Green Oceans’ White Paper on the Economic Costs of Offshore Wind

Economic Costs:

Tax Credits and Subsidies: The U.S. government could face costs of up to $429.915 billion[1] in tax credits if current offshore wind leases are developed. These credits will primarily benefit foreign-based companies. Projects already permitted and likely to come due during the next four to five years could cost $141 billion[2].  

Government-funded grants and Infrastructure: Additional indirect costs–such as the Department of Energy’s (DOE) $65 million grant to New Jersey in 2024[3], and $389 million in infrastructure upgrades to Massachusetts and Rhode Island[4], and $100 million for wind energy technologies R&D[5] represent substantial indirect costs.

Job losses and Economic losses: Projected job gains in the offshore wind sector will be more than offset by job losses in the fishing, manufacturing, and tourism industries[6],[7],[8]. The economic analysis conducted by offshore wind companies did not consider the number of jobs lost or displaced, only potential gains[9]. Nor did the analysis assess the impact of higher electricity prices on jobs.

Higher Electricity rates: The US Department of Energy estimates that offshore wind-generated electricity will cost more than any other form (4-5 times higher than natural gas-generated electricity[10]) . Electricity rates will rise as a result, hurting residents on fixed incomes, the elderly, and working families. This becomes a regressive tax. RI and MA are already seeing their bills rise as a result of the transition to offshore wind.  High electricity rates will drive manufacturing out of the U.S., stifle economic growth, and increase socioeconomic disparity[11],[12].

Property Value Declines: Coastal property values will decrease due to visibility and environmental concerns, eroding overall consumer wealth and decreasing the tax base in coastal states and communities.[13]

Grid insufficiency and instability:

NERC warning: North American Electric Reliability Corporation (NERC) warns that more than half of North America will face dramatic electricity shortages due to increasing demand, forced generator retirements, and the addition of intermittent energy sources in the next 5-10 years[14].

Increased Demand for Natural Gas: Critical demands for natural gas, and likely shortages in regions without reliable supplies, will increase as more weather-dependent resources, such as wind and solar, are added to the grid [15].

Rising Power Outages: The U.S. has experienced a 93% increase in power outages compared to the previous five years[16]. States with the highest penetration of renewable energy have experienced the most significant increases in outages, suggesting that offshore wind projects will make New England and the mid-Atlantic region particularly vulnerable to outages, posing significant risks to public safety. [17]

Appendix A: Calculating the Cost of OSW tax credits/benefits

Cost to the U.S. Government from Subsidies for Offshore Wind Leases

Subsidies such as the Investment Tax Credit (ITC) and the Modified Accelerated Cost Recovery System (MACRS) impose significant costs on the U.S. government. Here are the costs to the government per MWh for each technology:

If all current offshore leases sold are fully developed, the U.S. would install approximately 52,687 MW of capacity. Investment cost per MW = $15.15 million/MW (based on the cost of SouthFork[19])

Total Capital Costs = $798,208 million

Investment Tax Credits (40%) = $319,283 million

Modified Accelerated Cost Recovery System (MACRS) subsidies = $110,632 million

Total Cost of U.S. tax credits and subsidies = $429.915 billion

Appendix B: Calculations for permitted projects.

RevWind = 704 MW

SouthFork Wind = 132 MW

Sunrise Wind = 924

Coastal Virginia Offshore Wind (CVOW) = 2600 MW

Vineyard Wind = 800 MW

SouthCoast Wind = 2400 MW

New Engand Wind = 2,600 MW

Atlantic Shores = 2800

Ocean Wind 1 = 1,100 MW

Empire Wind = 2,076 MW

Sunrise Wind = 924 MW

Total MW = 17,060 MW

Investment cost per MW = $15.15 million/MW (based on the cost of SouthFork[19])

Total Investment Cost = $15.15 million x 17,060 MW = $258,459 billion

ITC = $103,383.6 million (40%)

MACRS =  $37,528 million (assuming a 22% Corporate tax rate, the accelerated 100% time frame, and the 10% bonus)

Total cost to the U.S. in tax subsidies and credits for currently approved projects = $141 billion.

