Maryland finds a more just & politically durable way to fund offshore wind

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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transcript)


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transcript)


Text transcript:


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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