Beveridge & Diamond
 

Maryland Takes Key Step for Offshore Wind

Authors: James M. Auslander, John G. Cossa, Zaheer H. Tajani
Beveridge & Diamond, P.C., May 16, 2017

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On May 11, the Maryland Public Services Commission (PSC) issued $1.9 billion in Offshore Wind Renewable Energy Credits (ORECs) to two prospective offshore wind developers, effectively ensuring a market for any electricity generated from their federal wind leases off Ocean City, Maryland.  If constructed, the planned projects, capable of generating 248 megawatts (MW) and 120 MW, would dwarf the capacity of the 30-MW capacity Block Island project off the coast of Rhode Island, which is the only current offshore wind facility in the United States.  Maryland’s issuance of ORECs is the first in a long line of necessary state and federal regulatory approvals, but signals Maryland’s commitment to generating energy from offshore wind and is regarded as essential to project planning and finance.

The Bureau of Ocean Energy Management (BOEM) issued federal leases offshore Maryland on December 1, 2014.  In 2016, the lessees sought ORECs from the Maryland PSC under the 2013 Maryland Offshore Wind Energy Act to make development of their federal leases more economically feasible.  The Maryland PSC approval grants the companies sellable credits for each megawatt-hour generated to help cover the cost of generation.   If developed, the offshore wind projects supported by the OREC program are projected to generate $1.8 billion in investment, to create 9,700 new direct and indirect jobs, and to contribute $74 million in state tax revenue by 2042.  Neither company has yet submitted a proposal to BOEM to develop their leases.  The issuance of ORECs is also subject to various terms and conditions, including investment in manufacturing and fabrication in Maryland, port upgrades, and payment into the Maryland Offshore Wind Business Development Fund.     

This latest ORECs decision is in line with Maryland’s 2013 Renewable Energy Portfolio Standards (RPS), which mandates that 25% of electricity purchased in the state come from renewable energy sources by 2020. The 2013 RPS carves out 2.5% of renewable energy procurement for wind energy. While the projects remain in the early stages of development and are still subject to the conditions in the order, the PSC stated that the decision “will position Maryland as a national leader in offshore wind energy.”      

Beveridge & Diamond’s Natural Resources & Project Development practice counsels clients on OCS project development, regulatory enforcement, and litigation. For more information on how these developments may impact your business, please contact the authors or your usual Beveridge & Diamond contact.

* Zaheer Tajani contributed to this alert.

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