Massachusetts Business Forum on Offshore Wind

March 18, 2020

WRITTEN BY ISABELLA GAMBILL, Policy Advisor on Climate, Energy, & Resilience

Moderator/Introduction: Elizabeth Henry, Environmental League of Massachusetts

MA 2016 Energy Diversity Act – ignited race for offshore wind
MA was leader in OSW with our initial offshore wind procurement law, but many Atlantic states have moved ahead and are leading us in actualizing wind deals

Bruce Carlisle, Mass Clean Energy Center (MACEC)

Role of MACEC is to support the responsible development of offshore wind and increase local jobs and economic activity
ISO NE was created in 1997 following deregulation, with the sole mission of keeping the lights on (reliability and consistency of power, agnostic to type of power source). ISO NE operates the regional power system and administers wholesale markets.
24GW=2019 peak demand
MA energy mix has changed considerably as coal and nuclear plants are discontinued; state policies in New England are driving these shifts in energy, primarily by encouraging the dominance of natural gas
The potential tipping point towards offshore wind fits nicely with legacy generators retiring, and could help to replace some of the lost power with a renewable source of energy
Offshore wind is seeing steep declines in pricing, with a wind production profile that overlaps well with winter peak demand
Significant economic benefit - $70B supply chain, 1600MW wind could result in anywhere from 2,000-3,000 direct job years, and $650-800M additional revenue into the MA economy. Wind is an extremely cost-effective fuel source.
7 lease areas – 1418 miles, 4 developer teams, 6 projects selected, 4110MW
2018 MA statute increased state offshore wind capacity to 3200MW, a May 2019 DOER study recommended additional 1600MW and an established schedule
Ports and offshore wind infrastructure needs:
- Currently, the European offshore wind technology market is dominating wind infrastructure production; if MA could boost its port infrastructure then we could play a more active role in offshore wind technology production
- The wind technology test center in Boston is one of the largest in the world, and is operated by the MACEC
- MA Maritime Academy has the nation’s only global wind organization (GWO) safety and technical training program
- New Bedford Marine Commerce Terminal currently is the only port in MA with the ability to participate in the offshore wind technology production market
Clear need for sector development re: supply chain forums, workforce training, and development

Panel #1: What Could Offshore Wind Mean for the MA Economy?

Jen Benson, Alliance for Business Leadership, formerly a state legislator/elected official

Businesses are more interested in discussing the value of offshore wind rather than cost, and in its potential positive impact on the economy
Offshore wind should continue to be seen as an economic development and an innovation opportunity
The business community continues to say that it needs clarity, transparency, and predictability for offshore wind to take off
- ROI needs to be aligned to renewable energy goals

Bethany Patten, MIT Sloan – MIT Sloan’s business and sustainability initiative – how to educate next generation of leaders – most effective policies and interventions to keep temperature below required levels.

Clean tech is a good example of MA leading the nation and the world in the innovations of biotech; if MA can come at offshore wind with the mindset of product and market development in the startup community then maybe we could make more progress
Boston is an education hub, we want to make sure that the brightest students stay here after graduation and have a job market to feed into. Wind could fill that role.
- We should use the institutions of Greater Boston as a pillar for renewable energy workforce development

Steve Pike, MassCEC – redefining mission to focus of GHG reduction (was economic development). Focus for offshore wind is an economic development opportunity.

“We have the opportunity to lead the development of a brand-new industry here in Massachusetts, and that opportunity doesn’t come along very often”
We would need 10-15 more New Bedford Marine Terminals just to serve the offshore wind projects already in the pipeline (issues of infrastructure and interconnection needs)

What offshore wind means to those paying utility bills? Over long haul, it would mean cost savings, and a good deal for ratepayers. In general, it would also provide MA with larger economic opportunity/value overall.

How can we advance offshore wind in as equitable a way as possible and ensure that everyone can benefit? Emphasis on workforce development and economic development opportunities, and do what we can to formalize those opportunities.

Port cities could be a great place to start as possible fulcrums for the offshore wind industry (could provide job opportunities for welders, electricians, truck drivers, boat operators, etc.)
Could be a chance to bolster economic development in communities that have historically be underserved/underinvested
We need to incorporate diversity and inclusion goals within wind developers and hold them accountable

What are you hearing in the campus hallways about offshore wind?

