. Robust technology is required if the turbines are to besafe and reliable (Sun, Huang, and Wu, 2012). The wind farms are usually at remote


FIGURE 2.4: Life cycle of offshore wind farms in Europe

locations, which poses additional problems for the instalment and maintenance. Thedeeper the water gets, the more expensive and difficult it is to anchor the turbine tothe seabed. The existing infrastructure and vessels to manage these operations arelimited as very specific machines are required. This bottleneck in the supply chainlimits the production speed of wind parks.

Political & Economical Onshore wind energy is already competitive with fossilfuel based power sources, and currently the cheapest form of renewable energy inplaces with good wind resources (WindEurope, 2015). However, building offshorewind farms is still much more expensive than onshore wind. The economic feasibil-ity of such projects is usually determined by electricity cost per unit (kilowatt-hour),capital cost and operational and maintenance cost (Perveen, Kishor, and Mohanty,2014). Especially the initial investment, or capital cost, that is required for the con-struction of offshore wind parks is very high. One of the main factors that con-tribute to this high price is the construction of the offshore foundations. The paperby Green and Vasilakos (2011) shows the significant increase in installation costs asa function of water depth and distance from the shore. Figure 2.5 shows the lev-elised cost of electricity for the major power generation technologies in Europe. The


levelised costs of energy (LCOE) represent the costs of production without interven-tions, which means subsidies and pollution costs are not taken into account. TheLCOE of offshore wind in Europe is between e102/MW and e152/MW, comparedto e52 to e110/MWh for onshore wind (WindEurope, 2015). As mentioned before,the power output of wind farms is not perfectly steady, and is also not always easyto forecast. This volatility of wind speeds causes fluctuations in the energy prices.In countries with a considerable amount of installed wind power, the energy priceswill drop below average at times when wind speeds are higher and vice versa forlower wind speeds (Green and Vasilakos, 2010). Like all renewable energy sources,wind energy has the advantage of being an inexhaustible energy source. This alsomeans that the produced energy is free from the volatility of fuel prices that otherfuel based power sources suffer from, like coal, oil, natural gas, biomass and nuclear(Snyder and Kaiser, 2009). Also, not everyone agrees that the economic viabilityshould be measured purely by the LCOE as this calculation excludes many of theharder-to-quantify advantages, such as the advantages to the society and the envi-ronment. Siemens, for example, introduces a new calculation model: Society’s Costof Electricity (SCOE) (Siemens, 2014). SCOE accounts for many factors: subsidies,transmission cost, variability costs, geopolitical risk impact, environmental impact,social effects, and employment effects.

FIGURE 2.5: Levelised Cost of Electricty (LCOE) of power generationtechnologies in Europe (WindEurope, 2015)

Investments from private investors, backed by institutional support, are needed toensure the future of offshore wind. Governmental support is still very important atthe current state of the offshore wind industry, even in Europe. The support is neces-sary to make offshore wind energy competitive against conventional power sources.Strong support policies enable the industry to grow, while lowering prices throughlearning effects, economies of scale and technological developments. Many differentsupport policies are being used to make offshore wind energy economically interest-ing. Couture and Gagnon (2010) analyze seven remuneration models to assess theirimplications for renewable energy investments. The support policies are country


specific and will be discussed in the case of California later in this research. Cur-rently, the EU is supporting offshore wind using two approaches: the feed-in tariffand green certificates (Green and Vasilakos, 2011). In the case of a feed-in tariff, theEU sets a fixed price per energy unit. This price is based on a number of variablessuch as the technology used, the location of the wind park, the year it was commis-sioned, and so on, and has to be set carefully. If the price per unit is too high, thendisproportionate profits are made at the cost of governmental money, if the price istoo low, then no company wants to pursue the technology and progress comes toa standstill. The second approach is based on tradable green certificates. These areawarded for generating green energy and can be sold to companies that do not meettheir own amount of green energy certificates.

2.2 Developments in offshore wind

The increased investments and interest in offshore wind energy have caused newtechnologies to emerge in the last few years. The offshore wind resource around theworld is very large, but the current technology of offshore wind turbines does notallow for wind parks to be installed at many of these sites. The current technologyrelies on bottom-fixed foundations, which are only economically feasible in shallowwater (around 30 meters). In 2016, the average water depth of Eurpean offshorewind farms was 29.2 m with an average distance of 43.5 km to the shore (WindEu-rope, 2017). The distance to the shore and water depth are steadily increasing asthe industry matures. However, this also means that the already high capital invest-ments of offshore wind parks increase rapidly as the water becomes deeper. Thiscreates a need for new technology: floating wind turbines.

2.2.1 Floating wind turbines

The idea of floating wind turbines has been around since the beginning of the rel-atively young offshore wind industry in the 1990’s. Floating wind turbines are off-shore wind turbines that are mounted on a floating structure, and the oil and gas in-dustry has shown that large robust platforms in deep seas are indeed possible. Thethree main technologies for floating wind turbines are shown in Figure 2.6. Floatingturbine technology now enables the deployment of wind turbines in deep waters,which was previously infeasible from both an economic and technical standpoint.


FIGURE 2.6: Technologies for floating offshore wind (European WindEnergy Association, 2013)

The floating turbine technology offers several economic benefits. First of all, theinitial investments of floating offshore wind parks are expected to be lower due tovarious reasons (European Wind Energy Association, 2013). Secondly, the necessarysupply chain and port infrastructure for floating wind turbines are very similar tothe existing fixed-bottom offshore wind turbines. But, the installation costs are likelyto be much smaller as up to 20% of the capital expenditure of offshore wind farmscomes from the production and installation of substructures. So, a cost reductionhere can significantly reduce the total costs of offshore wind. Floating wind plat-forms can be assembled on-land, or in a dry dock, and then be towed out to sea.This allows for an easier and more efficient installation as less vessels are needed.Also, the installation of floating wind turbines is less dependent on weather condi-tions compared to fixed-bottom turbines. Most of the installation cost for a floatingstructure comes from installing the mooring lines and anchors. In case of a turbinebreakdown or other large maintenance, the floating turbine can be towed back toshore to undergo maintenance, avoiding the use of expensive vessels, and decreas-ing the operations and maintenance (O&M) costs. Floating foundations have theadded advantage that they are relatively easy to adapt to different types of turbines,meaning that the same foundation can be used regardless of turbine design. Thisdecreases manufacturing and supply chain issues.

The first full scale floating offshore wind turbine was installed off the shore of Bergenin Norway in 2009 (Perveen, Kishor, and Mohanty, 2014). The project was led byStatoil-Hydro and Siemens, and consists of a single 2.3 MW turbine using the spartechnology. The pilot project was successful and Statoil considers the turbine readyfor commercialization. Statoil is now planning a floating wind turbine park in theNorth Sea near Scotland. The park is called the Hywind Scotland Pilot Park and


will use the already tested floating Hywind turbine technology. The park will be-gin production in 2017 and have a total capacity of 30 MW. Since 2009, many othercompanies have also been working on testing new substructure concepts. The mostnotable ones are Windfloat, Blue H TLP, Kincardine, Floating Haliade 150, Winflo,PelaStar, Ideol and Hexicon (European Wind Energy Association, 2013).

2.3 Offshore wind in the United States

The offshore wind energy industry in the United States is in its very early stages. Thefirst commercial offshore wind park with a capacity of 30 MW has been taken intooperation in late 2016 off the coast of Block Island, Rhode Island (Geuss, 2016). Thelaunch of this wind park will hopefully kickstart the offshore wind energy industryin the US, as there are many other projects planned at the East Coast, Pacific Coastand Great Lakes. The status of these projects is shown in Figure 2.7. As of 2016,11 commercial leases for offshore energy were granted by the federal government.The total energy potential on these sites is as much as 14.6 GW (US Department ofEnergy, 2016).

FIGURE 2.7: Offshore wind projects development in the US as of June2016 (DOE, 2016)

The European offshore wind energy environment is unique because of several rea-sons. The North Sea is characterised by relatively shallow waters and good windresources. The regions around the world that have characteristics similar to those of


the North Sea are rather scarce. That is the prime reason why most of the offshorewind energy development in Europe are seen near Northwestern Europe (Hender-son and Witcher, 2010). Other European countries such as Spain do not have thesame coastal characteristics. The seabed in the Mediterranean and the Atlantic dropsa lot faster, making the instalment of offshore wind energy a lot more challengingand very costly with the current fixed-bottom technology.

The United States have a big installed onshore wind power capacity but are laggingbehind in the development of offshore wind farms as the offshore potential is ratherlimited with the current fixed-bottom technology due to deep ocean waters. Thismakes onshore wind power currently more preferable. Although the US is behindin the offshore wind energy industry compared to Europe, it can use this to its ben-efit. The wind energy market in Europe is maturing, causing the costs to drop andtechnological developments now enable offshore wind in deep waters (US Depart-ment of Energy, 2016). This has resulted in an increased in interest in offshore windin the US. Especially as the sites with good wind resources that are currently beingused for onshore wind are in locations where relatively few people live, whereasthe optimal offshore sites are near the East and West Coast, where many people live(Small, Beirne, and Gutin, 2016). This would mean the power generation is close tothe population, reducing the cost of expensive transmission lines. The emergenceof an offshore wind energy industry also offer local economic benefits in the formof employment and investments to a country or state (Todd, Chen, and Clogston,2013). According to Pollin, Heintz, and Garrett-Peltier (2009) the offshore wind en-ergy industry creates more jobs than onshore wind per MW, because of the highermanufacturing and maintenance costs, and creates many more jobs than are cur-rently needed in the fossil fuel based energy industry.

However, beside the difficult access to offshore wind with the current technology,there are many other factors, which are political, economic, legal, social and envi-ronmental in nature, that are slowing down wind farm developments in the US.A market report made by the US Department of Energy (DOE) indicates that thebiggest challenges of offshore wind in the United States are a combination of thehigh costs required for such installations combined with the complex regulatory en-vironment (DOE, 2016). The regulatory approval for wind parks takes too long andis one of the main reasons that the offshore wind industry in the US is lagging behindin the development of its offshore wind energy industry(Kennedy, 2012).

