Permitting overhaul will keep the US offshore wind industry afloat

It is well-known that the US has a permitting problem -- and that complex energy infrastructure projects like offshore wind bear the brunt of the delays, cost overruns and commercial uncertainty that an inefficient permitting process causes. The Renewable Energy Modernization Rule, or Mod Rule, recently published by the Bureau of Ocean Energy Management, is the first major attempt to reform offshore wind regulations in the US since they were first put into place in 2009.

Back in 2009, the industry's regulations were largely based on BOEM's experience with the nation's other major offshore energy industry -- oil and gas. The changes proposed in the Mod Rule are thus about conforming those original regulations to how the offshore wind industry actually works now that the government has 15 years of experience under its belt.

The Mod Rule is intended to bolster the offshore wind industry by streamlining permitting, reducing administrative burden and providing greater regulatory certainty to developers. This is a timely reform that comes against the backdrop of an industry that has experienced significant recent struggles -- including rising prices, canceled contracts and project delays.

Any improvement to the permitting and development process that puts downward pressure on costs -- and/or speeds things up -- will be a welcome update to both industry stakeholders and the states looking to procure offshore wind power to meet their clean energy goals.

S&P Global Commodity Insights has analyzed the Mod Rule and evaluated its potential benefits. In the full report, The Implications and Opportunities of the Renewable Energy Modernization Rule, Commodity Insights analysts describe the layer cake of federal, state and local laws that is the US offshore wind permitting process and break down the roles of various federal regulatory agencies which will implement the proposed reforms. Some of the key provisions in the rule include longer leases, revised financial assurance requirements, guidance on shared transmission, and greater flexibility on reporting requirements and data collection.

Looking at BOEM's Regulatory Impact Analysis and reassessing the rule's economic impacts using Commodity Insights analysts' own views of the sector's costs and future levels of investment, we find that the new financing rules for decommissioning accounts, the elimination of site assessment plans for meteorological buoy deployment and reducing the requirements for geotechnical data submission could lead to industry cost savings of $1.6 billion over the next 20 years.

By applying our own outlooks for project capital expenditures and annual capacity additions, our estimate is more than 20% higher than the cost savings reported by BOEM.

Beyond the financial impacts of the Mod Rule, we also identify hard-to-quantify elements that are likely to be broadly beneficial to the industry and support more efficient project development. These include increased flexibility for report submittals, a restructured leasing process and better coordination with state and local governments around transmission planning.

Overall, we find that the Mod Rule achieves its aim to create a more streamlined permitting process, improve project economics, and create a more supportive environment for the US offshore wind industry.

The new regulations take effect on July 14, 60 days after their publication in the Federal Register, but there is more to be done. The rule leaves some potential benefits on the table, such as providing greater certainty around permitting timelines and leasing schedules.

Ultimately, the offshore wind industry will need all these regulatory improvements and more if it is to achieve the scale and impact envisioned by policymakers.