MIT’s sustainability certificate has gone from 9-60 enrolled students in a few years
State and federal $$$ going to research in offshore wind/renewable energy keeps MIT Sloan viable
We have to keep this job development and growth in state – need to provide the pipeline of incubation for jobs or the innovation and brightest minds will go elsewhere.

The opportunity to scale up the offshore wind workforce can be found in educational institutions:

UMASS Lowell – national science foundation for windstar initiative – want to create own R&D and not got to Europe. Know industry well and what it will take to grow.
UMASS Dartmouth – home to economic development for OSW – shared labor mkt – infrastructure not ready to take on these developments. Collaboration essential. Currently in parallel – what collaboration is happening with states?

National OSW institute in New Bedford community college – timing to train people to work on the turbines.

“We work in a 6-state regional grid, in order for Massachusetts to win, we need to bring other states along with us” -Elizabeth Henry

Work with fisheries/wildlife, port infrastructure, and workforce development could all be done using a regional approach

Panel #2: What Could OSW Mean for MA Businesses?

Moderator: Winston Vaughn, Ceres

Panelists: Jim Goudreau (Novartis), Dustin Sarnoski (State Street), and Dennis Villanueva (Partners Healthcare)

Background on the business potential for offshore wind

Renewable energy is winning on cost – cheapest source of new power – long term trend continuing. Solar dropped 90%, OSW dropped 70% in 10 yrs
226 RE100 companies committed to 100% renewable
817 companies taking action – meeting global science-based target for emissions reductions, which includes scope 3 emissions (supply chain)

How can businesses participate in offshore wind?

RECs (net additional cost)
On site behind the meter (energy and credits)
PPAs (buying energy and credits – through your grid)
Virtual PPAs (through another grid) contract for difference – what buying it for and selling it for on the wholesale mkt
Green tariffs (in regulated markets – not NE)

Jim Goudreau, Novartis –Novartis revised its environmental sustainability strategy 18 months ago – had been scope 1 & 2 emissions reduction by 30% for 2020; now the new set of goals push for nothing but renewable energy in all Novartis operations (scope 1&2) by 2025. Since 80% of Novartis’ footprint lies in scope 3 emissions, they are also including a goal of reducing scope 3 emissions across the supply chain by 50% in 2030.

The power of PPAs, specifically aggregated PPAs like the model used by ABC, is immense; Novartis was able to become carbon neutral across all its electricity use through the establishment of just one PPA
- 100MW Texas wind – commercial op date June 2019 – made Novartis carbon free in US market
- Additional PPA in for renewable energy in EU
Now need to move into supply chain decarbonization, and assets like OSW are critical in getting there

Dennis Villanueva, Partners Healthcare – started 10+ years ago with the goal of reducing Partners’ emissions by 25% (they have already met that goal). Now Partners has updated its target to be a 40% emissions reduction goal, with carbon neutrality by 2025 in scope 1&2 emissions

Wind farm of 30 MW – to meters; solar deal onsite and offsite
For the last 5 years, 100% electricity purchased by Partners on the electricity market is renewable
As a healthcare facility, Partners sees reducing greenhouse gases as a core part to its mission

Dustin Sarnoski, State Street – State Street occupies 7million square feet of space across 30 countries. State Street instituted science-based targets in 2015, and will be carbon neutral across scope 1&2 emissions next year. State Street is also using absolute reduction targets, thereby ensuring that emissions reductions go beyond the purchasing of RECs. Scope 3 emissions are incredibly difficult for the financial sector, given the amount of investments that they are involved in.

“We firmly believe that science-based targets are key in bringing together collective action across corporate institutions”

General discussion of targets and scope 1, 2, & 3 emissions

Jim: given that scope 3 emissions account for 80% of Novartis’ footprint, we can’t support businesses doing effective emissions reductions without considering scope 3 emissions impacts. The interdependencies across supply chains of different corporate institutions also would suggest that scope 3 emissions can help to lift up the environmental targets of the entire sector, beyond individual organizational commitments.