An example of the regulatory difficulties that can be encountered is demonstratedby the 468 MW Cape Wind project off the coast of Cape Cod in Massachusetts. TheCape Wind project took 9 years of permitting before it was given a commercial leasein 2010 (Musial and Ram, 2010). The main reason that this took so long is that thelease decision needs to be approved by the United States Department of the Interior(DOI). The DOI is a federal instance in this case responsible for assessing the risks tothe marine environment. The project later ran into more legal troubles as it had to


comply to the many federal laws that are in place to protect the environment and thehistoric and natural resources (Cassell, 2016). This process again requires coopera-tion and approval of many different federal actors such as the US Coast Guard andthe Fish and Wildlife Service. In 2014, the project was initially approved, but it wasaccused several months later of violating some of the federal statutes, mostly relatedto the impact the wind turbines would have on the seabed. The court decided thatadditional geological surveys need to be carried out to ensure that the impact on theseabed is minimal. More precise details of the regulatory aspects of offshore windenergy in the US are left out for now and will be come back to later in this thesis.

2.4 Energy Market California

This section serves as an introduction to the energy market in California. Somestatistics are given of the current energy market and trends are explained.

In 2015, California generated 196 TWh of electricity, where its main sources of elec-tricity generation were natural gas (59%), forms of renewables (24.5%), nuclear (9.4%),and large hydroelectric installations (5.9%) (California Energy Comission, 2016). Cal-ifornia imports more than 33% of its energy, with the Southwest importing 63.4 TWhand the Northwest importing 35.8 TWh. A large part of the imported energy in theSouthwest comes from coal installations, while the Northwest has a higher mix ofrenewables in the import. The state’s total yearly electricity demand is around 295TWh, but the electricity consumption per capita is quite low compared to other statesdue to the mild climate, and has been forecasted to remain relatively constant in theforthcoming years (Rockzsfforde, 2015).

The Renewables Portfolio Standard (RPS) is a state law that requires retail sellers toserve a certain percentage of the electricity from renewables. This goal is set at 33%by 2020, and 50% by 2030. In October 2016, 27% of California’s electricity came fromRenewables which puts it in a good position to reach this goal (California EnergyCommission, 2016). It is the leading state in many of the renewable sources such aswind, solar and geothermal. In practice, the percentage of renewables is controlledby using Renewable Energy Credits (RECs). The operation and maintenance of thetransmission infrastructure is the responsibility of the California Independent Sys-tem Operator (CAISO). The California Public Utilities Commission (CPUC) is thelegal instance that regulates the public utility companies which are private compa-nies. Some of the biggest investor-owned utility companies in California are PacificGas and Electric Company (PG&E), San Diego Gas & Electric (SDG&E) and South-ern California Edison (SCE). CPUC is responsible for the implementation of the RPSin Investor Owned Utilities (IOU) (State of California, 2017b). The distribution ofpower generation from renewable energy sources in 2016 is shown in Figure 2.8. It


is the California Energy Commission (CEC) who decides which installations are el-igible. It is interesting to note that large hydroelectric installations are not countedas a renewable energy source. The last few years, the generation from distributedsmall-scale solar panels has increased vastly. Figure 2.9 shows the distribution of thetotal installed capacity of renewable energy sources (26300 MW) in 2016. The figureshows that almost half of the installed solar photovoltaic cells are self-generation,and the state is well on its way to meet the goals it has set for distributed self-generation. Hydroelectric sources are used to provide a larger part of the state’selectricity demands, but have been doing poorly in recent years due to droughts(Tweed, 2016). California’s electricity import has gone up, especially in the eveningswhen solar generation decreases, because of the local gas generation that has beendecreased as a consequence of the RPS (U.S. Energy Information Administration,2016). The last nuclear reactor in California will soon close and offshore wind parkscould potentially help to serve as a more consistent baseline load (Speer, Keyser, andTegen, 2016).

FIGURE 2.8: Totalelectricity genera-tion from renewablesources in California(2016) (CaliforniaEnergy Commission,

2016)

FIGURE 2.9: Totalinstalled capacity ofrenewable sources(2016) (CaliforniaEnergy Commission,

2016)

California is known for its high installed capacity of onshore wind. In 2016, the firstoffshore wind park was proposed. The project is called Trident Winds and envisionsto install about 100 floating wind turbines, a capacity of around 765 MW, at theCentral Coast (Trident Winds, 2016). Trident Winds has requested a lease for a site48 km off the shore of Point Estero, with water depths of up to 1000 meters. An oldP&GE power plant would be used as the onshore substation to connect the windfarm to the grid.

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3 Theoretical Framework

In this chapter some insight is given into how a business environment can be eval-uated. To achieve this, some theoretical frameworks will be introduced that can beused to assess a business, market or industry. These frameworks provide the basisto answer the proposed research question.

3.1 Introduction

The business environment of an organization encompass the factors that have an im-pact on the operating situation of an organization (Worthington and Britton, 2009).Both small and large companies need to assess the environment that they are work-ing in. The business environment plays a big role in how businesses make decisionsand design their future strategies. A good environmental analysis shows how a mar-ket or industry should be approached in order to be successful, or even if successcan be achieved in the market with the value the company is currently offering. Thebusiness environment consists of both external and internal elements (Cadle, Paul,and Turner, 2010). The definition and techniques to analyse these environments areexplained in the following sections.

3.2 External Business Environment

The external business environment is defined as the environment that influences thefunctioning and strategy of an organization, but is not under direct control of theorganisation (Cadle, Paul, and Turner, 2010). The external environment containsopportunities and threats that should be recognized by the organisation in order tobe successful. There are many tools to analyse the external factors influencing theenvironment. The most well known techniques are the PESTEL analysis and Porter’sFive Forces framework.

3.2.1 PESTEL Analysis

The PESTEL analysis is a marketing tool often used by businesses to analyse theexternal or macro-environment. By analysing the driving forces behind a market or

Chapter 3. Theoretical Framework 17

industry, an organization can determine its business position. A PESTEL analysiscan also give information on the market tendencies and uncover the opportunitiesor challenges available in a certain industry or market (Hollensen, 2007). PESTELis an abbreviation for political, economic, social, technological, environmental andlegal. The PESTLE analysis is focused on exploring each of these factors. Makingstrategical decisions is not a part of the analysis, but can be a continuation of it. Thevarious factors are explained more in detail below. It must be noted that these factorsare often interlinked and as such influence each other.

Political The political situation in the studied area can significantly influence anindustry, business or market. If the political climate is stable, then the business envi-ronment is easier to evaluate. This will reduce risks for companies that want to entera certain industry or market. If the political situation is such that trends are easy toforecast, then this can create business opportunities.

In many industries, political support is important as it can favour businesses byoffering support policies. A tax reduction, tax policies or other subsidies can in turnsignificantly impact the economic environment. If there is governmental supportthen this can also speed up the regulatory process, the contrary is true if the politicalinstances disapprove of a business opportunity.

Economic The economic situation is very important for any business. If the theeconomic climate in a certain area is stagnant or even in decline, then businesseswill refrain from entering the market as the risks are too high. This is especiallytrue for industries that are capital intensive. Also, it is harder to take a loan or findinvestors in an economically unstable area.

Social The social aspects are highly important when doing business. The culture,gender, age, demographic, etc. need to be understood as they help to profile cus-tomers and are relevant to the market situation. The attitude of people in a certainarea can decide if a product or business will be successful or not. This attitude isshaped by the social aspects and is different between regions.

Technological The availability of technology can decide whether or not a businessopportunity is feasible. The existing supply chain in a nearby area might for examplefacilitate the expansion to a new market. If no infrastructure exists yet, then thisneeds to be taken into account. There is also the possibility for new technologies toemerge and open up new markets, or destroy old ones.


Environmental In this research the environment encompasses the natural environ-ment, the regulatory and other environments are part of the other factors in the PES-TEL analysis. The impact of the environment is growing as business and industriesare now becoming more and more a function of the environment. So is, for exam-ple, climate change driving the energy sector towards a more sustainable direction.Also, the geographical location and access to natural resources can be a determiningfactor in business decisions.

Legal It is critical to have knowledge about the different laws and statutes relevantto the market and industry. It must be noted that the legal system might be impactedby the political situation. As such the stability of the legal environment needs to beassessed.

3.2.2 Porter’s Five Forces

Porter’s Five Forces framework (PFF) is another tool to assess the external businessenvironment. However, the focus of the framework is different from the PESTELanalysis. PFF is used to look at the industry an organization is competing in. Theanalysis identifies the competition that is present and how intensive this competi-tion is. This competition landscape determines the profitability and business oppor-tunities for an organization in the industry. The five forces that are looked at are(Harvard Business Review, 2008; Hunt and Morgan, 1995):

Threat of new entrants How likely is it that new organisations will enter the mar-ket? A lot of new entrants will increase competition and most likely decrease profits.

Threat of substitutes Are there any organizations that offer a substitute for theproduct or service that you are offering?

Bargaining power of customers How much power does the customer have andcan he pressure the organization? The customer usually has a high bargaining powerif there are many alternatives. This will translate into lower profits and a fiercercompetition.

Bargaining power of suppliers How much bargaining power do the suppliershave? If there are many suppliers that can offer the same product or service, thenthe bargaining power of the supplier decreases.

Industry rivalry How competitive is the rivalry in the targeted industry?


3.3 Internal Business Environment

The internal business environment on the other hand are the factors within the or-ganization that have an impact on the success of the business. These are under di-rect control of the organization. It is important that an organization can identify itsstrength and weaknesses. Organizations have many different ways of doing this, forexample by defining their core competencies, or by looking at their track-record orportfolio to see where they have previously found success. A simple and effectiveway of doing this is by conducting a SWOT analysis.

3.3.1 SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. In a SWOT anal-ysis the internal strengths and weaknesses of the organization are evaluated and theexternal opportunities and threats are assessed. The analysis of the external environ-ment in the SWOT analysis is a simplified version of the PESTEL analysis. It allowsfor a quick assessment of the organisation in the market or industry. The combina-tion of the internal and external aspects are often used to set up a strategy for theorganization. The following parts are analysed in a SWOT analysis.

Strengths The internal strengths of the organisation are listed. The strengths shouldbe considered compared to the competition. An example of a strength is a strongproduct, a certain patent, or even a diverse team.

Weaknesses The weaknesses in the organisation are the areas where the companyneeds to improve to be competitive.

Opportunities There are opportunities in the external business environment thatan organization can take advantage of. This might for example be an emerging mar-ket due to a technological advancement.

Threats The external environment can also pose threats that can damage the orga-nization. For example, increasing resource prices can threaten profitability.

