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N.C. ramps up for wind energy

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Hurricane Earl's arms wrapped the Raleigh skyline in high, gauzy clouds as the storm curled toward the North Carolina coast last Thursday. That same morning, a news alert popped up on a mobile phone announcing that yet another oil rig had exploded in the Gulf of Mexico, albeit a less destructive blast than Deepwater Horizon.

Coincidentally, both of these events occurred during a meeting of the Governor's Scientific Advisory Panel on Offshore Energy and underscored the point of the gathering: North Carolina needs to find another source of energy that, at the very least, can significantly supplement fossil fuels—and, in the case of offshore wind—possibly overtake it.

"Wind is the next big energy supply," said Tim Toben, chairman of the N.C. Energy Policy Council.

Since last summer, when UNC released a study that showed the enormous potential for offshore wind energy in North Carolina, scientists, energy companies and utilities have flocked to the coast to determine how to harness the wind.

But as they have discovered, the investment in this clean energy source would be substantial, yet the payoff would not be immediate.

It could take at least 10 years before the first kilowatt is generated and the underwater transmission cabling built to the onshore grid. Like the coal, oil and nuclear industries, wind energy is subject to environmental regulations (although, arguably, the fossil fuel and nuke industries have consistently skirted many of those laws). Wind energy developers would have to secure financing, and the state Legislature would need to pass laws to financially boost the offshore wind industry, which is nascent in the U.S. and has few economic incentives and virtually no infrastructure.

(In the U.S., wind farms are on land, primarily in Texas, the Great Plains and Midwest.)

Yet given the push for more rigorous state renewable energy standards, and the possibility of a federal counterpart, investors, utilities and policymakers are serious about wind.

"The time does seem right for a larger-scale wind installation to be developed in offshore waters," said Doug Rader, chief oceans scientist with the Environmental Defense Fund. "If wind is to be a key element in North Carolina's long-term energy portfolio, it's time to develop the first offshore wind farm."

The results of UNC's initial wind study were stunning: Even after excluding areas that had military, environmental and fishing concerns, there are 55,000 megawatts of offshore wind capacity, the most on the Eastern Seaboard and enough to meet 130 percent of North Carolina's energy demand.

While the state wouldn't shift all of its energy portfolio to wind, the preliminary data was promising enough that UNC, with $300,000 in federal stimulus money, and Progress Energy, which provided matching funds, are conducting a second study to further analyze wind potential.

UNC Marine Sciences Professor Harvey Seim worked on the initial study and is also involved in its follow-up. Over the next two years, he says, scientists plan to mount remote sensors on Navy-owned platforms near the northern Outer Banks. (The Navy is decommissioning the platforms.) Combined with buoys equipped with anemometers, these sensors will deliver real-time data showing the wind's seasonal cycles and its velocity at turbine height. With this data, which will be public, wind developers, as well as utilities, mariners and meteorologists, could know exactly how much wind exists, at what altitudes and when it's most prolific.

This information is vital for wind developers. A miscalculation could be expensive.

"Its big money to put up one of these wind farms—billions," Seim says. "And the return is over such a long period of time."

"Just having a large amount of wind is not enough," says N.C. State Associate Professor Sukanta Basu. He and his colleague, Assistant Professor Anantha Aiyyer, are also studying the potential for offshore wind energy. They plan to unveil a public database of wind data that would be particularly suitable for smaller wind operations.

In hurricanes, such as Earl, turbines temporarily shut down, disrupting power to the grid. While foundations and towers are built to withstand extreme wind, Aiyyer said, shear and turbulence can shorten turbines' lifespans.

That's why wind developers are hungry for precise, accurate data. Apex Energy, which is headquartered in Charlottesville, Va., has worked on 40 wind projects in the U.S., all of them inland. The company, in concert with its subsidiary, Outer Banks Ocean Energy, recently made the first application for a North Carolina commercial wind project to the Bureau of Ocean Energy, Management, Regulation and Enforcement (formerly the Minerals Management Service).

Apex hopes to develop 24 lease blocks—equivalent to 214square miles—off Onslow Bay. The $3 billion project would be sited 20 miles offshore in federal waters that fall within state boundaries. This area is ideal because if constructed, the wind farm would likely connect to the electrical grid in Morehead City. The project would have to adhere to federal and state environmental regulations and would need approval from the N.C. Utilities Commission.

