Funding and Revenue Aspects of Offshore Wind Energy in Maryland

In this episode, Maryland state Delegate Lorig Charkoudian, author and primary sponsor of the state’s newly passed Promoting Offshore Wind Energy Resources (POWER) Act, shares about the exciting policy innovations embedded in the ambitious bill and what they have the chance to accomplish.

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David Roberts

Maryland was one of the first states in the US to see the potential of offshore wind energy. It passed its first offshore wind bill in 2013, and another supportive bill in 2019, but a few weeks ago, the Maryland General Assembly passed, and newly elected Democratic Governor Wes Moore signed, a bill that dwarfs both of those predecessors.

Whereas the state’s previous target was 2.5 gigawatts of offshore wind energy, the Promoting Offshore Wind Energy Resources (POWER) Act targets 8.5 gigawatts.

But that is just the headline. Underneath that target are clever new policy innovations that promise to make the funding and development of offshore wind energy more politically resilient and economically just for the long term, and to bring thousands of offshore-wind supply-chain jobs to the state. And the whole process is going to be turbocharged by the tax credits in the Inflation Reduction Act.

I love me some clever policy innovations, so I was eager to talk to the bill’s author and primary sponsor, Delegate Lorig Charkoudian, about who will pay for the new offshore wind, the transmission backbone that can help accelerate development, and the high-paying union jobs that will be created by the industry.

All right, then, without further ado, delegate Lorig Charkoudian. Welcome to Volts. Thank you so much for coming.

Lorig Charkoudian

Thanks for inviting me. It's a thrill to be here.

David Roberts

I love a good policy talk. I love a good policy.

Lorig Charkoudian

Me too.

David Roberts

And this Maryland bill is a delight, so I'm excited to get into it. The first thing to say is promoting offshore wind energy resources where you get "power" as an acronym. Just well done, good acronym work. I don't know who on your staff is responsible for that, but I love a good acronym.

Lorig Charkoudian

And I have to say the advocates always give me a hard time because I write brilliant policy and then I have terrible names. So on this one, Jamie from Chesapeake Climate Action Network came up with a name, and they were key on getting the bill passed too.

David Roberts

Awesome.

Lorig Charkoudian

That worked out well.

David Roberts

The Power Act. So before we jump into this, this is a bill about offshore wind in Maryland. Just to set everybody's expectations. Before we jump in, though, I want to back up a little bit and talk about offshore wind in Maryland. My understanding is that Maryland passed its first offshore wind bill in 2013, and then there was another bill in 2019. And yet, as far as I'm aware, there is no operating offshore wind off the coast of Maryland. Why is that? What's gone on in the history of this industry in this state that there's kind of so much hype and so little actual wind turbines?

Lorig Charkoudian

Yeah, well, it's a real challenge and it's kind of the story of renewable energy the challenges of renewable energy and offshore wind in a lot of places. So we were first out of the gate in 2013, one of the first on the East Coast, and then we had a couple of things happen. And so first we had the — Ocean City fought really hard against having the wind actually built. The Hogan administration really pandered to the Ocean City opposition. And so there were a bunch of sort of slow walking things that happened at the Public Service Commission.

David Roberts

You got nimbied.

Lorig Charkoudian

Yes. So you've heard that before. So we had that going on. And then that ran into the Trump administration and all the things that were going on at the federal level and BOEM and slowing things down from that perspective. And then all of that ran into the buzzsaw of PJM and the interconnection queues and slowing everything down from that end. And then we hit the pandemic and supply chains.

David Roberts

Well, you really hit the perfect storm of all the things wrong with renewable.

Lorig Charkoudian

Energy, everything that could go wrong. But I'm happy to say that those projects are really back on track now, so we expect to see them in the next couple of years. And a lot of things that we have in this bill set us up so that the various delays, transmission in particular, PJM, interconnections, that those don't become the barriers going forward. Got it as disheartening as that has been, all that's going forward now, and we learned from the last ten years and set ourselves up for success on this bill.

David Roberts

Right, so there's construction underway offshore, or what stage are the current projects at?

Lorig Charkoudian

Well, yes, some construction. And the really exciting thing just when we keep in mind that offshore wind is not only a really important renewable energy resource, but it's also a really important economic driver and a manufacturing on the manufacturing side, Tradepoint Atlantic, which is where Bethlehem Steel was for years and years and years. And the closure of that just really decimated the community and the economy. So in that same place now, Sparrows Point Steel, US Wind has a factory they're building, Ørsted just broke ground on a factory they're building. And so we can see it sort of starting, things starting to happen actually in the ocean.

But we're also seeing the beginnings of manufacturing coming back. And really importantly, those are union manufacturing jobs. And when we get to talking about the policies, getting the labor policies right within the legislation is key, but we're starting to see those jobs coming back. And so there are things happening on the ground and in the ocean now.

David Roberts

All right, we're going to get back to that union stuff for sure. But first I want to sort of set the stage for the innovation in your bill by talking about the previous offshore wind bill. So the Clean Energy Jobs Act of 2019 was generally, I think, great, overall a positive, but it created some conflict between clean energy proponents and ratepayer advocates. And the reason for this is that the bill basically paid for the new offshore wind with what are called ORECs. I'm sure that sounds completely obscure to 99% of the listeners. So maybe explain what is an OREC and why did that mechanism lead to that conflict?