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4 Methodology

This chapter explains the methodology that is used to answer the research question.Firstly the research paradigm that is used is explained, next more information isgiven on the research method and how the data is gathered. Finally some critique isgiven on the the research method, including reliability and validity issues.

4.1 Research Paradigm

The research paradigm influences how a study is carried out as it tells how knowl-edge is viewed by the researcher (Hussey and Collis, 2009). There are two mainparadigms: positivism and constructivism, or also called interpretivism. In this the-sis the interpretivist approach is taken. Saunders, Lewis, and Thornhill (2009) ex-plain that the social world of business is too complex to be put into laws, therefore“it is necessary for the researcher to understand the differences between humans inour role as social actors.” Thus, this leads to a research that is more qualitative inits nature. Unlike, the positivism paradigm which relies more on quantitative andobjective data to get to a conclusion.

4.2 Research Method

This research is exploratory and based on qualitative data. This approach was cho-sen after carrying out an extensive literature review concerning the trends and de-velopments of the offshore wind energy industry. The literature review revealedthat a qualitative approach is the most effective way of answering the research ques-tion. A quantitative approach was deemed too complex and not more relevant tothe research than using a qualitative approach.

Different frameworks were considered to analyse the macro environmental factorsof an industry. The two main frameworks that were looked at were the PESTLE (po-litical, environmental, social, technological, legal and environmental) analysis andPorter’s Five Forces. Both models are complementary and can be used together toassess both the macro- and micro-external environment. More specifically, Porter’sfive forces is used to see where the power lies in a competitive situation (HarvardBusiness Review, 2008). The Porter’s Five Forces framework was therefore discarded

Chapter 4. Methodology 21

as the offshore wind energy industry in California is currently non-existent and sono competitive situation exists yet. Because of this, it is not valuable to evaluate theexternal-environmental factors using this framework. Instead, the PESTEL frame-work is chosen, this method allows for a broad qualitative approach that coversall macro environmental factors. Hence, by carrying out a PESTEL analysis usingqualitative data, the state of California’s environment regarding the introduction offloating offshore wind turbines can be assessed. From the PESTEL analysis, a dis-cussion can then be made to evaluate the opportunities and threats for a floatingoffshore wind market in California. The strengths and weaknesses as they are as-sessed in a SWOT analysis are left out since they are connected to the internal stateof a business.

4.3 Data Collection

The data that will be used to solve the research question is secondary. Secondarydata is data that has already been collected by a third party (Hussey and Collis,2009). The secondary data that is available about the offshore wind energy indus-try and the various factors influencing the offshore wind energy industry environ-ment of California is sufficient to answer the proposed research question. A PES-TEL analysis can be made using secondary data on the condition that it is reliable.The secondary data that is used in this research is gathered from online sources inthe form of newspaper articles, online articles, websites, surveys, scientific papers,government reports, and consultancy reports. Some important sources include gov-ernment reports from the US National Renewable Energy Laboratory (NREL) andthe US Department of Energy (DOE). Care is taken to verify the source of the dataso that the information is relevant and trustworthy. For example, the data collectedabout politics is verified through several sources as to keep the political bias to aminimum.

4.4 Ethical and Sustainability Issues

It is impossible to determine if all factors in the PESTEL analysis are equally im-portant to analyse a market or industry. However, in this research all are treatedmore or less equally as the outcome of the research can not be predicted in advance.Hence, it might be unwise to disregard the importance of one of the factors in thePESTEL analysis. Furthermore, many of the sources used in this research likely havea bias towards renewable energy solutions. While the research has been carried asethically as possible, it must be kept in mind that the reality might be less rosy thanrepresented in these articles.

Chapter 4. Methodology 22

The topic of this research has social, economic and environmental implications, thisraises the question of sustainability. The overarching problem that aims to be solvedby pushing for renewable energy sources, and offshore wind energy in particular, isthe issue of climate change. It is important to address the social and environmentalsustainability issues that come paired with the need for constant economic develop-ment.

23

5 Analysis California

The following section will go over the various factors that are necessary to evaluatethe macro environment of the offshore wind energy industry. The analysis is madeso that it can be used to assess the business opportunities for floating offshore windturbines in California. A summary of each aspect of the analysis can be found inAppendix A.

5.1 Political

The political climate has been one of the most important factors in deciding whichenergy sources prevail and which sources do not. Governmental and state support isstill necessary for most of the renewable energy sources. Without this support in theform of tax reductions or energy subsidies, offshore wind energy still has troublescompeting with lower cost energy generation systems such as coal or gas plants,especially in difficult coastal environments that drive up the costs (Siemens, 2014).The energy industry is not a fair industry as political instances can intervene andchange the rules of the game at any time (Alberici et al., 2014).

Federal politics

The administration under the presidency of Obama from 2009 to 2017 was a bigproponent of renewable energy and launched several support actions. The reasonsfor the Obama administration to support renewables are many-sided. One of thereasons is that an increase in renewables reduces the dependency on volatile fos-sil fuels while also creating many new jobs. In 2009, a framework was launchedby the Obama administration to facilitate the development of renewable energyon the Outer Continental Shelf (OCS). Later in 2012, an initiative called “Smartfrom the Start” was launched to speed up the approval process of offshore windprojects, more specifically targeted at projects in the states of New Jersey, Mary-Land, Delaware and Viriginia (Farquhar, 2011). One of the biggest achievements ofthe administration to counter climate change was the implementation of the CleanPower Plan (CPP) in co-operation with the Environmental Protection Agency (EPA).The CPP was announced in 2015 and has as aim to reduce carbon emissions andincrease renewable energy sources. The emission goal is set and controlled by the

Chapter 5. Analysis California 24

EPA, but the states can decide for themselves how they want to implement the plansand reduce emissions. If the states are unsuccessful in reducing the carbon emis-sions as stated in the CPP, then the EPA will control the power plants directly. Thestates have until 2018 to set up a state plan, which needs to be approved by the EPA(Doniger, 2015). From 2022, the laid out reduction of greenhouse gasses is manda-tory, the CPP comes into full effect by 2030. The CPP also sets up a clean energycredit-based system that rewards clean generation. In this way, renewable energyinstallations become more economically interesting, while existing dirty plants be-come more expensive. The CPP is seen as the biggest measure taken to fulfill theParis Climate Agreement. The CPP also envisions an installed capacity of 86 GWfrom offshore wind by 2050 (Kamper, 2016).

In 2017, Donald Trump was elected as the 45th president of the United States. Theelection process between Donald Trump and Hillary Clinton was highly turbulentand some see the victory of Trump as a victory of populism (Wilkinson, 2017). TheTrump administration has shown no interest in climate related issues, and even in-tends to counteract the existing plans that aim at reducing greenhouse gases. Theadministration is instead focused on creating jobs and supporting companies byreducing corporate taxes. One of the envisioned ways to bring back jobs is by re-viving the dying coal industry. For now, the expectation is that federal support forrenewables will be extremely low on the agenda, and that the existing support forrenewable energies may possibly be cut. Trump initially said that the US would notuphold its promise to follow the Paris Climate Agreement (Milman, 2016). How-ever, after his election, his position on the agreement has been unclear as even manylarge companies have asked him to keep supporting the agreement (Egan, 2017).The trump administration has explicitly said that it considers budget spent on anyclimate change related research to be a waste of the public’s money. In the latest bud-get outline (April 2017), the budget for the Environmental Protection Agency (EPA)was cut by almost one third (Merica and Marsh, 2017), the same agency that playsan important part in supporting and promoting renewable energy policies. How-ever, the budget plan is not final as it needs to pass through congress first. Trumphas also signed an executive order to review the Clean Power Plan in an attempt todismantle it. Many states, one of which is California, are ready to oppose Trumpin his attempts to nullify the CPP. They base their arguments on the basis that CO2emissions threaten public health and welfare (Selin, 2017). Although Trump’s exactstance on offshore wind energy is unknown, he has already expressed his dislike tooffshore wind farms in Scotland. His opinion was founded on the visual pollutionthat wind farms cause (Fehrenbacher, 2016). It is highly uncertain if this stance willtranslate into an actual reduction of federal support for offshore wind energy andperhaps renewables in general.


State politics

On the other hand, not all of the energy related decisions are made by the federalgovernment, in reality the interference of the federal government on a state’s energypolicy is limited (Burdock, 2016). Many of the decisions concerning energy are madelocal and therefore the impact of the presidency can be moderated. Of course, thiswould require a clear willingness from the state’s government to enforce alternativemeasures. States are in control of their Renewable Portfolio Standards (RPS) andcan influence the legislative pathway regarding offshore wind energy, which willbe explained more in detail later in this Chapter. On October 7 2015, the Clean En-ergy and Pollution Reduction Act, also known as SB-350, was passed in California.This act requires that 50% of the states’ energy must come from renewable energyby 2030 (CALGOV, 2015). This act is an update to the existing RPS, which requirethat a certain percentage of the energy comes from renewable sources. As a resultof the framework set up by the Obama administration, the California Intergovern-mental Renewable Energy Task Force was created (OffshoreWind.biz, 2017a; Off-shoreWind.biz, 2016). The California Task Force is an initiative launched to simplifythe bureaucratic processes for the leasing of federal waters on the Outer ContinentalShelf of California for offshore wind farm purposes.

California is the leader in installed renewable energy capacity and has had a strongpolitical support history for renewables (Speer, Keyser, and Tegen, 2016). JerryBrown, a democratic politician, has been the governor of California since 2011. Brownhas held governorship before between 1975 and 1983 and is pushing hard for a re-duction in greenhouse gases. This is illustrated by the climate change strategy pil-lars for California that he set up in January 2015 (CEPA, 2016). At the end of theObama’s administration term, he requested the federal government to prohibit thelease of the waters off the shore of California for oil and gas purposes (Rogers, 2016).This request was made partly out of fear for Donald Trump’s interest in more oil andgas activity. However, the legislation could not be passed quickly enough (Guerin,2016). Other states such as New Jersey, Rhode Island, Massachusetts and others arealready supporting offshore wind energy projects by signing new laws specific tooffshore wind energy (Musial and Ram, 2010; Burdock, 2016). The bills are beingpushed by both democratic and republican governors. Furthermore, Brown has metwith the Scottish prime minister to discuss collaborative efforts in offshore wind en-ergy (OffshoreWind.biz, 2017b). It must be noted that Brown will be ineligible forthe upcoming election as there is a two term limit for governorship in California.However, the state voted strongly democratic in the last presidential elections and isexpected to do the same for the next governor. It is unlikely that the state’s stance onrenewables will change. Of course this is only speculation based on trends (Rogers,2016).


