California Offshore Wind Strategy Goes Into Focus

California currently deploys nearly 35 GW of renewable energy, but projects that another 148 GW of renewable energy will be needed to meet the state’s overarching clean energy goals for 2045. To fill this gap, California expects offshore wind to make a significant contribution and is systematically charting a path to bring offshore wind to market.

California Public Utilities Commission Proposed Regulation

The California Public Utilities Commission (“CPUC”) is authorized to mandate resource purchases by electric utilities, electric service providers, and community choice aggregators as part of its Integrated Resource Planning (“IRP”) process. Under Assembly Bill 1373 (“AB 1373”) enacted in 2023, the CPUC may also identify purchasing needs for long-lead resources through a central planning process. Through this process, the CPUC may request that the California Department of Water Resources (“DWR”) purchase long-lead resources on behalf of entities included in the CPUC’s IRP. AB 1373 also required the CPUC to make an initial “needs determination” for purchasing using a centralized purchasing mechanism. See our previous blog post for an overview of the AB 1373 process.

In the latest major step toward creating a path for California offshore wind, a proposed decision released by the CPUC on July 19, 2024 promises to begin the state’s lengthy procurement process and facilitate up to 7.6 GW of offshore wind energy. The proposed decision includes an initial determination of needs and recommends at least three rounds of offshore wind procurement, beginning in 2027. If the CPUC adopts the proposed decision, up to 7.6 GW of offshore wind energy could be procured for California retail customers and load-serving entities. It should be noted that the proposed decision is not yet final, but could be adopted as early as the August 22, 2024 CPUC meeting.

In its proposed decision, the CPUC indicated its desire to signal its “strong interest in developing the (offshore wind) resource and investing upfront to achieve the economies of scale that will be necessary to realize the full benefits…” The CPUC further argued that the 7.6 GW procurement level balances the state’s needs with the maximum available lease area for developing offshore wind projects.

Paving the Path for Offshore Wind Development in California

The determination of needs in the CPUC’s proposed decision is the latest in a series of milestones in California regulators’ efforts to strengthen the state’s nascent offshore wind sector. See our previous blog post for an overview of earlier steps in the process. At its July 10, 2024 meeting, the California Energy Commission (“CEC”) adopted and published its Final Commission Report on the California Offshore Wind Strategic Plan (“Final Report”), pursuant to the guidance of Assembly Bill 525 (“AB 525”). The CEC issued its Final Report in three volumes: Volume I as an overview, Volume II as the main report, and Volume III as technical supplements. These three volumes will guide the development of offshore wind in California, outlining opportunities and barriers to offshore wind in federal waters off the state’s coast. The final report, in conjunction with the CPUC’s procurement authority described in the proposed decision, will serve as a blueprint for offshore wind in California.

The final CEC report details the numerous opportunities and obstacles to California achieving its offshore wind goals of 2-5 GW by 2030 and 25 GW by 2045, identifying necessary investments in transmission, port infrastructure upgrades, energy options, workforce development needs, expected benefits of development, mitigation strategies, and proactive stakeholder engagement processes.

Investments in transmission infrastructure

Prior to the CEC’s final report, California strengthened its transmission planning processes through a December 2022 memorandum of understanding between the California Independent System Operation (“CAISO”), the CPUC, and the CEC. Additionally, on May 23, 2024, CAISO approved the 2023–2024 Transmission Plan, which included approximately $4.6 billion in new transmission projects necessary to accommodate offshore wind development on the North Coast.

Assessments in the final report indicate that multiple phases of significant investments in transmission, interconnection and distribution infrastructure are required to accommodate the planned offshore wind development. Given the relatively small local loads on the north coast and the lack of connections to major existing transmission paths, the final report reviews studies that consider five offshore wind farm areas off the coast of northern California and southern Oregon and various potential transmission scenarios ranging from 7.2 to 25.8 GW.

In general, the CEC plans for interregional transmission using onshore transmission, submarine transmission, high-voltage alternating current, and direct current options. The final report also predicts that emerging technologies such as dynamic cables, floating substations, and direct current circuit breakers will become more commercially viable as development progresses. However, the final report predicts the need for network or backbone transmission systems to effectively connect all of the proposed developments while minimizing environmental impact. Going forward, the CEC, CPUC, and CAISO intend to continue to conduct transmission corridor assessments, explore competitive transmission bids, implement interconnection process improvements, and streamline the issuance of transmission development permits by eliminating duplicate environmental determinations and reviews.

