New Bedford, Mass. is preparing for the offshore wind boom. The city is home to an interconnection point to connect offshore wind power onto the New England grid. Source: The Massachusetts Clean Energy Center

➤ The Federal Energy Regulatory Commission will decide on the "foundational issue" of whether offshore wind transmission should be tied to generation.

➤ The U.S. government should play a larger role in developing offshore transmission to streamline the regulatory process, the Anbaric CEO said.

➤ The developer wants any U.S. stimulus bill to provide financial backing to support the development of offshore infrastructure.

Wakefield, Mass.-based Anbaric Development Partners LLC has proposals before the Bureau of Ocean Energy Management to create open-access transmission networks to connect offshore wind generators to onshore electric grids from New England to New York and New Jersey. The company has run into regulatory snags in its efforts to build a subsea transmission highway and is pushing back against plans under which East Coast states and the PJM Interconnection have asked that transmission infrastructure be bundled with generation projects, thus preventing an independent developer such as Anbaric from creating a standalone transmission project not tied to an individual generator. S&P Global Market Intelligence spoke with CEO and Principal Edward Krapels.

S&P Global Market Intelligence: You're at the center of a debate about offshore transmission, i.e., whether to pursue this open-access model where transmission is separate from generation, or a bundled model that ties generation and transmission. At a high level, can you make your case for the former for our readers?

Edward Krapels: It's really doing transmission the way we have always done it, right. We've never asked generators, or we've never allowed generators, to own the transmission to which they connect to the grid. The transmission has always been developed systemically, if I can put it that way. Generators have been invited to connect to the grid. Now, if we were only doing one offshore wind project for 400 MW you'd say, 'Okay go ahead and build your own [transmission].' But we're talking about 30 GW. We're talking about the largest single energy development in the United States. And there you have to plan the transmission. And you have to frankly minimize the impact of the transmission on the environment. There's not that many places you can go ashore. And if you don't plan that carefully and develop it separately, then you're going to have a mess.

And with offshore transmission, you're dealing with dozens of federal, state and local agencies and multiple jurisdictions, and even in these early stages, grid planning is already getting a bit messy. Are there any solutions that can make the process at least marginally more efficient?

First, remember what all offshore wind generation has in common. It's that it's in federal waters. So the concept of a renewable energy zone does exist. And it happens to be owned by the same jurisdiction, the federal government. So I think the federal government could take a much larger role planning the transmission system.

Are there currently enough optimal interconnection points onshore to handle this offshore wind buildup?

The short answer is people thought there were. But the more thoughtful answer is, 'Be careful where you connect.'

So, for example, so far in New England, the offshore wind generators are connecting to the most fragile parts of the New England system through the Cape, Cape Cod. That doesn't make sense; they're going to have to upgrade terrestrial transmission in New England at some point. Not for the first project or two. But at some point. And upgrading online transmission in New England is practically impossible. It's so difficult to get the towns to agree to go from one voltage level to another; people simply don't want it. So, our suggestion is go to places that can handle the power ... It's Boston, it's a place called Brayton Point in Somerset, it's a place in Connecticut called Bridgeport. We have interconnection positions in all those places. And they're very robust. So for the next few projects, we think they should go to these robust substations and we shouldn't try to force a fire hose into a garden hose, which is sort of what we're doing right now.

That is a good segue for you to talk about where the company is at with its FERC complaint against PJM alleging that the grid operator's policies deny interconnection services to companies such as Anbaric. Can you give our readers an overview of that complaint, and how and when Anbaric anticipates it will get resolved?

We started down this road about two-and-a-half, three years ago. We wanted to be able to file interconnection requests so that we could create this sort of offshore grid connection. And to our surprise, PJM said that — after initially accepting our interconnection requests and working with us for more than a year — decided that we had to have a generator, a main generator, as a partner. We said, 'Well that's the opposite of open-access transmission. Why are you doing that?' And they basically said, 'Because we can't find the wording in our tariff that allows us to do that.'

We found that odd and a strange interpretation of the tariffs. So we launched a complaint with FERC. And we asked FERC to interpret the tariffs so that we could do that, or to order PJM to change the tariffs so that this kind of open-access offshore transmission proposal could be pursued ... We expect to get a ruling from them sometime in the next three months or so.

This is the foundational issue. If FERC doesn't agree with us, then every offshore wind development will be owned by offshore wind generators. And we've never done that in the United States. I don't know why that makes any sense.

And on that issue, are you pursuing any sort of legislative proposals or lobbying any state or federal lawmakers to change that? Or really any issue that relates to offshore transmission?

We are talking to legislators more right now in the context of the stimulus bill more than any specific legislation. We don't need legislation; the Federal Power Act provides FERC with plenty of capacity to make the ruling that we're seeking. So we don't really need to ask for any legislative fix on the federal level. So we're hopeful that FERC will see it our way.

What I find really interesting is that the stimulus bills have [addressed] funding infrastructure. We are developing a proposal in which the federal government would take a lead role in developing the concept of an offshore transmission grid, and make that part of the stimulus package. We and others would be happy to provide the financing for that, if the federal government would get behind it with some forms of loan guarantees or other kinds of support that are usually required to get a new industry off the ground.