Federal tax incentive

The most impactful governmental support for the development of wind energy isthe federal Production Tax Credit (PTC). The PTC offers financial support for re-newable energy sources in the form of a fixed sum per unit of energy produced, andis awarded for a set amount of years. It was first introduced in 1992 as part of theEnergy Policy Act with the goal to speed up the development of renewable energysources and to make them competitive with the existing solutions. Since then, thetax has been expired and extended multiple times. The annual installed wind energycapacity in the US is shown in Figure 5.1, and it clearly shows the impact of the taxon the development of wind energy. During the times that the PTC was no longeravailable, the growth of the wind energy industry was stunted as companies wereno longer developing new projects (Simmons and Hansen, 2015).

Currently, the future of the PTC and its role in a potential offshore wind energyindustry is highly unpredictable. Most recently in 2015, the wind power PTC wasextended, but according to a 5 year phase-out plan, which means that the tax creditwill be lowered by 20% every consecutive year starting from 2015 (Bailey, 2016). Fur-thermore, the tax credit does not make a distinction between offshore and onshorewind energy. This means that most likely no offshore wind project will qualify forthis federal support. Twenty state governors have already addressed this issue in aletter to Donald Trump as the future of an offshore wind energy industry in the USis unlikely without federal support (OffshoreWind.biz, 2017c). There are currentlytwo bills, bill S.3036 named ‘Offshore Wind Act’, and bill S.1736 named ‘Incentiviz-ing Offshore Wind Power Act’, which would provide offshore wind projects with anInvestment Tax Credit (ITC) so that offshore wind energy has the chance to developin the US.

5.2 Economic

The purpose of the economic analysis is to determine if the Californian economy ishealthy and interested in renewable energy. It must be kept in mind that the differentfactors in the PESTEL analysis are interrelated and so an impact on the politicalenvironment might influence the economic environment as well, tax regulations area good example of this. Knowledge about the state of the economy is importantas it can show if there are investors willing to invest in companies or technologies.A healthy and stable economy both benefit this. In the first part a short summaryis made of the economic situation in California the past 20 years, with a focus onenergy related topics. This section then leads to California’s current situation.


FIGURE 5.1: Impact of PTC on annual installed wind energy capacityin the US (Simmons and Hansen, 2015)

Economy of California

The economic situation in California has known a turbulent history due to a trans-formation of the economy and a series of crises. The deindustrialization in the 1990smeant a huge decline in manufacturing jobs (Cody, 2011). The state later wentthrough the dot-com bubble together with the rest of the US as technology com-panies used cheap money from the Federal Reserve to invest in their own stock andas a result inflate the stock prices. During this time, the Western US Energy Cri-sis, or California Electricity Crisis, also hit California. This crisis was mainly causedby the energy company Enron, which is why it is also sometimes referred to as theEnron scandal. Enron lobbied for a deregulation of the energy market which eventu-ally followed in 1996. The deregulation was in reality a reregulation of California’senergy market. Enron and many other energy companies then manipulated the en-ergy market by decreasing the energy supply, even though the installed capacitywas sufficient. In this way they increased the wholesale energy price to increasetheir profits substantially. Utility companies were the biggest victims as they hadto fulfill the contractual agreements that set fixed prices on the regulated consumer-side of the market, while having to buy wholesale electricity at the highly elevatedprices at the more unregulated production-side of the market. This price disparityled to the bankruptcy of utility companies Southern California Edison (SCE) andPacific Gas & Electric (PG&E). After several blackouts in the state in 2001, the gov-ernment intervened. The next crisis that hit the United States was the financial crisis


FIGURE 5.2: Visualization of California’s industry (Data from(Statista, 2016))

in 2008. California was hit badly and this translated in budgetary problems lead-ing to a budget crisis. Heavy cuts were made in government services and layoffs atuniversities between 2009 and 2011 to get the budget under control. The economicsituation improved steadily since 2012 under Governor Jerry Brown.

In 2016, California had a Gross Domestic Product (GDP) of $2,481.3 billion which isthe highest in the United States (US. Bureau of Economic Analysis, 2016). Basedon GDP, California would be the 6th biggest economy in the world (McCarthy,2016). The per capita personal income (PCPI) was $55,987, ranked 7th in the UnitedStates and significantly higher than the average. The PCPI and GDP have increasedsteadily in the past ten years. California is most well-known for its technology in-dustry but its economy is actually very diversified and dynamic (Winkler, 2016). Themain industries contributing to California’s GDP are shown in Figure 5.2 (Statista,2016). California has the biggest agriculture, forestry, and hunting industry in theUS, producing three times more in terms of GDP than second place state Iowa (Win-kler, 2016). California also has the largest manufacturing industry, followed byTexas.

Even though California has had a turbulent financial history, the economy is cur-rently booming. However, there are concerns that the state’s tax structure causeshigh volatility and depends too much on its income taxes from its high income res-idents. In 2015, the state received half of its income taxes from the top 1 percentCalifornians. In 2012, the tax had already been increased temporarily for high earn-ers, only adding to the revenue volatility. Standard & Poor, one of the largest creditrating companies, attributed a rating of AA- to California in 2016 (California StateTreasurer, 2016a). An AA- rating corresponds to a low risk investment, anything be-low BBB is considered as high risk and junk. The state’s credit rating has been mov-ing up steadily in recent years, but most other states still have a higher credit than


California (California State Treasurer, 2016b). Only New Jersey, Illinois and Ken-tucky are rated lower by S&P (Pender, 2015). Yet, even though the revenue growthof California is anticipated to slow down and its credit rating is lower than in otherstates, the financial media company Bloomberg states that the investment environ-ment in California is still safe and promising (Winkler, 2016). There are, however,concerns regarding the huge outstanding state debt that California has (Gutierrez,2016). This has been a problem not only for California, but for many US states.

Electricity market California

The supply and demand situation on the electricity market in California has an im-pact on energy prices and is therefore an important factor to consider as the energyprices determine the pay-off for energy related investments. Offshore wind farmshave a high capital expenditure and the electricity cost is many times more expen-sive than for most other energy sources, even compared to land-based wind energy.There are different actors on the electricity market in California, some of which areregulated and others which are not. There are independent electricity producersthat sell their electricity at wholesale prices to utilities. The prices are set throughan action process under supervision of the California Independent System Operator(CAISO). The utility companies then sell the purchased electricity to consumers atretail prices. The retail prices are regulated by the California Public Utilities Com-mission (CPUC) (Cook, 2013).

California is known for its high electricity prices, the electricity prices in the US areshown in Figure 5.3 (Rockzsfforde, 2015). The electricity price for residential cus-tomers is 0.1534 $/kWh, this price is almost 30% above the US residential averagein the US (Electricity Local, 2017). This high price is the result of several events.After the Californian electricity crisis in 2001 the state encouraged utilities and in-dependent producers to build more power plants to avoid further blackouts. Theprofits for these installations were guaranteed by the state and this caused a surge inthe addition of energy capacity. After the recession in 2008, the electricity demand inCalifornia stagnated. This lead to an over installation in capacity, well above the 15%above peak demand that is set as the already large safety margin. The update to theRenewable Portfolio Standards then forced many of the underutilized power plantsto close down well before the end of their lifetime. At the same time, small scalepower production is becoming more and more common in the form of solar panels.As a result, the price that wholesalers are ensured by the state are charged to theconsumers, explaining the high electricity rates (Bushnell, 2017). The environmentalpolicies are forecasted to have an influence on future electricity prices. The electric-ity infrastructure will also need to be updated to manage the increasing amount ofrenewables, most likely resulting in an increase in electricity prices (Cook, 2013).


FIGURE 5.3: Average electricity prices in the US in 2014 (Rockzsf-forde, 2015)

FIGURE 5.4: California Cap-and-Trade market visualization

Carbon emission trading

In 2013, California introduced a cap-and-trade system to reduce carbon emissions, itis similar to the European Union Emissions Trading System (EU-ETS) and is in factthe first comprehensive system of its kind in North-America (C2ES, 2014). In the cap-and-trade system, California sets the maximum allowed amount of greenhouse gasemissions, this is called an allowance. A visualization of the trade system is shownin Figure 5.4. About 600 companies have to comply and can trade allowances ona marketplace to reach the imposed target (Rosenhall, 2015). Initially most of theallowances are handed out for free by the state, the amount of free allowances thendecreases each year. In this way the cap-and-trade system promotes clean energyprojects and is an economic measure against climate change. The market system isexpected to help California reach its greenhouse gas reduction goals, but it has beenargued that this system is in reality a hidden carbon tax (Busch, 2017).


FIGURE 5.5: Employment rate in California and the US (State of Cal-ifornia, 2017a)

Employment status

The potential for job creation is an important economic factor to consider. Loweringthe unemployment rate is economically interesting for California and also providespolitical goodwill for new projects. For these reasons, a look is taken at the unem-ployment situation in California. The unemployment rate in California and the USfrom 1977 to 2017 is shown in Figure 5.5 (State of California, 2017a). In 2010, Cali-fornia was among the states with the highest unemployment rate at 12.4% (US De-partment of Labor, 2011). Both the state and federal government have been fightingstrongly to bring the unemployment rate down. Currently, California has an unem-ployment rate of 5%, this is only slightly above the US average of 4.7%. Accordingto Navigant Consulting (2013), California is the state with the most unemployedpeople that have skills relevant to offshore wind energy. The National RenewableEnergy Laboratory (NREL) has made an assessment of the economic impact of float-ing offshore wind in California (Speer, Keyser, and Tegen, 2016). This analysis wasmade for two different scenarios, namely a deployment of 16 GW and 10 GW by2050 respectively. The report show that a significant amount of long-term jobs canbe created in both these scenarios in the US.

Financial support examples

The federal US Department of Energy (DOE) financially supported offshore windprojects in the United States. It has granted a total of $190 million to offshore windprojects since 2006 (Nikolewski, 2016; U.S. Department of Energy (DOE), 2017). Thegrants are available for research projects concerning offshore wind, furthermore theDOE offers loans for offshore wind projects.