UNC Marine Sciences Professor John Bane, a principal with OBCE (he did not participate in the UNC wind studies because it would have been a conflict of interest), told the scientific advisory panel that the wind farm, which could be completed as early as 2018, could generate enough energy to power up to 350,000 homes in the state.

This potential has also attracted a former oil and gas man, Brian O'Hara, who founded Outer Banks Wind in 2009. "I see the long-term opportunity for a state like North Carolina. The future and growth in energy is going to be in renewables," he said. "That's the direction we ought to be going."

Like Apex Energy, his company is looking at areas in Onslow Bay, although it has not pinpointed a lease block.

"I think the possibilities are huge," O'Hara said. "If the state can get the right policies in place, there are huge economic development opportunities."

While North Carolina has the most wind resources in the East, it lags behind other states in terms of incentives to wind developers. Toben said North Carolina could look north to New Jersey, which is grooming its economic conditions for wind energy. "My hope is to see if it is economically feasible to promote significant offshore wind development on the same magnitude as New Jersey," Toben said.

There, the Legislature recently passed a bill requiring utilities to buy at least 1,100 megawatts of offshore wind energy from developers. (Progress Energy's Shearon Harris nuclear plant in Wake County generates about 900 megawatts.) The purchase goes toward the utilities' renewable energy requirements. The state has also offered up to $100 million in tax credits for wind energy facilities, which, with the required wind purchases, guarantees a revenue stream for the wind developer.

These incentives help defray the costs of wind projects, which include not only construction of the wind farms but the underwater cabling from the sea to the shore. Since the lines can't cross the beach, workers would drill horizontally beneath it to get the lines to an onshore substation.

On the upside, unlike coal, natural gas and nuclear energy, wind is nearly free—and the fuel cost is fixed for 20 to 25 years. But to surmount the financing hurdle, O'Hara said, developers need the state, most likely, the Legislature, "to create a steady and stable demand for the market. Financial viability depends on the certainty of the revenue."

If North Carolina took a similar tack as New Jersey, Progress and Duke would be required to purchase a portion of their energy sources from wind developers.

"My sense is both the utilities are being open-minded at looking at this opportunity," O'Hara said.

Progress Energy has a competitive advantage on the coast because it is the primary service provider and owns most of the transmission lines and substations in the eastern part of North Carolina. (Dominion Power has some territory in the northeast corner of the state.) Wind developers would tie in to the Progress-owned grid, although Progress would not be required to buy that energy. In that case, the utility would levy a "wheeling charge" on the developer to pass the power to another provider, such as Duke Energy, which is the dominant utility from Durham westward.

Sam Waters, Progress Energy's director of system planning and regulatory performance, told the scientific advisory panel that Progress would likely have to upgrade its grid, including new substations. The cost of those enhancements and other data will be released Sept. 21 at a meeting of the N.C. Transmission Planning Collaborative in Raleigh.

Waters said Progress' primary concern is the reliability of wind energy—keeping the lights on when the wind doesn't blow or blows too hard. "We can get past this," he said, "but it has to be dealt with."

In North Carolina, utilities are interested because Senate Bill 3 requires them to ramp up the amount of energy efficiency or renewable energy they save or purchase—12.5 percent by 2020, modest goals when compared with Colorado, which has set a benchmark of 30 percent.

Congress is also weighing a federal renewable portfolio standard, which could boost the demand for renewable energy. "We wouldn't buy wind at this point," Waters said. "But if [there's a] federal portfolio standard, we'd have to think about it."

Toben said the N.C. Energy Policy Council has contracted with La Capra Associates to analyze the economics of wind energy. La Capra is the consulting group that prepared an analysis of renewable energy resources before Senate Bill 3 was crafted.

Last session, the Legislature passed a manufacturers' tax credit for wind. That is a crucial piece of the puzzle, because turbines, due to their enormity, should be manufactured near the places they'll be used. Turbines are too large to be efficiently transported by rail or truck, and building and shipping them offshore, for example, from Morehead City or Wilmington, could also boost the coastal economy.

"We've been known as the graveyard of the Atlantic," Toben said, referring to the gusty winds that have sunk many ships off the coast. "What has been a very difficult condition for centuries is an immense opportunity for offshore wind."

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