Lorig Charkoudian

I actually want to put it in a little bit of context because I do think it's important whenever we're talking about subsidies, which we're going to talk about now for a little bit, an offshore wind. Whenever we're talking about subsidies for renewables, I think it's important to remind everyone that we have been subsidizing and continue to subsidize fossil fuels for over 100 years. And that's really important. And the other really important thing to highlight about it is that those subsidies for fossil fuels are in all different kinds of things, right? So there's direct subsidies, there's subsidies in terms of tax credits, there's subsidies in terms of indemnification, there's subsidies in terms of lower than market rates, access to federal lands for drilling and it's like hidden in all these little places and —

David Roberts

Permitting much easier to build a pipeline than a transmission line.

Lorig Charkoudian

That's exactly right. And that doesn't even start to talk about the externalities right, like all the costs of climate change and pollution and health and all those kinds of things. So that's just a really important context. And I know probably most of your listeners know that and kind of come in understanding that. But I do think every time we open up a conversation about the subsidies that are needed for emerging technologies to reach the point that they're competitive, I think it's really important to put that in context and to take an opportunity to say we need to end those fossil fuel subsidies last week.

David Roberts

Can't say it often enough.

Lorig Charkoudian

Now that I've said that I'm happy to talk to you about ORECs. So then the question becomes when we do need to find places to subsidize to close this gap, to basically internalize the value of the social cost of carbon that we're not emitting, right? Like however you want to think about that, when we need to find a place to put that, that is kind of the next conversation. And I think what we've seen in state policy, and I kind of think this is unfortunate and what I'm hoping my bill does is not just solve this problem in Maryland, but really start a different kind of conversation in other states.

What we've seen in a lot of state policies is that RECs the renewable energy credits is a primary driver of how we do renewable energy subsidies. And the renewable energy credits are generally required from our utilities and they are purchased. And those purchases of those RECs, whether they're solar RECs or general tier one RECs in our case, which is the land based wind and whatever else is in the mix.

David Roberts

Is that what O-RECs means what is the O in ORECS?

Lorig Charkoudian

O-RECs is different. ORECs is the offshore wind RECs. So we've got the RECs for everything else and then we've got SRECs or solar RECs, and then we've got ORECs. Now, this is where it gets tricky. ORECs are not actually RECs like SRECs and other tier one RECs are, right? So ORECs are actually more like a guaranteed price and a guaranteed amount that's being purchased. It's more like a PPA, although it's not a PPA. It's more like a PPA than RECs are because there's not a separate OREC market where they could get traded and the price would go up and down depending on how much you have in the mix.

David Roberts

Right?

Lorig Charkoudian

So we call them orcs because they're sort of managed by the Public Service Commission and they're reflected on a ratepayers bill, but they're not actually like other types of RECs. So they really just kind of create the guaranteed price and purchase amount, which is what a wind developer needs to get capital at the lowest possible rate is having the guaranteed $56 megawatt hour and 5 million MW. Right? Like that's what you take to the bank and that's how you finance the project. So that's what ORECs do. But what that means is that ratepayers are paying for that subsidy.

And so this is the challenge that you talked about earlier, which is that it makes sense in some ways, right, because you are tying the clean energy costs. The more energy you use, the more you're paying for the clean energy. But what it means is that rates are especially residential rates, are the most regressive place to put a subsidy like that. So while taxpayers and ratepayers theoretically are the same people, but ratepayers rates are the most regressive because people who struggle the most to pay their bill don't pay less because they earn less, right? People suffering from an energy burden are going to suffer from that energy burden regardless of what they make.

And they're suffering. The less they make, the more they're suffering, right?

David Roberts

And tax systems can and often do exempt low income people from taxes. But nobody is exempted from rates. No matter how poor you are, you're paying rates.

Lorig Charkoudian

You're paying rates. And generally if you have a house that is drafty or is not weatherized because you can't afford that, right, you're probably paying more in your electric rates and people have cut offs and everything else. So as much as I feel like we need to make our taxes more progressive, they're at least more progressive than our rates are. So that's a show for another time. Maybe it's a different podcast. But anyway, sticking to the rates for a second. So as we have looked at ways to continue to expand subsidies for offshore wind clean energy in general, one of the things that I've really looked for is ways to create those subsidies, create the same guarantee that the offshore wind developers need in order to take it to the bank and get the financing right.

But do it in a way that is out of a state budget which is going to come out of taxes as opposed to putting it on ratepayers.

David Roberts

Pause here because this is so conceptually important and underlies everything else. It really is, and as you say, can be a lesson to other areas, which is just like so much clean energy policy, especially because it's all about electrification, it's all about electricity. So much of it gets piled on electricity ratepayers, which as you say, is the most regressive possible way to pay for something and just shifting to the tax base, much more progressive, much more the burden falls on high income people. It's much fairer, generally fairer way to pay for things. So it's just about finding the mechanism, right?

Like how do you tie the subsidy to taxes? So how does that work?

Lorig Charkoudian

So I think one of the interesting things that happens, and I often think about this as the difference between doing compromise, like split the difference as opposed to creative problem solving, which I think we need to be doing more of. I think what happened with the Clean Energy Jobs Act is that we had a compromise which is we said, okay, ORECs, go on the bills, we're worried about ratepayers, so we'll put a cap on how much this could cost ratepayers. And so what that does in the end is it protects ratepayers. Like they're not going to pay more than XYZ, whatever the cap was that we put on there.