Wind park developers need to set up contracts to sell the energy that will be pro-duced. These contracts or agreements are called Power Purchase Agreements (PPA).It is vital to the project that a PPA can be obtained because it secures a long termrevenue stream for the project (Windustry, 2014). The PPA can be legally cancelledby the purchaser for various reasons, one of these is that the project needs to have


all the required permits to realize the project. Several offshore wind projects in theUS have already run into problems trying to secure a PPA. The Windfloat Pacificproject from Principle Power off the shore of Oregon found no buyers for its energyas utility companies claimed that the prices of the energy were too high comparedto other clean energy sources such as onshore wind (Walton, 2015; Powles, 2016).Consequently it has lost its grant given by the DOE. Another project, the Cape Windproject, has also seen its two PPA’s cancelled because they were unable to securefinancing in time (Renewable Energy World, 2015).

5.3 Social

The social aspects of energy projects are not to be neglected as they can in fact be thedeciding factor in the success of a project. If the public attitude towards renewableenergy projects, and offshore wind farms in particular, is negative, then the projectcan be heavily delayed or even cancelled. This section explores if there are objectionsto offshore wind energy projects in California and if so, who these objections arecoming from. There are some recent offshore wind energy projects in the US and theEU that illustrate the importance of public acceptance.

The public acceptance of renewable energy solutions is a sensitive issue. The oppo-sition against wind turbine farms is sometimes termed the “Not In My Backyard”problem where most of the concerns are related to the aesthetics of the turbines andany possible noise pollution. However, in reality, the public attitude is much morecomplex than that and depends on a variety of factors such as the culture, economy,political stance, location, use of the coast and so on (Nordman, 2011). Several in-stances such as SolarCity and Navigant Research have carried out surveys to findout more about the attitude of the public towards energy. Navigant Research sur-veyed 1084 adults in the US in 2013 (Hurst, 2013). Their survey showed that solarand wind energy were the most favorable renewable energy sources with respec-tively 79% and 72% of the surveyed being in favor. The unfavorable responses tothese two technologies were 6% and 7%, compared to 32% for nuclear power. Thesurvey from SolarCity that surveyed 1400 homeowners in 2015 returned similar re-sults (SolarCity and Clean Edge, 2015). Solar and wind energy were also consideredto be the most important energy source for the future.

In a thesis made by five students at the Bren School of Environmental Science &Management in California, the social environment in California was assessed re-garding offshore wind farms (Feinberg et al., 2014). Several observations were madefrom a public survey carried out in Santa Barbara, California. The survey had 345participants, but a bias was expected as the majority of them were white, highly ed-ucated, high-income individuals. Figure 5.6 shows the response of the participants


when asked if they would oppose or support offshore wind energy in Santa Bar-bara. While a majority of the respondents were in favor of such projects, a small butsignificant percentage indicated to strongly oppose them. The survey also showedthat the main concerns were firstly the impact on birds, secondly the visual impactand then the effect on marine species. When asked, the respondents also answeredthat they would prefer the sites to be as far away from the shore as possible, and ifpossible as far away from their region as possible (NIMBY). The same observationwas made by Nordman (2011) who researched the public perspectives of offshorewind energy: even though people might support offshore wind energy when asked,they would oppose a specific project. Furthermore, a majority of the respondents(65%) had a positive response when asked if they would be willing to pay more forelectricity coming from an offshore wind farm. The opposition against wind farmswill most likely come from people whose profession is linked to the ocean such asfisheries, nonprofit/government and real estate.

FIGURE 5.6: Question to locals in California: Would you support oroppose offshore wind energy in Santa Barbara County (Feinberg et

al., 2014)

There are many examples in Europe and US that illustrate the importance of publicacceptance for offshore wind farms. One of these is the Navitus Bay wind farm inEngland for which the planning permission was refused in 2015. The basis of therefusal was the visual impact that the wind farm would have on the tourism in thenearby region (Macalister, 2015). An example in the US is the 468 MW Cape WindEnergy Project off the coast of Massachusetts which was one of the first offshorewind project to be approved in the US (Kennedy, 2014). The project’s first permitapplication was filed in 2001 and has been granted a lease in 2010 (Todd, Chen, andClogston, 2013). Throughout this process, over a dozen lawsuits have been filedagainst the project by local opponents (Genter, 2016). Some members of the localcommunity are afraid that the project will damage the environment, disrupt com-mercial activity and lower property prices (Saveoursound.org, 2015). Various otherprojects have had similar problems by the opposition of local anti-wind organiza-tions.


In California, perhaps the most relevant example of the impact of the social environ-ment on new projects is the Carlsbad seawater desalination project. The desalinationproject near San Diego went through 14 lawsuits filed by environmental activistswho were worried about the impacts of the water extraction on the local marineenvironment (Rogers, 2014). The Carlsbad project is now required to balance its en-vironmental impact by restoring 66 acres of wetlands elsewhere in the San DiegoBay. More recently, in April 2017, the California Task Force met with members of thepublic in San Luis Obispo County to get them involved in the offshore wind plan-ning process as interests in the area for offshore wind projects have been shown byTrident Winds and Statoil (San Luis Obispo County, 2017). The Task Force also cre-ated an online platform, the offshore wind energy gateway (Bureau of Ocean EnergyManagement, 2017a). The platform is an online tool to inform and gather data aboutthe environment in California. During the public meetings, the local residents aretaught how to use this platform, making the data gathering a collaborative effort tomaximize the involvement of the local public.

5.4 Technological

The technological environment is of great importance when the opportunities for anoffshore wind market are considered. As mentioned previously, there are many dif-ferent technological obstacles related to offshore wind energy, aside from the floatingturbine technology. The focus of this thesis is on floating offshore wind turbines asthe coastal environment in California is not well suited for fixed-bottom offshorewind turbines. The developments in this technology have been described in theliterature review in Chapter 2 and will therefore not be covered again here. Someof the technological challenges are inherent to renewable energy solutions such asthe difficulties a variable energy production poses to the electricity grid. The anal-ysis of the technological environment will not handle these issues but will insteadfocus on the availability of existing technology. The existing energy infrastructuredecides how easily energy coming from offshore wind turbines can be integrated inthe grid. If there is no infrastructure present, then this can dramatically increase thecost. There are other technological factors to consider such as the existing supplychain for wind turbines, and the manufacturing environment in California.

Location assessment

A report made by the National Renewable Energy Laboratory (NREL) assesses thelocations, technology and costs for offshore wind energy in California (Musial etal., 2016; Clean Energy States Alliance, 2012). Six different sites in California wereconsidered for commercial offshore wind farms, selected on various criteria such aswater depth, average wind speed, transmission on land, availability of ports and


distance from shore. More information about the environmental condition of Cali-fornia will follow in the Environmental section of this chapter. Figure 5.7 shows thetransmission lines and ports suitable for the chosen sites. They found that SouthernCalifornia has a more suitable grid and better port services, which makes this regionmore desirable technology-wise for early projects.

FIGURE 5.7: Map of offshore wind farm sites selected by NREL withthe ports and transmission lines (Musial et al., 2016)

Energy storage

Recently, California has been investing in storage technology as the state is afraidof having blackouts. Even though there is sufficient installed capacity, a significantpart of the electricity generation comes from solar power. The generation from so-lar installations shows a high peak during the day (Figure 5.8), which results inoverproduction and even negative energy prices. During these times, the output ofsolar generation sometimes has to be curtailed (Denholm et al., 2015). Then, laterin the afternoon, when solar generation decreases and consumption increases, thereis an energy deficit. Musial et al. (2016) find that offshore wind energy can com-plement the solar load characteristic to have a more even distribution. Previously,hydroelectric dams were used as the primary way to store energy. However, theproblem of energy storage is growing as more renewables are entering the energymix and baseload plants are being phased out at the same time that long droughts


FIGURE 5.8: Power characteristic for an average 2016 March day inCalifornia (Sommer, 2016)

are occurring. The two major utility companies SCE and SD&E are already workingon installing a large capacity of battery storage (100 MW) to replace a gas powerplant (Fialka, 2016). CPUC has also set up a plan that requires utility companies tobuild energy storage in order to tackle these issues and improve the grid (Califor-nia Energy Commission, 2010; California Energy Commission, 2014). Other meansof energy storage are being explored, for example the Pathfinder CAES project byPG&E where energy is stored underground in the form of compressed air. This formof storage is not common but has been used before in Germany for a storage of 290MW.

Supply chain

The consultancy firm Navigant Consulting was commissioned by the US depart-ment of energy to research the US offshore wind manufacturing and supply chaindevelopment (Navigant Consulting, 2013). The research explores different scenariosfor an offshore wind industry both on the short and long term. A list of the currentand potential US wind market suppliers is compiled in the research, this is referredto for more information as the full description of the supply chain exceeds the scopeof this thesis. The U.S currently has a limited supply chain related to offshore windenergy as the supply chain has been developed around the only sizeable offshorewind energy market, the market in Europe. However, the onshore wind industryin the US is well developed and so some of the components are available locally.As mentioned in the economic section of the PESTEL analysis, California has thebiggest manufacturing industry in the US (Panchak, 2016). The analysis also findsthat the total employment in industries relevant to offshore wind is highest in Cal-ifornia. Furthermore, California has the highest amount of potential workers in theoffshore wind industry at more than 100 000. California also has the most peopleemployed relevant to the electrical systems, mechanical systems and is second insectors relevant to the towers and foundations.


Many of the observations regarding the supply chain are likely irrelevant for near-future projects as the supply chain will not have a chance to develop until offshorewind takes off in the US. According to Navigant Consulting (2013), some of the morespecific components will have to be imported from Europe at the early stages of theindustry because suppliers are not willing to invest until the potential of a US off-shore wind market has been demonstrated. The same is true for specialized instal-lation vessels. The Cape Wind project, for example, will most likely use convertedships and the first special purpose offshore wind farm installation vessel built inthe U.S, and will make use of the European offshore technology (MarineLog, 2014).However, these observations were made for fixed-bottom technology. Floating foun-dations are more adaptable to various wind turbine designs and can be more easilymanufactured locally. The United States has the third most installed onshore windcapacity. In 2011, around 67% of these turbines were produced domestically. Oneof the biggest wind turbine manufacturers is US based General Electric (GE) (WindPower Monthly, 2015). Aside from the component supply chain, the ports will haveto be adjusted to allow the construction and towing of floating turbines. Addi-tionally, the installation of floating turbines does not require a specialized vesselas the turbine can be mounted in a dry-dock. The biggest barrier concerning vesselsis formed by cable-laying vessels which are in high demand (Douglas-Westwood,2013).

