President Biden signs climate legislation bill into law

President Biden has signed a $430 billion economic and energy bill – an omnibus spending bill that seeks to address climate change, inflation and Medicare costs while allocating billions to cut carbon emissions and incenting clean energy production and development.

In a big victory for the Biden Administration, The Inflation Reduction Act of 2022 quickly gathered momentum in Congress in late July after Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) – two holdouts that opposed Biden’s original climate bill – agreed to lend their support.

The legislation – which aims to cut emissions 40% by 2030 – contains $369 billion in climate and energy provisions, devoting nearly $280 billion to clean energy tax incentives.

Generally speaking, renewables in the US are facing pressure from rising supply chain costs, global supply chain disruptions and spiking commodity costs. The IRA will stimulate green technologies and ramp up domestic supply chains, creating favorable conditions for US offshore wind.

The act extends and expands several new clean energy tax credits, such as the Investment Tax Credit (ITC), Production Tax Credit (PTC) and Advanced Manufacturing Production Credit. Such long-term extensions are crucial for developers and suppliers to plan future projects without the fear of tax incentives expiring.

Perhaps the most impactful measure for offshore wind is an extension of an existing ITC, which was set to expire in 2025. The bill allows for the 30% ITC available to projects placed in service after 2024. Notably, the ITC and PTC would phase out when emission reductions meet target levels of 25% of 2022 levels or after 2032, whichever is later.

“The Inflation Reduction Act provides certainty for clean energy as this legislation breaks the ‘on-again off-again’ policy cycle,” notes Doug Pfeister, Managing Director of The Renewables Consulting Group, an ERM Group company. “This game-changing legislation will set-up US offshore wind for years to come and go a long way in helping President Biden achieve his stated target of 30 GW of US offshore wind by 2030.”

A long-term extension should also help to alleviate wind developer concerns about the rising cost of raw materials. Projects meeting certain domestic content requirements are eligible for a bonus credit. The act supplements the offshore wind supply chain with a broad array of supportive tax measures, such as extra deductions for US-made content like offshore wind shipbuilding but also for production costs of critical minerals, nacelles, tower foundations, inverters, batteries, and other components in the offshore wind supply chain.

The Act also opens up wide swaths of seabed available for future leasing opportunities. For starters, the IRA will resume offshore wind leasing off the southeast seaboard, reversing a 2020 executive order issued under President Trump. The IRA also directs the Bureau of Ocean Energy Management to issue Calls for Information before September 2025 for offshore wind areas within the exclusive economic zone adjacent to US Territories such as Puerto Rico, Guam, American Samoa, the US Virgin Islands and the Northern Mariana Islands.

For the first time, the act includes significant new incentives for clean hydrogen production, such as a Clean Hydrogen PTC/ITC. The bill provides a separate credit stream for integrated hydrogen projects and is available during the first 10 years of facility operation provided projects begin construction before 2033.

Tokyo, Japan – The Renewables Consulting Group, an ERM Group company, has appointed offshore wind energy specialist Yoshinori Okahara as a Director in the firm’s Tokyo office.

The appointment will help support the firm’s in-country efforts as the Japanese offshore wind market is currently a hotbed of activity with offshore wind auctions being launched and projects and alliances moving forward. For example, Japan’s Ministry of Economy, Trade and Industry recently announced four offshore wind promising areas – and up to 10 potential areas that require further study – as part of the country’s carbon neutrality plan. Japan aims to build 10 GW of installed capacity by 2030 and 30 GW to 45 GW by 2040.

Okahara will play a central role in supporting RCG’s growth in Japan and internationally as well as developing new revenue opportunities for RCG within Japan and the wider Asia Pacific region. He is also expected to provide leadership with the emerging requirement for owner’s engineering and other renewable project life cycle services.

He has more than 30 years’ experience in civil engineering construction sector with project management, construction management, design, schedule control, risk management, and trouble-shooting roles for both international and Japan domestic projects. Before RCG, Okahara served as acting general manager at Taisei Corporation, where he oversaw the company’s offshore wind program among other duties.

Commenting on the appointment, Gareth Lewis, managing director for the Asia Pacific (APAC) region, said:

“He is joining RCG at an opportune moment as Japan’s offshore developers will be preparing for auctions, securing consents and designing and procuring equipment. With Okahara-san’s extensive offshore experience in other sectors, he brings a wealth of relevant knowledge to the offshore wind sector.” Gareth Lewis – Managing Director, APAC

RCG’s continued growth means the firm can deploy experienced local teams on any renewable energy engagement, backed up by a team of international experts, to deliver high-value market intelligence, management consulting and technical advisory services on any renewable energy assignment in the Asia-Pacific region.

Tokyo, Japan – The Renewables Consulting Group, an ERM Group company, has appointed offshore wind energy specialist Yoshinori Okahara as a Director in the firm’s Tokyo office.

Commenting on the appointment, Gareth Lewis, managing director for the Asia Pacific (APAC) region, said:

Deb Haaland, US Department of the Interior Secretary, announced in October that the Bureau of Ocean Energy Management (BOEM) would hold up to seven new offshore lease sales by 2025 as part of the Biden-Harris administration’s goal to deploy 30 GW of offshore wind energy by 2030.

Many of the locations, such as the New York Bight and the Carolinas, were expected by developers and industry-watchers. However, it was the inclusion of the Central Atlantic – specifically the far-reaching area that BOEM has allocated for further study – that took some by surprise.