The importance of ports

Since no single port can handle all of California’s offshore wind needs, the CEC is advancing a coordinated multi-port strategy, using 16 large and 10 small ports over the next decade. The final report indicates a need for three to five 80-acre berths and integration sites, 12 production and fabrication sites, and nine to 16 operations and maintenance berths. However, the CEC believes that California must prioritize the development of berths and integration sites, as well as operations and maintenance sites – over production and fabrication sites – because some components may need to be imported.

According to the final report, the ports of Humboldt, Long Beach and Los Angeles will be the most suitable locations for preparation and integration, and Humboldt and Long Beach are actively working to meet the urgent needs of the industry. A total of $11 billion to $12 billion in port infrastructure modernization investments are needed to meet the state’s 2045 goals.

Developing the Workforce

Workforce development will require partnerships between industry, training institutions, government entities and the community, the final report explains. The final report also notes that the skilled workforce needed to meet California’s offshore wind energy needs will require six major job categories: technicians and craftsmen, construction and assembly workers, marine and port workers, engineers, management staff, and administrative and clerical workers. Safety is a top priority across all job and skill categories. Short-term workforce development will focus on trade, technical and construction skills. Long-term development will focus more on a robust supply chain and manufacturing workforce. Throughout the workforce development process, CEC plans to support underserved or potentially impacted communities in a number of ways.

Economic and social benefits

The final report projects numerous short-term and long-term economic benefits from a growing offshore wind industry in California. CEC estimates that by 2045, offshore wind will generate more than $5 billion in gross state-level projects, with an additional $1.2 billion in labor income and $385 million in fiscal revenue. If California adopts policies to adequately incentivize increased supply chain capacity in the state, CEC believes these projections could increase by 20 percent.

The final report estimates that the Port of Humboldt will gain 500 annual short-term jobs by 2030 and 14,000 annual long-term jobs by 2045 through necessary investments in port infrastructure and workforce development. In addition, based on 1 GW of planned development in Morro Bay, CEC estimates 13,000 full-time equivalent jobs, $1.09 billion in profits, $3.23 billion in economic output, and $1.57 billion in gross domestic product. If development increases to 10 GW in Morro Bay, CEC projects more than 169,000 jobs and $45 billion in economic benefits.

Mitigating the effects

California will implement comprehensive monitoring plans and adaptive management strategies to ensure the protection of marine resources during development. The final report proposes a number of specific strategies to protect marine resources, including site surveys, identification of threatened resources, habitat restoration, compensatory funds for mitigation, monitoring of construction areas, the use of shields on submarine cables, anchoring in conjunction with the best available mooring systems, and establishing a robust baseline date to inform scientific monitoring of potential environmental changes during development.

Proactive stakeholder engagement

The Final Report explains that additional controls will be implemented to protect tribes, fishing communities, and national defense stakeholders. For tribes, CEC plans to facilitate meaningful consultation with tribal representatives. For fishing communities, the Condition 7c California Offshore Wind and Fisheries Working Group is working to develop strategies to avoid or minimize impacts. As required by California Senate Bill 286, the Working Group will adopt specific strategies by May 1, 2026, that will outline plans for communicating with fishing communities in areas potentially affected by development, maximize continued access by fishermen to productive fishing areas, develop a template for a community benefit agreement for fishermen, and consider options for compensating fishermen for economic losses. For national defense stakeholders, mitigation strategies will focus on avoiding conflicts. This will be accomplished, according to the Final Report, through coordinated communication plans among state agencies, the Office of the Secretary of Defense for Sites, the Office of Ocean Energy Management, and developers.

The way forward

In summary, the pending CPUC Finding and the final CEC report provide a better understanding of California’s offshore wind strategy, but California will need to continue these efforts to ensure that the key components of the offshore wind industry can work together to advance the state’s clean energy goals.

*Bracewell contributor Max Galatas provided invaluable assistance in writing this blog.