A more direct impact on offshore wind projects related to the supply chain is im-posed by the Jonas Act. The Jones Act requires that commercial activity in US waterscan only be performed by ships that carry the US flag, additionally the ships musthave been constructed in the US and be owned and crewed by US citizens (Mar-itime Law Center, 2015). In practice, this means that the vessels that are needed forthe transportation of the turbine parts need to be qualified Jones Act vessels. Thislaw hampers offshore wind developers and requires workarounds because some ofthe parts needed for the turbines and the more specialized installation and O&Mvessels would come from Europe. The installation vessels can be foreign, but areenforced to be stationary, otherwise this would qualify as a commercial movementin US waters by a non-qualified vessel (Papavizas, 2016).

5.5 Environmental

In this part, we will take a look at the environmental factors that might influence thebusiness environment for floating offshore wind energy projects. The environmentalanalysis encompasses mostly the natural environment in this research. The presenceof good wind resources is of course important for offshore wind energy projects.The average wind speed is important, but the variability of the wind is a significantfactor as a steadier wind can provide a more constant output (Stoutenburg, Jenkins,


and Jacobson, 2010). This is desirable in California where a significant part of the do-mestic energy demand is already being generated by privately owned solar panels.The availability of suitable offshore sites close to dense urban centres can translateinto opportunities because the wind farms can be placed closer to the consumer, cut-ting transmission costs. At the same time, the visibility of the park from the shoreneeds to be considered, the wind park needs to be placed closer or further depend-ing on the visibility from the shore. Furthermore, weather patterns are importantto take into accounts as some parts of the US can experience natural disasters suchas hurricanes or earthquakes. The frequency of these events can have a big impacton the insurance cost of wind development projects, impacting the project cost andas a result the electricity cost. Furthermore, the environment can also impact theoperation and maintenance (O&M) cost. All of these aspects and more need to beconsidered by developers when they search for a suitable wind site, and need to beevaluated in detail on a per-location basis.

Climate change consequences

The natural environment also influences the political and social tendencies, for ex-ample because of a change in climate. California has been suffering from longdroughts as a consequence of climate change (Environmental Protection Agency,2016). It is not uncommon that the state has to put constraints on its water con-sumption (Farrington, 2016). This not only has an impact on the significant agri-culture industry in California, but has also affected hydropower installations (Cali-fornia Energy Comission, 2017). The state used to generate a significant amount ofits energy from hydroelectric sources, and the water reservoirs are used as a wayto store energy. However, due to the decrease in rain- and snowfall, the capacity islowering and is not as reliable as it used to be. The shortfall is made up for by usinggas turbines, renewables and imports from other states.

Marine environment

Much of the permitting process of offshore wind parks is related to investigating thelocal natural environment to assess the impact of the turbines on the environment.In the US in particular this process is very lengthy because a large amount of studiesis needed. Many similar studies have already been carried out in the more advancedEuropean offshore industry, but the US legal system requires a repetition of the stud-ies (U.S. Department of Energy, 2010). Coastal and Marine Spatial Planning (CMSP)is used to manage the ocean’s resources in the case of offshore wind energy. It takesthe existing use and the new potential use of the ocean into account (Samoteskulet al., 2014). The marine life environment needs to be researched thoroughly for thechosen site. The Pacific Northwest National Laboratory has researched the coastal


environment of California for both floating and bottom-fixed offshore wind turbinesand lists the various animals that need to be considered (Copping, 2013). It is goodto note that floating wind turbines are less intrusive to the environment and mightface less environment related legal issues.

The onshore Altamont Pass Wind Farm in California illustrates the importance ofconsidering the environment. The wind farm was one of the first in the United Statesbut now has to shut down at certain times of the year to avoid killing protected birdsthat use the pass as a migration route (Lautamo, 2016). The old turbines are beingreplaced by newer, supposedly more avian friendly turbines, but still this downtimecan be detrimental to the economic feasibility of such wind parks.

Resource potential

The paper by Musial and Ram (2010) finds that the offshore wind resources in Cali-fornia are far greater than the available land based resources. The National Renew-able Energy Laboratory (NREL) made an assessment of the offshore wind energyresources in the United States (Schwartz, Heimiller, and Haymes, 2010). The re-search does not take all the criteria of offshore development into account and thuslooks at all the available offshore areas. The wind speed estimates at a height of 90mare shown in Figure 5.9. The highest wind speeds at the West Coast are found Northof San Francisco at the border between California and Oregon. California is locatedat the Pacific Ocean, which is characterized by its deep waters due to the quicklydropping continental shelf. Figure 5.10 shows the water depths near the US coast.The map shows that the ocean reaches a depth of more than 300m very quickly atthe Californian coast. Especially the deeper waters hold an immense potential foroffshore wind energy. Another research was done by the US Department of Energy(2016) to see if the 86-GW offshore energy scenario as set up by Obama was realistic.The technological potential of the different areas in the US is shown in Figure 5.11.

FIGURE 5.9: Offshorewind resources at 90min the United States(Schwartz, Heimiller,

and Haymes, 2010)

FIGURE 5.10: Waterdepths in the US(Schwartz, Heimiller,

and Haymes, 2010)


FIGURE 5.11: Technological potential of offshore wind in the UnitedStates (US Department of Energy, 2016)

Dvorak, Archer, and Jacobson (2010) look at the offshore wind energy potentialspecifically in California. They account for the existing transmission infrastructure,the water depth, population density and wind speeds at 80m. Their research identi-fied various areas with good potential in Northern, Central and Southern California.They identified that Northern California has the best wind resources, but that thetransmission infrastructure is the least suited for new high capacity energy sources,and the potential market is smaller. The offshore wind resources in Central Califor-nia are good and close to the market, but the suitable areas might face permittingdifficulties. Good offshore sites in Southern California are located far offshore andare only exploitable with floating wind turbines, but are close to the market and theavailable infrastructure is able to handle the development of offshore capacity. Theresearch concludes that the total potential capacity suited for offshore wind energyin California is about twice the state’s electricity needs.

Geological phenomena

California has an interesting geological position, potentially relevant to offshorewind energy. The most notable geological phenomenon in California is the San An-dreas Fault. It is one of the longest faults on earth, and runs through California asit is located on two tectonic plates (Picazo, 2016). Scientists predict that a significant


earthquake will occur in the next 30 years in Southern California, making Los An-geles the biggest victim. Luckily, the San Andreas Fault runs through land only andis thus not located in the pacific. This means that in the event of a large earthquake,it will not generate a tsunami as seen in for example Japan (Zielinski, 2015). Even ifa wave were generated, it would be local and close to shore (Ryan et al., 2015). Ofcourse it might still have a devastating impact on the economy. As far as waves areconcerned, the waves in the Pacific are getting larger, the cause of this phenomenonis unknown. It is estimated that a 100-year wave can reach heights of up to 15 meters(Stauth, 2010).

5.6 Legal

Legal issues are very important and are mostly dealt with by developers. Legalaspects have been cited as one of the biggest concerns when it comes to the develop-ment of an offshore wind energy industry (U.S. Department of Energy, 2010). Theoffshore wind industry is relatively new, Europe has had around 10 years of com-mercial experience in offshore wind projects, while in the US the first offshore windturbines only started turning more recently. This means that there is no clear reg-ulatory environment yet in this emerging industry (Musial and Ram, 2010). Eventhough there is no specific legal framework, US institutions are familiar with bigenergy projects from the oil & gas industry. It appears that the legal pathway thatwind farm developers have to go through is complex and that the outcome is heav-ily dependent on social support and political backing. This section looks at someof the legal aspects relevant to an offshore wind project. This analysis gives an up-date on the existing information and demonstrates the legal difficulties that can beencountered through some recent examples.

First of all, the regulations that apply depend on where the wind farm is placed inthe Pacific Ocean. The state’s jurisdiction applies to the state waters which extendto 3 nautical miles from the shore. From there the federal waters begin, extendingto 200 nautical miles. In these waters federal jurisdiction applies. Wind developerscan choose to build wind farms in state waters where the permitting process is a lotsimpler with the trade-off that wind resources are lower. However, the sites in statewaters are limited and it is more likely that large-scale offshore wind farms will bedeveloped in federal waters (Musial and Ram, 2010).

BOEM, the Bureau of Ocean Energy Management, has been assigned the respon-sibility for implementing the regulations for renewable energy projects as per theEnergy Policy Act of 2005 (BOEM, 2015). As such, BOEM is the overarching federalinstitution that grants leases to offshore wind projects, and aids them in the regu-latory process. Throughout this process, BOEM coordinates with other federal andstate agencies (Feinberg et al., 2014). BOEM has two ways of issuing leases, either


through a competitive bidding process or through a non-competitive process (USDepartment of Energy, 2016). In case of competitive bidding, an area with goodwind development potential is identified by BOEM, after which it is leased througha bidding process with the interested developers. A company can only participate inthe bidding and development process if it has sufficient financial, legal and technicalmeans to carry out its intents. If there is no interest in one of the identified areas, thenBOEM continues with a non-competitive leasing process (Bureau of Ocean EnergyManagement, 2016). So far 11 commercial leases at the Atlantic Coast have beengranted by BOEM. It is also possible for developers to file for an unsolicited lease re-quest. The requested area is then analyzed by BOEM and once accepted it continuesin either a competitive or non-competitive leasing process. When a lease is awardedit does not authorize the developer to start any construction. Instead it means thatthe developer gains the rights to develop its plans on the leased area, which needto be approved by BOEM before moving along in the permitting process. In 2016,BOEM received an unsolicited lease request for the Trident Wind farm in California.Recently, Statoil has expressed its interest for the same site, this means that if the sitegets approved it will most likely go through a competitive bidding process (Bureauof Ocean Energy Management, 2017b).