But it also means that we're only going to produce as much as that cap will allow for, right? And so rather than doing that, what I try to do is to say, what are our values? Our values are to protect ratepayers, our values are to build as much offshore wind as we possibly can. And so given that we can in fact come up with new ways of doing things. But it was an interesting process because I looked at basically every other state and talked to a lot of people about what are the other ways that we could do this?

And there is often within policy making circles there's this way that we get stuck in, like, this is just how it's done. This is the way that we create that guarantee to the developers. This is the way it's done. But you start to see the danger of that. And like, I think in New Jersey, there was a filing by the Office of the People's Council, their ratepayer advocate there, suggesting that they ought to slow down some of the offshore wind because of the ratepayer impact. And so eventually there'll be the pushback. And so it's worth taking the time.

And it did, it took me like a year and a half to figure out a way to do it. And once I tell you what that is, which you already know, but once I tell your listeners what that is, it seems so obvious. But just because people haven't done it, I think a lot of people are just hesitant to try something new, especially in an area where it feels like it's risky.

David Roberts

Like many good policy ideas, it's like once you hear it, you're like, oh, duh.

Lorig Charkoudian

Duh. Right, exactly. So the idea is what the developers actually need is a guaranteed amount of offtaking, and they need a guaranteed price. That's what they need to go to the bank, right? So what we did is we said, okay, so the state is going to do a power purchase agreement, and the state is going to put out an RFP, and the state is going to take a look at the social cost of carbon, the state's goals. The state's RFP has the ability to consider things other than just the lowest possible price. Right? They'll look at price. Right.

We didn't want to make the state a full-on price taker, but we did want to make the state have the ability to look at a range of considerations beyond just the price.

David Roberts

And just to insert here just for listeners' benefit. I believe this is all in the context of Maryland having a law on the books that targets 100% carbon-free electricity by 2035. Is that correct?

Lorig Charkoudian

Yes. So this bill created the goal of 8.5 gigawatts. So that's a goal that gets considered. The 60% decrease in greenhouse gas emissions by 2031 gets considered. The 2035 gets all of those things get considered in addition to price in consideration of the RFP. But the other piece of it is the state uses, or will in a few years when they're doing these contracts, the state uses roughly 2 million megawatt-hours a year in electricity. And we believe that the two current offshore wind lease areas that we're trying to fill out with this procurement have the ability to produce about 5 million.

So the first thing that's really obvious is, well, the state's 2 million should all be offshore wind. Right? So make that happen. That makes sense. But then the next part of it is that we authorize the state to then offer the remaining if they end up getting to 5 million or whatever it is they end up getting to based on the RFP, the remaining 3 million, 2 million. Whatever it is, they have the ability to offer it either in bilateral contracts to, for example, other counties that want to purchase it, school systems that want to purchase it, or to offer it in the wholesale electricity market through PJM.

David Roberts

Wait, so you say when the state uses you mean the actual government itself? The actual state government uses that amount?

Lorig Charkoudian

Yes.

David Roberts

Not the state as a whole?

Lorig Charkoudian

Yes, the state government. Yes, correct, right. So the state government does procurement for the state's own buildings.

David Roberts

Right. So it's going to satisfy all its own demand and then have a bunch left over.

Lorig Charkoudian

Well, that'll depend on how the RFP goes. Right? Again, I didn't write the bill, I wrote the bill so that we weren't going to be inherently price takers. We want to create a competitive RFP process, but the state has the ability to purchase up to 5 million based on the way the bill is written. And so if they do that, if they'd get to 5 million, right, they use the 2 million of their own electricity, and then the additional 3 million can be offered through bilateral contracts or offered on the wholesale markets.

David Roberts

So then you'd have the sort of state government in the position of being a participant in the wholesale market, basically selling power on the wholesale market.

Lorig Charkoudian

Presumably through a broker, but yes.

David Roberts

Right.

Lorig Charkoudian

Because the state is going to have a PPA with a guaranteed price. Right. Any subsidy that's needed, the state will pay that subsidy, right. And the state basically takes on the risk. So I suspect that the way it's going to work is it'll be a subsidy in the first ten years of the 20-year contract. And at some point, because of the direction energy is going, I suspect that the state will actually have a contract for lower than the wholesale price for the second ten years of the 20-year contract. Right. So it's not that we're sure it's a subsidy, we're offering a subsidy.

We expect it to be a subsidy in the early years. But whenever you're doing something like this, what we're really saying is the state's taken on the risk instead of ratepayers taking on the risk.

David Roberts

Right. So the state's going to sell the power and if the state loses money on the deal, that will be absorbed by taxpayers, that's the subsidy in question. But if the state makes money, which you think it eventually will —

Lorig Charkoudian

Then it's revenue.

David Roberts

Then it's state revenue, it benefits taxpayers.

Lorig Charkoudian

Correct. So it's really that the state's taking the risk rather than the state's committing to the subsidy. It could be a subsidy. It could be a subsidy for the 20 years, but it's the risk that the state's taken.

David Roberts

Right. And so it is going to depend on what is the cost of this offshore wind production relative to general wholesale prices.

Lorig Charkoudian

Over a 20-year period.

David Roberts

Over 20 years.