How can corporations diversify risk in renewable energy procurement?

It’s important to diversify and balance risk across corporate assets; incorporating a balanced portfolio of solar, wind, and other renewable energy sources across geographic location will be critical.
- You also need to account for the shape of an offshore wind asset to minimize risk. E.g. consistency of generation may be better than just cost. Additional considerations for the seasonality of wind depending on the time of year and time of day are also relevant to the shape/viability of an offshore wind asset.

How can we make sure that everyone can participate in the renewable energy market?

Dennis: hospitals alone contribute to 10% of US emissions! But their motto is to do no harm. The current model for renewable energy procurement is state driven. There is a serious need for clear direction and policy so that private organizations can be empowered to act and collaborate on renewable energy. This is a great time to philosophize how to promote renewable energy policy that is in pace and aligned with renewable energy development. With current technology available, batteries cannot be a long-term solution – they can only offer demand management in the immediate term, and/or a resilient energy supply lasting a maximum of 1-2 days only.
- In terms of scope 3, Partners built headquarters in Somerville to allow for remote work (very successful), not travel intensive org, EV charging, starting with big medical suppliers to make them more efficient. It’s important to not just offset, but to also lower emissions!
Dustin: there is a clear role for investors. As an investor/financial institution, State Street is always looking at risk – climate change must be seen as a material risk and have that risk managed appropriately. Since State Street is not 100% owner in any company it works with, State Street instead advocates for change through proxy votes and stewardship. Clean power will be key for achieving these climate goals, and the value to be found in renewable energy like offshore wind is bigger than risk.
Jim: the complexity of tackling scope 3 emissions can overwhelm you! Don’t let perfect become the enemy of good enough. Understand who your big spend partners are and aggregate those deals.
- “A big company no longer has to pay a premium for renewable energy. Offshore wind is a ‘cost-affordable’ approach” -Jim Goudreau

What policies are necessary to help support offshore wind market development?

Jim – RPS – the faster move towards a more aggressive Renewable Portfolio Standard, the better off we are. The longer we delay incorporating renewables into our energy portfolio, the larger the cost of adaptation will be.
Dennis – RPS. We just had the RPS standard increased – but this was countered by an immediate oversupply of RECs with the first offshore project. Within 3-4 years, the market will be oversupplied with renewable energy. The cost of RECS has decreased from $50 to $5. We need to price what isn’t being priced in market (externalities) and make sure that our RPS matches the potential capacity that offshore wind and other renewables can provide.
Dustin – State Street purchases of lot of RECS – in defense of RECs, their lower prices are attractive and can get a wider range of actors on the pathway to carbon neutrality. This will eventually sustain the REC market. Large REC costs a barrier to entry for some companies.

Thermal load and as look at OSW and big changes in elec. purchasing and thinking of electrifying etc.?

Jim – We make things. Decent thermal load globally. EE is foundation including thermal load – tough! In talks with major supplier to decarbonize NG. Won’t be able to electrify everything across global market. Pursuing electrifying. Can create virtual gas generation? Some gas companies providing offsets – questionable?
Jim: there will always be a need for offsets, as some actors will never be able to achieve fully zero carbon direct emissions. We need to ditch the emotional baggage with offsets and pursue as many natural climate solution offsets as possible (for example, you can sequester carbon organically through natural climate solutions for $30-100/ton, whereas mechanically it might cost closer to $600-700/ton).
Dennis – object to provide service to community – 40% of energy consumption is thermal and will get bigger. Need to rethink perceptions. Doing on site generation – improving efficiency 30-50%, and emissions 20-30%, take pressure from pipeline as generating onsite. We need to rethink and challenge our notions of how do we get there and what is our plan? We need to act both in our own institutional facilities, as well as put pressure on working with those in our supply chains (ex. Big medical suppliers) to reduce their emissions.
Additionality is a priority in the consideration of any RFP, across all three institutions represented on the panel

Future Opportunities for Business Engagement

New England for Offshore Wind coalition now (campaign endorsement)
Lawmaker education/lobby day – April 1 – setting net zero goals for Commonwealth
Letters of support on behalf of the business community will be hugely helpful as well

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