The paper by Feinberg et al., 2014 goes through the complete regulatory process thatis in place in 2014 for developing offshore wind facilities in California. The researchis based on available literature, statues and supplemented by interviews. In theirresearch, they found that 8 state approvals, 17 federal approvals, and 3 approvalsat the local level are required for a commercial scale offshore wind project. Thispart of the PESTEL analysis is limited to the general legal entities and some of thelegal challenges, a more complete description on the exact permitting process inCalifornia is available in the works by Feinberg et al. (2014). The decision makingprocess that has to be followed is set up by the National Environmental Policy Act(NEPA) at the federal level and the California Environmental Quality Act (CEQA) atthe state level. There are many common requirements between these acts, resultingin duplicative work. However, the way in which the permitting has to be carriedout is different, making it a complex and time consuming process. The Coastal ZoneManagement Act (CZMA), Clean Water Act (CWA), and Clean Air Act (CAA) arefederal laws that are made to give the states the flexibility of fulfilling these lawswhile taking local aspects into consideration. Hence, these permits must be obtainedfrom the state.

Even though an offshore wind farm may be situated in federal waters, the state canlay claim on the offshore wind project because of the export cable that connects theoffshore wind park to the onshore grid as it runs through state waters (Feinberget al., 2014). The main state permit that needs to be acquired in California is theCalifornia Environmental Quality Act (CEQA). This act is the overarching act formultiple local agencies. It requires that the impacts of an offshore wind park on the


environment is studied, and minimized wherever possible. In the case where any ofthe infrastructure is located on land owned by the county, not only state permits butalso certain local permits are required. To more easily understand the different stepsin the regulatory process, a comprehensive infograph was made by Feinberg et al.(2014).

There are several examples of early offshore wind projects that have struggled be-cause of legal problems. One of the main causes of this is that local stakeholders, likefishermen and local tribes, are not explicitly protected by any law (Feinberg et al.,2014). These stakeholders have multiple opportunities throughout the planning andpermitting process to give their input. However, this input has no legal consequenceand the permitting agencies are not required to follow their comments. Hence, theonly way these stakeholders can pressure the project is by filing lawsuits. The out-come of these lawsuits is often uncertain and can heavily delay projects and run upcosts. Another main concern during the permitting is the public resistance becauseof visual impact. The visual impact of an offshore wind farm is taken into accountduring the permitting process and members of the public can give their input duringthis time.

As can be noticed, the permitting process for an offshore wind park in federal watersis a very strenuous and complicated procedure. It is not made easier by the fact thatmany of the permits are duplicates because both the federal and state laws need tobe fulfilled. Furthermore, the laws are not specific for offshore wind but are insteadgeneral frameworks for all activity in federal waters, this means that laws need to befulfilled that are not especially relevant to the application. The complete permittingprocedure takes many years and is very challenging compared to the more flexibleEuropean offshore legal environment. As was mentioned in the Political analysis,the Intergovernmental Renewable Energy Task force was launched in 2016 in Cal-ifornia and is in charge of coordinating the federal, state and local governments,together with the stakeholder groups (4C Offshore, 2016).

44

6 Discussion

In this chapter the opportunities and threats for floating offshore wind solutions inCalifornia are discussed based on the PESTEL analysis made in the previous chap-ter. The PESTEL analysis is summarized in Appendix A to facilitate the discussion.The aim of this discussion is to assess the future of the Californian market for float-ing wind turbines. The opportunities and threats are discussed as explained by theSWOT framework. The strengths and weaknesses are left out as these factors areinternal to an organisation. A more condensed version of this discussion is availablein Appendix B.

6.1 Opportunities and Threats

The first topic that needs to be addressed is the environmental setting of California,without good offshore wind resources there is no case for an offshore wind mar-ket. Fortunately, the offshore wind resources are very good. This, in combinationwith the quickly dropping outer continental shelf results in very deep waters whichonly allow for floating solutions to be utilized. Also, climate change is being felt inCalifornia as long droughts are becoming more and more common. This has its im-pact on multiple aspects: the energy generation systems are influenced as generationfrom hydroelectric installations decreases, and the social willingness to take actionincreases as people are actively affected.

The energy industry is highly politicized, especially so for offshore wind energy.Federal support has historically been available to develop other renewable energysources in the US, an example is the considerable impact of the Production Tax Credit(PTC) on the development of onshore wind energy. However, the PTC supportseems to have come to an end, and the current political situation with regards torenewable energy sources is unsure. This can pose challenges to get offshore windprojects going in California. Federal politics are not favouring the development ofrenewable energy projects as there are attempts to dismantle the Clean Power Plan.Luckily, most of the energy decisions are made at the state level, and even if theClean Power Plan would be dismantled, California would still pursue a reduction incarbon emissions (Megerian, 2017). This is in part thanks to local political supportat the state level by California’s governor Jerry Brown. His support for renewable

Chapter 6. Discussion 45

energy, and offshore wind projects in specific, is considerable. California’s progres-sive Renewable Portfolio Standards and the California Task Force are proof of this.In practice, this means that even if federal support decreases, it is unlikely that thechances of a Californian offshore wind industry would come to an end as the majordecision makers are proponents of offshore wind projects (Burdock, 2016). Addi-tionally, California is not afraid to oppose federal decisions and has considerableeconomic and political power. From an economic point of view, it is unlikely thatTrump will actively oppose offshore wind projects considering the job creation op-portunities they provide.

California has a large and diverse economy and is the harbour of many big compa-nies. Many industries, such as the manufacturing industry, are well represented inCalifornia. This offers benefits for both the local economy and the pace of develop-ment if an offshore wind industry were to be established. Additionally, California’selectricity prices are one of the highest in the US caused by a combination of theover-installation of capacity after the electricity crisis in 2008 and the updated Re-newable Portfolio Standards, forcing some installations to close prematurely. Thereare however concerns about the large outstanding debt of California. The state hasa credit rating of AA- which is good, but below average. The volatile stock markets,expiration of the PTC and California’s tax system pose some considerable financialuncertainties. This is not helped by the potential budget cuts to environmental agen-cies. Other offshore wind projects have had trouble selling their (quite expensive)electricity, this might be less of a problem due to California’s RPS and the cap-and-trade system to force a reduction on carbon emissions. Furthermore, the federal gov-ernment has previously granted financial support for offshore wind projects. Also,from a financial viewpoint, floating solutions are the only viable option for offshorewind in this region.

California is actively working on improving the energy grid so that it can managethe increasing amount of renewables. The biggest struggle for the grid comes fromthe over-generation due to solar installations during the day. Even though the in-creasing curtailment of solar and wind power poses a threat, the overproductionat certain times is inevitable with California’s RPS goal and current storage capac-ity. Offshore wind energy has the advantage that it has a more stable load and cancomplement the load characteristic of solar generation. Additionally, California isworking on battery storage. The on-land supply chain for floating technology isavailable due to the fact that floating foundations are more adaptable to turbine de-sign and that there is a large onshore wind energy industry and supply chain. Theoffshore wind supply chain is not so readily available but needs to be developed inany case, as the US doesn’t have any experience with offshore wind projects. TheJones Act does pose some problems, for example for the vessels that are needed tolay the transmission cables. Yet, the influence of the Jones Act is smaller for float-ing foundations as less specific vessels are required. This can favour the growth of

Chapter 6. Discussion 46

a floating wind industry in California compared to other states where fixed-bottomtechnology would be applicable. Southern California is likely the best location forearly offshore wind projects due to a combination of the availability of a transmis-sion network, port services, and the proximity to consumers. Furthermore, there areno notable geological or weather related phenomenons that would pose a threat tofloating offshore wind farms.

One of the main issues so far in the United States regarding offshore wind projectsis the lack of a regulatory framework. It is the federal Bureau of Ocean Energy Man-agement (BOEM) who is responsible for leasing the offshore sites and approving thepermits. Currently the regulatory process is extremely complex and requires a largeamount of federal, state, and local approvals. The complex permitting process canpose big threats as it can take many years to acquire all the permits, this runs upthe costs and scares off potential investors. The California Task Force to facilitatethis process is a great initiative, but results have yet to be delivered. Not only canthe complex regulatory environment be an impediment for potential developers, butthe fact that the first leasing sites will most likely be in high demand can result in afairly competitive bidding process, posing financial problems for the industry.

Also, the impact of the social environment on offshore wind projects is quite large.There are many examples of projects that get tied up in court due to unhappy lo-cal residents or stakeholders, even despite the clear local economic advantages thatsuch projects offer. Many of the residents in California are in favour of renewable en-ergy and even offshore wind projects, but still the social problems are hard to avoid.Therefore it is important that they are considered carefully. It is recommended thatthe local residents are involved from the early stages of the projects to minimize therisks. The main concerns from residents are the impact on the environment and vi-sual pollution. The California Task Force is doing a good job addressing these issuesby actively involving the public in a data gathering effort. A benefit is that floatingwind turbines are already less intrusive to the environment compared to the fixed-bottom technology. Of course, all environmental concerns should be addressed withcare. A good focus on the social and environmental aspects can significantly reducethe risks and favour the project in terms of time and money saved.

47

7 Conclusion

As the realities of climate change become more and more apparent, societies andsystems need to transform in order to reduce greenhouse gas emissions. The energysystem plays an important role in this transformation. One of the rapidly grow-ing renewable energy sources is offshore wind energy. The literature review showedthat Europe is leading this relatively young industry. Other countries and continentscould not make use of offshore wind resources, mainly due to deep waters which arenot accessible with the current fixed-bottom technology. However, the emergence offloating turbine concepts now enables these previously inaccessible regions to makeuse of their available offshore potential. California is one of the leaders in renewableenergy in the United States and has set the very progressive goal of 50% renew-ables by 2030. The vast offshore wind resources off the coast of California are beingeyed as the potential next source of renewable energy for the state. This leads to thequestion of what the challenges and opportunities are for a floating offshore windturbine market in California. In order to answer this, a PESTEL analysis was madeanalyse the external business environment, and to decide if California is a promisingmarket for floating offshore wind turbines. The political, economic, social, techno-logical, environmental, and legal aspects relevant to floating offshore wind energywere therefore investigated. The analysis shows that the offshore environment in-deed offers great opportunities, especially for floating turbine concepts.