Lorig Charkoudian

And so just, I remind people, I mean, no one predicts 20 years, right? Just take a look at the last 20 years. And we weren't expecting fracking and then we weren't expecting a war in Ukraine, right. So you have the prices going all over the place and so we'll see what happens.

David Roberts

Right, but the point is, eventually this could evolve just through the evolution of power markets into an ongoing source of revenue for the state.

Lorig Charkoudian

That's correct.

David Roberts

Fingers crossed, I guess.

Lorig Charkoudian

Fingers crossed, yeah, absolutely. Because that will mean a lot of things that are important for our clean energy future if that happens. But one of the other things that I'll say about it is the other thing that was important about doing the bill in this way is that we wrote it so that this new way of doing procurement is a short-term strategy for the two lease areas which currently exist to fill them out. Right. Like to buy the rest to basically to build in the rest of those two lease areas. We expect BOEM soon to have its new lease area where we hope we'll have six gigawatts worth of space.

And so we haven't yet, while that's part of the goal and the other part of the bill that I hope we get to talk about, because I always want to talk about transmission, is preparing for that six gigawatts. The procurement is just for this smaller amount. And what it does is it gives us a chance to test it out in the short term. And if it works, then it's a system that we can use for this larger procurement of six gigawatts that we're going to have to develop in the next two or three years

And BOEM, just for listeners' benefit, can you spell out BOEM? Not everybody is up on the latest fed, federal agencies.

Yeah. The Bureau of Ocean Energy Management. They manage all the energy in the oceans.

David Roberts

And what does it mean for them to give you a lease area? It just says this area is now open for development. That's the significance.

Lorig Charkoudian

Correct. And they're not giving Maryland the lease area. They're working on lease areas across up and down the East Coast. Well, actually the West Coast, too, but they're drawing them and then DoD and NOAA and all the other federal agencies weigh in based on their knowledge about the area, and then they will auction them off. And so developers will then have a chance to bid on them. And then once the developers sort of have the lease on the lease area, I think it's a 99-year lease, then they'll have a chance to bid into whatever, Maryland offshore wind.

New Jersey offshore wind, whoever's got the system in place to purchase offshore wind.

David Roberts

Right. So you're testing this state government-based procurement on these two smaller lease areas that exist, and if it works well, then you think it will be extended to this larger lease that's on the way.

Lorig Charkoudian

Yeah. And if it doesn't, then we go back to the drawing board, find another creative solution.

David Roberts

How progressive is Maryland's tax system relative to other states? Do you have a good sense? Because the reason I asked this is I am talking to you from what I believe is, last time I checked, 50th on the list of 50 states in terms of the progressivity of their tax base. Washington State has the most regressive tax system of any of the 50 states. It's almost all sales tax. There's no income tax. I assume it's probably still a little bit more progressive than ratepayers, but I don't know how much. So this will differ state to state, I assume.

Lorig Charkoudian

Yeah, well, it would. And I actually don't know what our ranking is. I know it is considerably more progressive than that, but we do have income tax and so on. But I don't know the ranking. But it's a great question and it sends me to — It's my task as soon as we finish recording today, I will find that out.

David Roberts

Okay, so that's procurement, a very different and interesting model. You're not doing utilities through ORECs, you're getting the state involved and you're paying for it out of the state's tax base. And this has the potential, which I just think is so interesting, like the state's going to sell its leftover energy and depending on energy markets, could well be making money. And I feel like if a state is procuring gigawatts of clean energy and making money on it, that's going to catch the attention of other states, this model. So the second big policy piece of this, which I found interesting, has to do with transmission.

So sort of the current model insofar as there's any model at all since there isn't actually that much offshore wind. But you're sending developers out. They build turbines out in the ocean and then they run a transmission line back to land to carry the power. And then the next developer comes, builds more turbines, runs its own transmission line to land. You end up with all these separate transmission lines to land which are doing basically the same thing, only it's incredibly duplicative and incredibly wasteful. So what does your bill do on transmission to try to circumvent that problem?

Lorig Charkoudian

I think you described it pretty well, but I'll just say the way that I sort of think about it is right now you have let's say that there's six developers who each get a piece of this offshore wind lease area that's coming. Each of those developers now has to run an extension cord into plug into the state of Maryland and get onto the grid, right? And it actually is a bunch more than one extension cords just because of the complexities of transmission. And so the idea behind the bill is instead of that, how about the state coordinates an effort to run one line, one extension cord out to the ocean and put down a power strip and everyone plugs into it there.

And so if you think about it that way, it is both way more efficient, right? Like so it costs significantly less and it is way less ecologically disruptive to ocean floors and everything else that gets sort of touched by transmission interconnection. We started talking a little bit about. I know you have listeners all over the country, all over the country. People know that transmission is a challenge for renewable energy. But on offshore wind, as I was saying at the beginning, that is one of the issues, the interconnection issues here on the East Coast. It's one of the issues that still has us not yet having built the 2013 authorized wind.

Right. So solving this is really key and it's key for both actually having a solution and being more likely to build the wind. It's key for reducing costs and it's also key for signaling to the offshore wind industry that we are really serious about getting this done in the state of Maryland. And that's important as an economic driver, it's important to have people seriously looking at bidding on these lease areas and investing in the state of Maryland.

David Roberts

How does this solve the interconnection problem? Is the idea that the main power strip will be the one interconnection that all the others piggyback on? Or are they all still going to have to how does this interact with the sort of interconnection queue which, as all listeners know, is extremely backed up everywhere?