The Central Atlantic Initial Planning Area (IPA) – a wide swath of seabed 20 miles offshore stretching from Dewey Beach, Delaware and to Cape Hatteras, NC – is in many respects a work in progress as much still needs to be studied in the area.

Exhibit : The Central Atlantic Initial Planning Area (Source: The Renewables Consulting Group)

Based on the map’s boundaries, The Renewables Consulting Group (RCG) estimates the Central Atlantic IPA at just short of 20,000 square miles (52,000 km²). To put that massive number into some context, the zone is nearly six times larger than the total area of all offshore wind leases executed in the United States to date (3,374 square miles; 8,700 km²).

It is not yet known the number of lease sales the Central Atlantic IPA will yield. In general, BOEM follows a five-step procedure before reaching a lease auction. The Central Atlantic IPA is at the first step: planning and analysis. Here a Renewable Energy Task Force is established to coordinate among federal, state, local, and tribal governments around the leasing process and share information about the advantages and disadvantages of potential offshore wind areas. The industry observes and makes contributions to the Task Force and thereby stays abreast of developments. As BOEM works through this initial stage, the agency is meeting with stakeholders and next month plans to hold meetings with fisheries management councils and representatives from recreational fishing organizations. The next meeting of the Central Atlantic Task Force is expected in February 2022.

At-A-Glance: Central Atlantic Initial Planning Area

The origin of the Central Atlantic IPA dates back to April 2020 when the Virginia Clean Economy Act was passed into law creating Virginia’s 100 percent clean energy by 2050 Clean Energy Standard. Governor Ralph Northam, D-Va., then wrote to BOEM requesting the formation of a renewable energy regional task force that could lead to a lease sale. BOEM agreed and created a Central Atlantic Intergovernmental Renewable Energy Task Force encompassing the area defined above. The first Task Force meeting took place in February earlier this year.

Clearly, Virginia – along with other southeastern and mid-Atlantic states – is banking on offshore wind to help meet its economic and environmental objectives. In October 2020, Northam announced a three-state collaboration with Maryland and North Carolina to advance offshore wind projects in the region and promote the area as a hub for offshore wind:

“Harnessing the power of offshore wind is key to meeting the urgency of the climate crisis and achieving 100 percent clean energy by 2050,” said Gov. Northam. “Virginia is well-positioned to scale up offshore wind development with a 12-megawatt wind demonstration project already built off our coast. This agreement will help unlock our collective offshore wind resources and generate tremendous economic and environmental benefits for the region. We look forward to working with our partners in Maryland and North Carolina to grow the offshore wind industry and secure a cleaner, healthier, and more resilient future.”
As there is still much to be determined, one thing is clear: the US East Coast has yet another promising area to further develop offshore wind energy.

Doug Pfeister, Managing Director of RCG in the Americas, says, “Identifying the Central Atlantic IPA is yet another example of the Biden-Harris Administration’s unprecedented commitment to offshore wind. Though it is early in the process, the Central Atlantic presents many opportunities for this multistate effort as well as the federal government to reach all of their renewable energy and climate change goals.”

Japan’s METI (Ministry of Economy, Trade and Industry) has named four offshore wind “promising areas” – in addition to the existing three offshore wind promising areas – as the country begins to lay out detailed plans to meet its carbon neutrality targets of 10 GW of installed capacity by 2030 and 30 GW – 45 GW by 2040. Additionally, it named 10 potential areas that have progressed to certain “preparatory stages” which require further study.

The status of designation of promotion areas to date is as follows

Promotion areas for Round 1

Goto-city, Nagasaki prefecture
Noshiro-city, Mitane-town and Oga-city, Akita prefecture
Yurihonjo-city, Akita prefecture
Choshi, Chiba prefecture

Promotion areas for Round 2

Happou-town and Noshiro-city, Akita prefecture

Following a two-month period of consultation and data gathering with the prefectures, METI named the following promising areas and potential areas:

7 Promising areas

The Renewables Consulting Group (RCG) considers the following three areas as candidates for Round 2 promotion areas, in addition to Happou-town and Noshito-city. Aomori in Japan Sea (South) and Saikai-city are currently under discussion at the council (Kyogikai), but the council has not yet been formed for Japan Sea (North).

Offshore Aomori in Japan Sea (North), Aomori prefecture
Offshore Aomori in Japan Sea (South). Aomori prefecture
Saikai-city, Nagasaki prefecture

The following areas were newly added. RCG considers the following four areas as candidates for Round 3.

Oga-city, Katagami-city and Akita-city, Akita prefecture
Yuza-town, Yamagata prefecture
Murakami-city and Tainai-city, Niigata prefecture
Isumi-city, Chiba prefecture

10 potential Areas that have progressed to the “certain preparatory stages”

Ishikari-city, Hokkaido
Ganwu and Minami Shiribeshi, Hokkaido
Shimamaki, Hokkaido
Hiyama, Hokkaido
Matsumae, Hokkaido
Mutsu Bay, Aomori prefecture
Kuji-city, Iwate prefecture
Awara-city, Fukui prefecture
Hibikinada, Fukuoka prefecture
Karatsu-city, Saga prefecture
(NOTE: Ishikari-city, Shimamaki, Matsumae, Kuji-city, Awara-city, Hibikinada and Karatsu-city were newly added.)

If you would like to know more about this announcement or more information about how RCG could assist you in the Japanese offshore wind farm market generally, please contact one of our team in Tokyo.