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The Company has been
developing the Grays Harbor Demonstration Project in Washington
state since early 2007. A full-scale offshore wind/wave
project is not proposed now in Washington because the local energy
cost is very low and offshore energy cannot compete with it
economically. But other states have much higher energy costs.
In November 2008 the Company filed applications for seven offshore
projects in six states. The criteria used to select the sites
are below.
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Offshore Wind/Wave Farm Site Selection Criteria
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The local electric power
market must be in the top quartile of electricity costs in the USA,
averaging > 15 cents/kW.
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The state must have
significant incentives and requirements for renewable power
generation.
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The local grid and load
are adequate to absorb 1000MW of power and to balance it when the
wind/wave energy drops off.
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The site must have at
least 100 square miles of area to develop.
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A suitable harbor and
construction site and clear access are available
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The inner side of the
site must be at least 10 miles offshore to maximize wave and wind
power and minimize visual impacts.
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The site must not be in a
commercial shipping navigation lane.
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The site depth must not
exceed 250 feet.
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The Company has identified
the following sites that meet these criteria:
Under the FERC system the
first applicant for a hydropower site can obtain site development
priority rights. The Company's technology solution for ocean
renewable energy is a mobile jackup platform that supports wave
energy (a kind of hydropower) and wind turbines. The Company
therefore applied for FERC preliminary permits to produce wave
energy from the sites identified.
If FERC grants one or more
of the preliminary permits the Company will have the first priority
right to apply for commercial power generation licenses for those
sites.
"Section 4(f) of the Federal
Power Act authorizes the Federal Energy Regulatory Commission to issue
preliminary permits for the purpose of enabling prospective applicants for a
hydropower license [covers wave power but not wind power] to secure the data
and perform the acts required by FPA section 9.3 which in turn sets forth
the material that must accompany an application for license. The purpose of
a preliminary permit is to preserve the right of the permit holder to have
the first priority in applying for a license for the project that is being
studied. Because a permit is issued only to allow the permit holder to
investigate the feasibility of a project while the permittee conducts
investigations and secures necessary data to determine the feasibility of
the proposed project and to prepare a license application, it grants no
land-disturbing or other property rights."
Why is Washington state
not among the proposed
sites, if the Company is doing a demonstration project there?
Because Washington's cost
of energy is too low. The wholesale cost of BPA hydropower is about 3
cents/kilowatt hour, compared to about 11 cents in the Northeast. Offshore energy is more expensive
than the regional hydropower resource and we do not believe an offshore energy
project
will be competitive with alternative sources within the next ten years unless
subsidies are available or the local cost of energy increases
substantially.
But, Grays Harbor is an ideal physical site for a demonstration project and we
believe it is a good bet that the future of energy in the state will
encourage a larger project.
What about the Mineral Management
Service?
The Federal Energy Regulatory Commission (FERC) asserts that its
jurisdiction includes wave power generation in Federal offshore
waters beginning 3 miles offshore (10 miles in Texas). In the past,
the U.S. Department of the Interior's, Mineral Management Service
(MMS) has also asserted that it has jurisdiction over all
alternative energy generation outside State waters. But as of
December 2008, MMS does not have a workable leasing process in place
for wave power generation leases. Therefore, it is not yet possible
to submit an application to MMS for offshore space dedicated to wave
energy generation. Since FERC's permitting system is already fully
operational, Grays Harbor Ocean Energy Corporation filed for permits
with FERC.
We believe the FERC process is appropriate for offshore energy
generation, particularly in light of the extensive site assessment
and feasibility studies required by FERC. However, Grays Harbor
Ocean Energy Corporation will also comply fully with MMS
requirements when they are promulgated. The Company strongly
supports and endorses the MMS program on alternative energy on the
outer continental shelf, with the exception of the competitive bid
process for offshore leases. We believe that a company's investment
in completing site assessments and feasibility studies should be
balanced with a preferred leasing arrangement to encourage
investment in renewable energy sites and technologies. MMS has made
a tremendous effort to advance this new energy industry and its
staff are working closely with other agencies to determine how to
regulate it. The Company will work with MMS and FERC to assure a
fully compliant process is followed for permitting and leasing at
the proposed sites.
UPDATE April 9, 2009:
FERC and MMS
agree to rule
changes that suspend the FERC preliminary permit system for OCS wave
power projects. The Company expects its current permit
applications to be denied. But our existing preliminary permit
in Washington state is not affected by this decision. We will
continue our business in the other sites using the new permit
system. The Company's plans for these sites are not affected
by the change in the FERC preliminary permit system. |
