Delaware lawmakers to weigh bill to buy offshore wind power

More than a decade after Delaware first considered buying some of its electricity from future wind farms off the coast, it finally has a bill that would set it on a path to do so.

The Delaware Energy Solutions Act of 2024 was introduced in the General Assembly on April 18, and supporters say they’re cautiously optimistic that lawmakers will pass the measure in the approximately 10 weeks that remain in the current legislative session.

The bill would instruct the state, on its own or with other states, to seek bids from offshore wind developers to supply power to Delaware; draw power from a project generating 800-1,200 megawatts – enough to power at least 400,000 homes; pay no more than 110 percent of the average electricity price that consumers have been paying for electricity over the last three years, and invite bidders to include the benefits of their project for climate, the economy and public health.

The plan would also allow a developer to raise its costs by 2 percent a year to allow for inflation, a provision designed to avoid the disruption and even cancellation of some offshore wind projects in other states over the past year. Denmark’s Orsted, a leading wind developer, cancelled two planned wind farms off New Jersey last year, saying that inflation and supply-chain problems meant the projects were no longer economic at the price negotiated with the state.

Advocates for Delaware’s procurement of offshore wind power hailed the bill as a landmark in the state’s long, halting process of securing a major clean energy source that would help the state meet its goal of net-zero carbon emissions by 2050.

“This is a huge milestone,” said Kris Ohleth, director of the University of Delaware’s Special Initiative for Offshore Wind (SIOW), whose report to the State in 2022 recommended procurement because the cost of offshore wind had fallen significantly amid improved technology and rising demand from other states.

The SIOW report said the economics of offshore wind had improved since 2018 when Governor John Carney’s (D) working group concluded the price was too high for the state to step in. In 2011, a developer blamed the ending of federal tax credits for dropping a plan that could have made Delaware the first East Coast state to buy offshore wind power.

Now, the bill recognizes that a switch to renewable energy is “critical” to reducing greenhouse gas emissions, and that offshore wind represents an important opportunity for Delaware to advance its climate goals. It follows the Climate Action Plan (CAP), a Carney administration policy that commits the state to cutting emissions, and the Climate Change Solutions Act, a 2023 law that gives legal heft to the CAP.

The 19-page bill calls offshore wind a “significant opportunity for large scale renewable energy power for Delaware, reducing harmful emissions from power generation.”

It limits the per-megawatt hour cost of proposed projects to within 110 percent of the Delaware Benchmark Price, a new measure that adds the price of energy that Delmarva Power has been buying over the last three years to the cost of complying with the Renewable Energy Portfolio Standard – a state law requiring utilities to buy at least 40 percent of their energy from renewable sources like wind and solar by 2035.

The bill builds in “non-price criteria” including community benefits and workforce development that a developer could include in its bid, but said bidders have to meet cost requirements before the State Energy Office will evaluate the other factors.

And to ensure “checks” throughout the bidding process, the bill requires a solicitation to be proposed by DNREC’s State Energy Office, reviewed by the Renewable Energy Task Force, and approved by the Public Service Commission.

The Department of Natural Resources and Environmental Control sent what it called “model legislation” to lawmakers after producing its own report late last year recommending that Delaware moves ahead with offshore wind procurement.

The bill is being introduced by state Sen. Stephanie Hansen (D-Middletown), chair of the Senate’s Environment, Energy and Transportation Committee. She also heads an Energy Stakeholders Group of utility executives, state energy officials, academics and environmentalists that has been scrutinizing the bill, and have mostly supported it.

An exception is David Stevenson, an energy analyst at the Caesar Rodney Institute, a free-market research group. He argued that offshore wind is more expensive than new nuclear power, onshore wind, hydrogen and carbon capture at existing coal and natural gas power plants.

At a meeting of the Stakeholders group on April 12, Hansen made a series of technical or language changes to the bill following comments at the group’s previous meeting on March 28. She said she hopes to get the bill through the Senate by the end of April and to introduce it in the House in May.

Dustyn Thompson, director of the Delaware Sierra Club, and a member of the Stakeholders’ panel, said there is “certainly” enough support in the Senate for the bill to get approved but that “the House we need to work on.”

Asked whether he expects the bill to become law this year, Thompson said: “I have very high hopes that it will. It comes down to how much support we can build in the House. It’s a different political animal, and ultimately, I think it’s going to come down to that.”

But State Rep. Rich Collins, (R-Millsboro), said he will vote against the bill because offshore wind is a more expensive source of energy than any other kind and because he believes Delaware’s legally required net-zero emissions goal is unattainable regardless of what forms of energy the state uses.

Collins, speaking after seeing an early draft of the bill, also said it gives too much power to the State Energy Office which he said is unelected and of unknown competence. “We have decades of experience of government meddling in energy, and they have screwed up virtually every opportunity they’ve had,” he said.

But he said there’s a “better than 50-50” chance that the Energy Solutions Act will be approved by the House, where Democrats outnumber Republicans by 26 to 15.

Throughout the East Coast, state commitments to buying offshore wind power have underpinned the industry’s investment of billions of dollars in planned wind farms. If the new bill becomes law, Delaware would be the last Atlantic state to procure the power, and developers are showing strong demand for a piece of the state’s power market as it nears a green light on the plan, experts say.

“The level of interest in bidding into a Delaware procurement, pending details in the final legislation, is quite high,” said Evan Vaughan, executive director of Mid-Atlantic Renewable Energy Coalition (MAREC Action), a trade group for wind and solar developers. “There are several lease areas near the coast of Delaware that could bid into and ultimately serve Delaware’s electricity demand. So those leaseholders are excited about the prospect of a potential market in Delaware, and would be ready and willing to submit bids.”

The industry sees the bill’s plan for a 2 percent annual cost-escalator as a sign that Delaware’s leaders are working on a “solutions-oriented” approach to building offshore-wind infrastructure, Vaughan said.

“Both the legislature and the Carney administration are thinking very hard about crafting a policy to grow offshore wind in the state,” he said. “We welcome the chance to engage with them on that.”

He argued that offshore wind is a critical source of emissions-free energy that will help coastal states like Delaware meet their climate goals.

“Even with the economic challenges that the entire energy sector has faced over the last few years, the fundamental value proposition for offshore wind is very strong,” Vaughan said. “It’s dependable, and produces a lot of energy, and it’s close to where people live. I really see offshore wind as a keystone of any coastal state as these states seek to decarbonize their economies.”

Still, Ohleth of SIOW questioned whether the proposed 2 percent escalator would be high enough to attract developers, given that it is less than the current national rate of inflation.

“Offshore wind will have a hard time meeting a 2 percent cap,” she said. “Other states like New York and New Jersey have offered more flexible approaches. So it may be a little bit aspirational; their costs will probably rise closer to inflation. I don’t know that it’s a death knell for the bill but it’s likely that when developer comments come in, we’ll see pushback that they need more generous terms.”

And the bill’s inclusion of “add-ons” such as workforce development and the health benefits of non-fossil fuel energy could deter developers by raising the costs of a bid beyond just the cost of generating power, Ohleth warned. The extra cost requirements may make offshore wind power look more expensive than it is, fueling the arguments of its foes, she said.

“It’s going to continue to make offshore wind appear to be more expensive than other forms of electricity generation,” she said. “How do we really do an apples-to-apples comparison of the generation costs of two kinds of electricity if there are billions of dollars of add-ons?”