Lorig Charkoudian

I'm going to go ahead and claim worse in PJM than anywhere else, but someone can challenge me on that.

David Roberts

I think that's right.

Lorig Charkoudian

New Jersey is the one state that sort of has done this already. And they did it, although they didn't do it with legislation, their Board of Public Utilities did it kind of through regulation and through their process.

David Roberts

This common transmission thing.

Lorig Charkoudian

Yeah, this organized, right? This state organized and it's not state-owned. Right. That's really important. It's not the state's building the transmission, the state's kind of coordinating the effort, the study, the figuring out the transmission interconnection points and then working with PJM to take bids for transmission developers to actually build and own the transmission lines. So that's the system that New Jersey kind of modeled that they could do over the last three years. And we took notes and paid attention and put it in legislatively. And so there still is a need to work with PJM in Maryland.

The way the bill is written, the Public Service Commission works with PJM, works with the developers, works with everyone who has information in this, the current transmission owners, the potential bidder transmission owners, does all the studies and then works through the interconnection process. And there's a couple of different questions and the Power Act leaves open a few different options about how it gets paid for because we have an evolving process right now with FERC and FERC rulemakings and PJM and so on. There's a couple of different ways that it could get paid for. The state agreement approach is one possibility.

That's what they used in New Jersey, I think that has advantages and disadvantages. I didn't want to lock us into it so we could end up with that. We could end up with depending on FERC decisions over the next few years, we could end up with some other sort of way that it gets paid for.

David Roberts

Is paying for that out of state revenue also on the table with all the same sort of advantages, all the same reasons.

Lorig Charkoudian

It could be, but it's far enough away that it's not clear yet, right? So here's how it could be. If you ended up tying the cost of the transmission to the developers and so you basically lumped it in with the cost of the offshore wind. And if we went with the procurement method that I've been describing, then you would have that done through the state budget. If you went with another model and if FERC ends up with decisions about renewable transmission and spreading the cost over everyone, who benefits, you might have ratepayers across the region paying.

Because of course, these transmission lines are not only going to benefit Maryland, they benefit the congestion that we relieve in Virginia and Pennsylvania and so on and so forth. So there's a couple of different possible directions that it could go in, but one possibility could be that you end up with it back on the system that we described earlier.

David Roberts

And I'm assuming you've heard from offshore wind developers that this is a big impediment, right, this transmission sort of quandary?

Lorig Charkoudian

Yes, we have. And yeah, I mean, I worked very closely with the industry on developing kind of this solution.

David Roberts

When I was reading about this, it sparked an extremely old memory. Like one of the first freelance pieces I ever wrote, and this was probably more than a decade ago, was about this scheme, I can't remember what it's called now. I didn't bother to google the piece, but it was a scheme to build basically what you're talking about, like this extension cord, this sort of power strip, but to build it all the way up the East Coast. Like it was one of these grand super schemes, you know, and of course, like many of the grand super schemes I wrote about back in the day, who knows what happened to it?

But is there any —

Lorig Charkoudian

Don't give up on it yet, David.

David Roberts

Is there any thought or discussion of doing a multistate version of this?

Lorig Charkoudian

Yes, there is. So it is still in the conversation, this sort of backbone right up the I think that's probably what you wrote about, which wasn't that long ago, I don't think but —

David Roberts

Everything pre-pandemic is a haze.

Lorig Charkoudian

Pre-pandemic is ancient history. So the backbone up the east coast and then sort of interconnected at a couple of key points and it actually still is a really good idea and it has a lot of potential for thinking about resilience and if certain parts of the grid go down or certain regions have a significant weather event or something like that. So it actually still is a really good idea. And when I first started looking into this, people were like, oh yeah, and Maryland should coordinate with the states around it and the federal government should coordinate.

And what I wanted to do was to build this so it has the ability we talked about the system being mesh ready. It has the ability to interconnect in that way, but we're not waiting on that to happen. So it's possible that all of a sudden, in two years, all the states will get together, sing kumbaya, federal government will be on board, and we'll build that thing, and then we'll just all connect into it. But in the meantime, we have to keep moving forward. And so —

David Roberts

If there's one thing that makes transmission easier, it's involving multiple states.

Lorig Charkoudian

Right. It absolutely streamlines everything. So in the meantime, the idea was we're going to have a process that could tie into that should that come about in the near future, but we won't be waiting for that.

David Roberts

So kind of modular, a modular power strip that could be added to in the future.

Lorig Charkoudian

Sure, yeah.

David Roberts

And I remember writing about that because the potential benefits of connecting the entire east coast would do so much for congestion. I mean, it's really mind-boggling to read about the potential benefits, but of course, coordinating every single state is —

Lorig Charkoudian

Well I mean, it's mind-boggling to consider that you could have a solution that's out there that is that beneficial and we can't get our act together to build it like that's. Also mind-boggling.

David Roberts

I'm much more familiar with that story.

Lorig Charkoudian

Which is why we just kind of do everything we can leave it all in the field and hope it all connects with each other at some point in the future.

David Roberts

So we went through the sort of novel procurement mechanism, which I think is really cool, and then this common transmission plan, which I all think is really cool. Let's talk about labor.

Lorig Charkoudian

Yes.