Given that offshore wind only generates electricity about 40-45% of the time, the actual cost is 141 billion for 59.8 TWh of electricity per year. Assuming the US consumes approximately 4,050 TWh, this represents less than 1.5% of our consumption. Not a good use of taxpayer dollars. Moreover, we will need to add the equivalent amount of dispatchable electricity in order to mitigate the risk of power outages from the intermittency. This will add to the overall cost.

[1] See Appendix A.

[2] See Appendix B.

[3] https://content.govdelivery.com/accounts/USEERE/bulletins/3aa9cf7; https://www.offshore-energy.biz/us-doe-releases-14-5m-funding-opportunity-for-rd-in-marine-and-offshore-wind-energy/; https://energycommunities.gov/funding-opportunity/offshore-wind-workforce-readiness/

[4] https://energy.ri.gov/press-releases/new-england-states-selected-receive-389-million-federal-funding-transformational

[5] https://www.energy.gov/eere/wind/wind-energy-technologies-office-budget?utm

[6] Lesser, J., “The False Economics of Offshore Wind,” 2024. https://www.cato.org/regulation/spring-2024/false-economic-promises-offshore-wind#

[7] Prevost, L., “Fishing Industry group casts doubt on offshore wind’s job creation promises,” 2020. https://energynews.us/2020/10/12/fishing-industry-group-casts-doubt-on-offshore-winds-job-creation-promises/

[8] Richards, H., Offshore wind is stumbling. Can Biden save the industry?” E&Enew by Politico, 2023. https://www.eenews.net/articles/offshore-wind-is-stumbling-can-biden-save-the-industry/.

[9] https://ripuc.ri.gov/efsb/2021_SB-01/Revolution_Wind_DR1_Statewide_Planning_Program.pdf, Guidehouse Advisory Opinion on the Economic Development benefits of the proposed Revolution Wind Project, 2021, page 18.

[10] Hanley, J., “New wind energy costs blow the doors off projections,” 2023. https://www.empirecenter.org/publications/new-wind-energy-blows-doors-off-projections/

[11] Furchtgott-Roth, D. and Pollard, M., “How the forced energy transition and reliance on China will harm America,” 2024. https://www.heritage.org/china/report/how-the-forced-energy-transition-and-reliance-china-will-harm-america

[12] https://www.cbia.com/news/issues-policies/electricity-cost-spikes-energy-policy/

[13] Bidewell, M., Armenia, M., and Knight, E., “Do offshore wind projects affect proximate property values: Block Island as a test case,” https://www.green-oceans.org/s/Property-Values-and-offshore-wind_case-study.pdf.

[14] NERC, “2024 Long term reliability assessment,” https://www.nerc.com/pa/RAPA/ra/Pages/default.aspx.

[15] Ibid, p. 15.

[16] Institute of Energy Research, “As renewable Energy increases in the power mix, power outages grow,” 2024.https://www.instituteforenergyresearch.org/renewable/as-renewable-energy-increases-in-the-generation-mix-power-outages-grow/

[17] Ibid.

[18] This estimate is based on the cost per MW of the SouthFork Wind project. This project experienced no significant delays or problems that would point to an obvious reason why subsequent projects would not have comparable costs. If anything, the cost based on SouthFork might be an underestimate, given the supply chain issues facing more current projects. McGeehan, P., “Take a Look at the First Major Offshore Wind Farm to Power U.S. Homes,” The New York Times, 2024. https://www.nytimes.com/interactive/2024/01/11/nyregion/ny-wind-farm-south-fork.html?searchResultPosition=2.

[19] McGeehan, P., “Take a Look at the First Major Offshore Wind Farm to Power U.S. Homes,” The New York Times, 2024. https://www.nytimes.com/interactive/2024/01/11/nyregion/ny-wind-farm-south-fork.html?searchResultPosition=2.