Offshore wind energy is, especially in the beginning, heavily dependent on politicalsupport. The support of the federal government is highly uncertain under Trump’sadministration and poses some financial uncertainty. However, California’s gover-nor is actively engaged in realizing offshore wind projects through initiatives suchas the Californian Task Force. This support will likely increase even more as climatechange is very tangible in California through events such as long droughts. Further-more, the state has a vast economy to support such projects, and is interesting todevelopers because of its high electricity prices. The technological environment inCalifornia also shows bright prospects as there is an available onshore wind energysupply chain that can facilitate the development, and many of the jobs related to themanufacturing are available locally. There are some technological difficulties for thetransmission network posed by the increasing amount of renewable energy sources,however this problem will need to be tackled by California, regardless of the energysource, as they are not likely to change their RPS goal. Therefore, diversifying the re-newable energy mix with offshore wind energy seems logical. The biggest challenge

Chapter 7. Conclusion 48

is posed by the extremely complex regulatory environment that can significantly in-crease costs and slow down projects. The Jones Act, for example, in combinationwith a lack of specialized US vessels can create difficulties. Finally, local oppositionagainst such projects is not uncommon in the US and can increase financial uncer-tainty. In the future, it will be interesting to learn more from the Trident Windsproject that is currently being launched in California. All in all the opportunities fora floating offshore wind turbine market in California seem bright. The threats thatare present are deemed surmountable.

49

A PESTEL Analysis Summary

PolicalFederal support needed for the development of the emerging US offshore wind energy industry

Federal• 2009-2016: Obama administraon strongly in favor of renewable energy

• 2009: Framework for renewable energy on Outer Connental Shelf (OCS)• 2012: “Smart from the start” iniave to speed up approval process of offshore wind

projects• 2015: Clean Power Plan (CPP) under supervision of Environmental Protecon Agency (EPA) to

reduce carbon emissions by 2030 (mandatory)• 2015: Wind Vision Scenario: 86 GW offshore wind by 2050

• 2017-now: Trump elected aer controversial elecons• Opposes climate change related policies• Proponent of oil, gas & coal industry in the US• Campaign based on job promises in these industries• Preliminary budget plan: cut EPA budget by ~30%• Signed execuve order to dismantle Clean Power Plan

State makes many of the energy related decisions

State• Current Governor Jerry Brown (2011-2019) big proponent of renewables and offshore wind in

specific• 2015: Request to prohibit oil & gas extracon off the shore of California• 2015: California updates Renewable Porolio Standards (RPS) to 50% renewables by 2030• 2016: California Task Force created to speed up leasing process for offshore wind projects• 2017: Meengs with Scosh prime minister to discuss offshore wind

Federal Production Tax Credit (PTC) has been historically important for the development of wind energy

PTC (Federal incenve)• PTC introduced in 1992: expired and extended numerous mes• Significant decrease in wind energy development during mes

without PTC• 2015: PTC extended according to phase-out plan• 20 State governors have already asked for an extension specific

to offshore wind

Effect of PTC on onshore wind development in the United states (Simmons and Hansen, 2015)

Appendix A. PESTEL Analysis Summary 50

Economic

Historic trends are important to consider to forecast future stability/instability

• California has experienced a series of crises in recent years• 1990: Deindustralisaon leading to loss of manufacturing jobs• 1997-2000: Dot-Com bubble

• 2000-2001 Western US Energy Crisis/Eyron scandal: • Paral deregulaon of California’s energy market allowed for market

manipulaon• Many black outs in California & Bankruptcy of 2 major ulity companies,

even though sufficient producon capacity

• 2007-2008 Financial Crisis• Budget crisis in California

• 2011: California’s budget & economy improve under Governor Jerry Brown

Current state of the economy is important to find investors for offshore wind projects

• California has 6th largest GDP in the world

• Economy is very diverse, not just technology• Largest agriculture, forestry & hunng industry

in US• Largest manufacturing industry

• Economy is growing currently but state has volale tax structure

• 50% of state’s income comes from 1% of Californians

• Below average AA- credit rang (by Standard & Poor)• Large debt

California’s industry as % of GDP (Stasta, 2016)

Supply and demand on Californian electricity market decides profitability of energy projects

• California has high electricity prices (30% above US average) caused by:• State ensured profitability of new power installaons aer Electricity Crisis• In 2008: electricity demand stagnates and overinstallaon in capacity• Update to RPS forces power plants to close early• Small scale power producon with solar panels

• Cap-and-trade system to reduce carbon emissions (similar to EU-ETS)• First of its kind in North America

Reducing unemployment can influence political decisions

• 2010: California has one of highest unemployment rates (12.4%)• Currently: 5% compared to 4.7% US average• California is state with most unemployed people relevant to offshore wind


Economic

Reducing unemployment can influence political decisions

• 2010: California has one of highest unemployment rates (12.4%)• Currently: 5% compared to 4.7% US average• California is state with most unemployed people relevant to offshore wind

Economic support for offshore wind

• Federal government has granted $190 million so far to offshore wind projects since 2006• Previous US offshore projects failed to find buyers for its electricity (Power Purchase Agreements)

• Resulted in a cancellaon of lease agreements and eventually the project


Social

Social acceptance of offshore wind is needed for successful offshore wind projects

• Surveys show that solar and wind are the most favorable renewable energy sources

• Survey carried out in Santa Barbara, California • A lot of support but some strong opposion• Opposion comes from people working with the

ocean• Concerns: 1) Impact on birds

2) Visual impact3) Effect on marine species

• Mulple examples in the US of offshore projects shut down due to local opposion

Survey carried out in Santa Barbara (California) asking if people would support or oppose offshore wind projects (Feinberg, 2014)

Technological

Local infrastructure & supply chain impacts feasibility of offshore wind projects• Studies made show that

• Southern California has the most suitable grid and best port services• Well-developed onshore wind industry but limited offshore wind supply

chain• California has highest amount of potenal workers in the offshore wind

industry

• Early stage offshore wind aspects• Floang turbines have less technological requirements compared to fixed-

boom• Foundaons can be produced locally• Cable laying vessels in high demand

Opmal offshore wind sites in California selected by NREL

• California baery storage plan• Store overcapacity of solar energy• Replace gas plants

• Jonas Act significant obstacle to installaon and construcon• Commercial acvity in US waters needs to be performed

by ships constructed in US and owned by US cizens

Power characterisc in California of an average March day (Source: CAISO)


Social

Social acceptance of offshore wind is needed for successful offshore wind projects

• Surveys show that solar and wind are the most favorable renewable energy sources

• Survey carried out in Santa Barbara, California • A lot of support but some strong opposion• Opposion comes from people working with the

ocean• Concerns: 1) Impact on birds

2) Visual impact3) Effect on marine species

• Mulple examples in the US of offshore projects shut down due to local opposion

Survey carried out in Santa Barbara (California) asking if people would support or oppose offshore wind projects (Feinberg, 2014)

Technological

Local infrastructure & supply chain impacts feasibility of offshore wind projects• Studies made show that

• Southern California has the most suitable grid and best port services• Well-developed onshore wind industry but limited offshore wind supply

chain• California has highest amount of potenal workers in the offshore wind

industry

• Early stage offshore wind aspects• Floang turbines have less technological requirements compared to fixed-

boom• Foundaons can be produced locally• Cable laying vessels in high demand

Opmal offshore wind sites in California selected by NREL

• California baery storage plan• Store overcapacity of solar energy• Replace gas plants

• Jonas Act significant obstacle to installaon and construcon• Commercial acvity in US waters needs to be performed

by ships constructed in US and owned by US cizens

Power characterisc in California of an average March day (Source: CAISO)

Environmental

Environmental conditions can determine political, economic, legal and social feasibility of offshore wind projectsE.g.: Altamont Wind Pass in California has to shut down during bird migration seasons

• Climate change is tangible: long droughts• Impacts hydropower installaons and imports

• Offshore wind environment in California• High offshore wind speeds, especially in Northern California• Deep waters due to quickly dropping connental shelf, only suitable for floang soluons

Wind speeds at 90m (Source: NREL) Water depths (Source: NREL)

• Research on California’s offshore wind potenal show• Northern California has best wind resources but transmission infrastructure is least suited• Suitable offshore sites in Southern California are far offshore• Potenal is almost 2 mes California’s electricity needs

• California located on San Andreas Fault• Significant earthquake esmated to occur within 30 years• Fault is land-based, does not run through ocean• Chance of significant tsunami very unlikely

• “100-year” wave esmated to reach heights up to 15 meters

Various environmental conditions are relevant to offshore wind


Legal

Legal aspect is one of the biggest concerns for the development of offshore wind energy in the US

• US Offshore wind industry very new• No clear regulatory environment• Outcome of legal pathway depends strongly on social & polical support• Many duplicate procedures & not allowed to rely on European research

• Complex regulatory environment: State vs Federal laws• State waters (0 – 3 naucal miles) <-> Federal waters (3 – 200 nm)• Best offshore sites are in federal waters

• Bureau of Ocean Energy Management (BOEM) overarching federal instance• Coordinates state & federal agencies• Leases offshore sites through compeve or non-compeve bidding

Legal process is responsibility of offshore wind farm developers

• Extremely complex regulatory process• 17 federal approvals• 8 state approvals• 3 local approvals

• Overarching act in California is the California Environmental Quality Act (CEQA)

• Studies show that• Environmental laws overpresented• Local stakeholder laws underpresented• Leads to many lawsuits by local stakeholders as the only way to have a say

• Jones Act a hindrance for offshore wind development• California Task Force launced recently to facilitate regulatory process


56

B Opportunities and ThreatsSummary

Opportunities

Political Economic Social

Considerable state support Renewable Portfolio

Standards California Task Force Job creation prospects

Large and diverse economy High electricity prices Many manufacturing jobs Cap-and-trade market

California Task Force includes local public in data gathering effort for offshore wind sites

Majority is pro-renewables

Technological Environmental Legal

Onshore wind supply chain available

Offshore wind complements uneven solar load characteristics

Southern California suited for early projects (transmission, ports & proximity to consumers)

Climate change tangible (droughts) Need for more energy Increases social

willingness Excellent conditions

High wind resources Deep waters No notable barriers

State of California attempts to facilitate legal process

ThreatsPolitical Economic Social

Trump administration anti-renewables

Budget cuts to environmental agencies (EPA)

Financial uncertainty Expiration of PTC (federal

support for renewables) California tax system Hard to obtain a PPA

Competitive leasing process

Local opposition likely Result of legal system Can heavily impact

project duration & costs

Technological Environmental Legal

Import parts from Europe Jones Act difficulties

Ports need to be adjusted

Many local species Need to be investigated

Earthquake potential Economic implications

Extremely complex regulatory process No clear regulatory

environment Duplicate procedures Environmental research

required Jones Act

Appendix B. Opportunities and Threats Summary 57

58

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