David Roberts

And unions. Maybe before getting into what this bill says, you could just tell us sort of like, what has been the general disposition of labor toward offshore wind in the past, and what does this bill do vis a vis labour?

Lorig Charkoudian

Offshore wind has been committed in Maryland anyways. I think there's been this commitment to build offshore wind with good labor standards, I think from the beginning, and I think that a lot of developers have built relationships locally in Maryland and elsewhere. So we knew that folks already really had a sense that offshore wind is a development that really can be done with good union jobs. I think we had that idea back in 2013. Now I want to back up and just mention that for myself. I've been in office for five years and I've had a lot of clean energy legislation, and I've been committed to every single bill that I write, whether it's big development of offshore wind or residential solar micro grids that I'm doing, every single bill that I write has labor standards in it.

I think this moment in time is so crucial in terms of really thinking about we're going to build a new economy. What we're doing with a clean energy future is going to be a new economy. And so we have this chance to get it right or we have this chance to drive ourselves into an income inequality sort of hole that we're never going to be able to get out of.

David Roberts

This attitude, this sort of approach. And I say this happily seems to be basically conventional wisdom at this point. Like if you look at blue states passing these big energy bills, it's in almost all of them now.

Lorig Charkoudian

Well, we're getting there. We're getting there. It is coming more into it. And I think the IRA helps. And I've certainly seen progress since five years ago when I started putting it into my bills. And I do think the IRA helped and I think that there's been really good organizing around it. But I think what we looked at with offshore wind, so this gets to 2013, 2019, and then this year what we looked at with offshore wind was what standards did we have in there? How much would they guarantee that really these were going to be good union jobs all the way from manufacturing, bringing manufacturing to Maryland, bring steel development, cable development, cable factories, all of that into Maryland with union jobs as well as all of the construction on the development being with project labor agreements as well as we have labor peace agreements for the maintenance on the projects as well.

All of that is in the bill. And I think when we looked back at the 2013 and 2019 bills, they had some standards in them. So we could see like there was clearly an intent to build the industry in this way, but we also had places where we could see things could fall through the cracks and we wanted to really make sure that there was no question about the standards and the jobs that we were going to create. And so this bill has a lot more and it's a lot tighter and it's all the way around and includes the domestic content and so on.

And the good news is that that is then reinforced by the IRA. So not only is it the right thing to do for the future of Maryland and the Maryland economy, but it also is going to be the lowest cost way to do it because the IRA is going to we're going to be able to maximize the rebates and the tax incentives in the IRA.

David Roberts

Right. Just for listeners perspective, the IRA ties in tax credits to labor standards. So the sort of higher labor standards you have, the more of the tax credit you can get. So if you are going into this industry with the highest possible labor standards, that means you're going to get the most possible IRA money.

Lorig Charkoudian

That's exactly right. Labor standards and domestic content.

David Roberts

Right.

Lorig Charkoudian

Both.

David Roberts

And so labor was presumably in support on your side lobbying for this bill. Yes or no?

Lorig Charkoudian

Yes, absolutely. Labor was 100% with us on the bill, and that's because we built a coalition early on that everybody was in the conversation together. And as I mentioned, I think I worked on the bill for a year and a half before I actually brought it in. And so we had a coalition that included labor, that included environmental organizations, that included industry, include ratepayer advocates. It included civil rights organizations, environmental justice groups. And we just kind of stayed in that conversation for a year until everyone felt like this was something that they really believed in. And so then you had that coalition coming in and really fighting for the bill, and that made a big difference in terms of getting it through.

David Roberts

So when you say domestic content, are there provisions in this bill that require domestic content, like Maryland content, like Maryland manufacturing? What does the bill say about that?

Lorig Charkoudian

Well, you actually can't do that because of the interstate commerce clause. It's got to be Maryland manufacturing. So you have domestic content requirements in the Community Benefit agreement. So we do have that in there. But I will say what Maryland has with our advantage is that we have a deep port in Baltimore, deep harbor in Baltimore. Right. So you have the port where what was talking about Bethlehem Steel earlier that built basically the ships that won our world wars and everything else. You have that. And so it is a really strategic place from which to build an offshore wind industry, to build domestic content that we're going to have in this country, not just for Maryland, but for the entire East Coast, right?

David Roberts

Right. A lot of this doesn't exist. It's not like you could buy it elsewhere. Currently, a lot of this just doesn't exist yet. The supply chain.

Lorig Charkoudian

Right. It's not like there's some place in the Midwest that's building offshore wind manufacturing like components, and we're just going to ship them in. So the combination of what we have in Maryland, what Tradepoint Atlantic, what the port offers in terms of a strategic location for building the commitment that Maryland has made, the solution to the transmission problem and the domestic content together. We have reason to believe that a lot of that content will be based in and will be built in Maryland at Trademark Atlantic.

David Roberts

Right. Do we have any sort of like estimates or models or guesses about job creation here? I mean, presumably if you're going to build an industry almost from scratch, that's a lot of jobs.

Lorig Charkoudian

Yeah, it is like 5000 is the number that I've heard. I've seen a couple of different numbers, and I have to say I haven't looked at an analysis before. I quote a particular one. But it is and it's a lot of jobs because it's iterative we're going to get these first two lease areas built, and then we're going to get the six gigawatts, and then there'll be additional unit manufacturing for additional locations along the East Coast. And then we haven't started talking about, but coming soon is floating offshore wind. Right. So that's even beyond the 8.5 that we have envisioned in this bill, which we're trying to have in place by 2031.

