Offshore Atlantic Wind Power Connection Receives Backing from Prominent Investors

Date: October 13, 2010

Google and Good Energies, a New York renewable energy/energy efficiency investment firm, have each agreed to a substantial investment in a $5 billion transmission backbone for future offshore wind farms along the Atlantic Seaboard. The venture, officially dubbed the "Atlantic Wind Connection" transmission backbone (AWC) was proposed by Trans-Elect, a Maryland-based transmission line company. It is generating quite a buzz among investors, government officials, and environmentalists in light of its potential to transform the region's energy needs.

The proposed 350-mile underwater spine would run in shallow trenches on the ocean floor from New Jersey to Virginia. The cable would be located 15 to 20 miles offshore in federal waters with the underlying intent that any future wind farms hooking into the line would not be visible from the shore. The system's backbone cable would be designed to have a capacity of 6,000 megawatts, equal to the output of five nuclear reactors.

Trans-Elect hopes to begin construction as early as 2013. Construction costs are estimated to reach $5 billion, plus permit fees and financing. The first phase, a $1.8 million 150-mile cable running from New Jersey to Delaware, could go into service as early as 2016. The remainder of the project would not go into service until 2021, at the earliest.

While generating electricity from offshore wind is more expensive than relying on coal, natural gas, or onshore wind, energy experts expect that there will be a growing demand for offshore wind in order to meet state requirements for greater reliance on local renewable energy as an alternative to fossil fuels. The AWC presents an opportunity to foster the development of offshore wind farms and, given their support of offshore wind as an attractive alternative clean energy source, it is anticipated that it will receive the backing of governors along the Atlantic Seaboard.

The AWC proposes four connection points along the east coast: southern Virginia, Delaware, southern New Jersey, and northern New Jersey. Minimizing the number of connection points would simplify the task of transmitting the energy onshore because of fewer permitting hurdles and fewer property owners from whom to obtain consent. Prior to the construction of any off-shore wind farms, though, the underwater cable would channel existing supplies of electricity from southern Virginia, where it is relatively cheap, to northern New Jersey, where it is more expensive. This would alleviate some of the demand on one of the most congested portions of the North American grid and would lower the energy costs for northern customers.

Although industry experts have hailed the proposed AWC as "audacious" and "innovative", they have warned that because it is a first of its kind endeavor, it is likely to run into bureaucratic delays and unforeseen challenges. At first glance, the hurdles appear to have more to do with administrative procedures than engineering or financial issues. One potential issue is that the federal subsidy program for wind is set to expire in 2012, well before the U.S. Department of the Interior could issue permits for the backbone. Another concern is that the PJM Interconnection, the regional electricity organization that would have to approve the project and assess its member utilities for cost, does not yet have an integrated procedure for calculating the value of the tasks that the backbone would accomplish: (1) hooking up new power generation sources; (2) reducing congestion on the grid; and (3) improving reliability.

Despite these obstacles, investors, government officials, and environmentalists remain confident in the prospect of developing the AWC. Given the strong backing that the project is receiving and with the market increasingly shifting focus to renewable and alternative energy sources, such confidence is not unfounded.