David Roberts

8.5, just to clarify, is a non binding aspirational. That's just sort of like what you want.

Lorig Charkoudian

That's right. 8.5 is. I mean, anytime you set a goal, you actually can't make it binding, if we're being honest.

David Roberts

Right. You could pretend.

Lorig Charkoudian

Yeah, so whenever you set a goal maybe I shouldn't say that because now people know they can get out of the goals. What makes the bill? I mean, it's interesting because I appreciate the chance to talk to you for like a full hour about it. You can tell I'm kind of in love with this bill, but most of what gets the headlines is 8.5 gigawatts. And that's important. It's big, it does matter. But really, what's going to make us meet that goal is the transmission, planning, and development that's in the bill and the new way of doing procurement that's in the bill.

That's actually how we're going to meet the 8.5 gigawatts. And those are the pieces that are real game changers for the state of Maryland for building that and then making sure, as we've talked about, the labor standards that are critical to how we do it.

David Roberts

Do we have any sense of the total power potential off the Maryland coast once we do the fixed turbines and then the floating turbines and all the rest of it? Do we have any sense of the total?

Lorig Charkoudian

Again, it's one of those things. I've heard numbers from like 13 total to 20 total, right. When you add in floating on top of the 8.5, that would be fixed. I haven't studied the studies enough that I'm going to say this is where I'm coming down.

David Roberts

There's a lot of guessing in studies, too, not to sort of expose all the illusions in this one pod. A lot of studies are just this side of guessing.

Lorig Charkoudian

Yeah.

David Roberts

So this tackles the procurement problem, which is awesome. The transmission problem, the labor problem, all these pieces are signed up. The one other thing that we were sort of mentioned earlier that has impeded offshore wind development in the past is NIMBYism. And just reading articles about this bill, they all sort of are obliged to quote a few opponents. I don't like to cast aspersions, but like, "Oh, it's the view. Oh, it's the whales." It just has this feel of people who don't want any change groping around for some plausible argument to use. But nonetheless, we're not here to discuss how irrational NIMBYism is.

But is there anything in the bill directly about that, or do you just think the sort of advantages that you've brought together here are just going to kind of overwhelm that?

Lorig Charkoudian

So it's a great question, and it is a really important thing that we need to address. And I think that let me start with whales, because I care about whales, too, and marine wildlife. And I have read those studies, and I have engaged with NOAA, and I've engaged with the National Aquarium, and I've engaged with people who are actually experts on that, which many of the people standing on beaches and talking about whales are not. And so I got a really clear understanding of, because if there were proof, if there were evidence that somehow offshore wind development were affecting whales, then I would want to build mitigation strategies into the bill, right?

So there isn't any proof right now, and that's really important for that to be clear. There's no proof right now. There is proof that whales are dying from a bunch of other things, climate change being one of them, but there isn't any proof that that's happening because of offshore wind development. But having said that, there is still a full NEPA process that goes into the development of offshore wind. And so all these experts who know way more about whales than I do and other marine wildlife will be able to engage every step of the way in the NEPA process to make sure that any harm that could come or any danger that could come is mitigated.

And that just coming back to the transmission for a second. The fewer transmission lines that we have to run, the less kind of cable that we have to run, the more options there are to run that cable in a way that is least harmful, right, to any sort of marine wildlife. So to the extent that that is addressed in the bill, there's just a section of the bill that says that the developers have to share whatever those plans are that are part of the NEPA process that are being shared with the federal government, that that has to also be shared with the state government. Now, that means we'll be able to see it.

I think the federal government really has the experts who are looking at that and can determine what is and isn't appropriate to do, but it's addressed because the state will be able to take a look at what that is as well. So there's that piece of it, I think the second piece of it in terms of views, and I think that realistically, if you look at renderings, if folks are actually worried about views, they should look at renderings because you sort of can squint and maybe you'll see something if it's a really clear day. I've taken a look at those things. But I think it's really important to remember that a lot of, especially in the context of offshore wind, a lot of the NIMBYism that we hear, because we're talking about like 11, 12, 15, 70 miles away from the coast, right.

So a lot of the NIMBYism that we're hearing is really driven by, and is funded by and is supported by folks with ties to the fossil fuel industry —

David Roberts

Yes. Always worth saying.

Vested interest in not building this. And if you can get people worked up about a view and people are hesitant to change anyways, and people are bought into a culture war that is about not moving forward with clean energy, then it doesn't take a lot to rile folks up. And that's, unfortunately, where some of this has gotten caught up.

Yes, Volts listeners will recall a few months ago we did a pod about just that, about the sort of conservative groups that are out there very actively generating this sort of opposition.

Lorig Charkoudian

But in terms of your question, I think you asked another question about, like is, are we going to get caught up again? And I will say there's a couple of things that make me hopeful. One is that unfortunately, in the previous administration, under Governor Hogan, his Maryland Energy Administration and the PSC members that he appointed, the Maryland Energy Administration asked the PSC, sort of sided with Ocean City, asked the PSC to reconsider. It was related to a change in the turbine size that was tied to technological advancement. And so that reopened everything. There were hearings. There were all this kind of thing.

And so we're moving to we have a new administration. Governor Moore is 110% behind developing offshore wind, and his Energy Administration is 150% behind developing offshore wind, and the new members of the PSC are being appointed now and behind offshore wind. And so I just think even if there were to be filings from folks who oppose it, we're not necessarily going to have the same slowdown that we saw over the last couple of years that came from that.

David Roberts

The glory of a trifecta. I've been doing several pods over the last year, basically talking to state legislators in these states with new Democratic trifectas about individual bills and stuff, which I'm very interested in, but also trying to sort of make the meta point that like, wow, look what happens when you elect a Democratic trifecta in a state. They go do stuff. So one of the things I ask all such people is how helpful or not were Republicans in getting this bill passed, developed and passed? And more broadly, how helpful or not are Republicans on the broader issues of clean energy in Maryland?

Lorig Charkoudian

So we did have a bipartisan vote. We had some Republicans in both the House and in the Senate voting in favor of the bill. I think that the folks who voted in favor of the bill, definitely because of the conversations I had with them, they could see that there was a real economic advantage to Maryland continuing to grow this. They could see jobs, they could see jobs in their districts. They could see jobs in their communities, and they could see that they were going to be really good jobs. And so I think that that was helpful.

I think that the opposition, unfortunately, in my mind, is tied to some of these culture wars I don't think that there's anything about — I don't understand. I work really hard to have relationships with all of my colleagues, including the Republican colleagues. And even when I work on understanding what the perspectives are, where we disagree, I don't understand where there is disagreement on the extraordinary economic opportunity of being out front on an emerging industry. Seems we would all share that value, clean air, those kinds of things.

David Roberts

But what about liberal tears, though? This is going to create a shortage of liberal tears.

Lorig Charkoudian

Is that what it's going to do? I'm not familiar with that theory.

David Roberts

Yes, liberal tears are the top policy priority of the Republican Party.

Lorig Charkoudian

I got you. Okay, I'm with you now. Sorry. Yes, well, that's true. I wouldn't have as much to cry about. I remain hopeful that as the industry grows and as it shows itself for what it can be as an economic driver in the state, I think that what we'll see is kind of iteratively more and more consensus.

David Roberts

Is there an obvious next step in offshore wind policy? Specifically, like, is there an obvious next thing to do or is this you're going to wait for a few years and see how this plays out? What's the agenda?

Lorig Charkoudian

So the next thing is really to make sure these things that we just passed happen. Right. So we need to make sure the Public Service Commission starts on this process, the transmission process, working with PJM as quickly as possible. I will say, I also do work with other legislators in other states really trying to push PJM to fix the interconnection queue. I met recently with a FERC commissioner on this. That broader issue of fixing that interconnection queue and the problems with it I think are related to this. It also affects other clean energy, but related to this.

So that's not necessarily a specific legislative policy, but it is something that I will be working on and others in this area.

David Roberts

Not really clear what it is, what that solution is, honestly.

Lorig Charkoudian

Well, if you'll indulge me for a second, David, I will tell you about one of the bills that I had this year that did not move forward. But part of the problem with PJM is in addition to the fossil fuel interest having so much power, it's not very transparent. Right. And so one of the bills that I had this year was to require that all of the Maryland so we can't change that directly. Right. Like, I don't have authority over PJM, but we do have authority over Maryland utilities. And so I had a bill that would require that all of Maryland utilities who vote in the lower level of the PJM decision making would have to disclose their votes.

These are the undisclosed votes. We have to disclose their votes and explain how they're in the public interest and they would have to do that annually. Right. It's a great bill.

David Roberts

I love that.

Lorig Charkoudian

Thank you. We got out of the House and we couldn't get out of the Senate this year, but I'll be bringing it back and a lot —

David Roberts

Oh, my God, I bet they hate that. I bet they hate that bill.

Lorig Charkoudian

Exelon invested a lot in making sure that that bill didn't move. But my colleagues in other states who are also concerned about PJM and transparency are also bringing that bill. And so I say all that to say, it's sort of the big splashy 8.5 gigawatts. That's the stuff that gets the headlines. But it's these other bills that actually, when you ask what else has to be done to move offshore wind forward, to move clean energy forward, like, these other bills are actually part of the package of how we get that done. So that's one thing. And then I think the other thing that I'll just mention is I've been talking to the Department of General Services who's going to do this procurement, and they're excited, and we've been working with them.

David Roberts

A totally new thing for our state government to do, right? I mean, this is really from scratch.

Lorig Charkoudian

Well, sort of. It's worth noting that the state government does procure energy for state buildings. Like, they've been doing that for 50 years, right? So 100 years. So it's not like they've never done RFPs for energy before. Like, they have they do know how to purchase energy, but doing it in this way where you have all these other values that you're asking them to consider in addition to just the price, right, that is new. So in a few years, we'll be ready to actually develop the legislation that creates the procurement for the next six gigawatts right, to get to the 8.5.

And what we'll have by then is we'll have this experience the DGS has with the state has with this procurement, and we'll hopefully have made some progress on the transmission, and so we'll have that to work into it. And so, really, we're making sure those things move forward, and we'll be able to take all of that into account when we figure out how we want to design that six gigawatt procurement, which hopefully will be in a few years.

David Roberts

I love it all. Lorig Charkoudian, thank you so much for coming on the pod and sharing with us.

Lorig Charkoudian

Thank you for inviting me. It's a pleasure.

David Roberts

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