The cost of electricity is expected to increase, negatively impacting the number one concern for tourism income sources for local businesses, so why push forward? Here is Maryland’s energy mix, and an update from the mayor.
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1. Maryland’s Energy Mix (2023, Pre-Offshore Wind Project)
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Nuclear Power: 40% (primarily from the Calvert Cliffs nuclear power plant).
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Natural Gas: 34% (the second-largest source, with increased use due to the shift away from coal).
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Coal: 9% (declining due to plant closures and environmental regulations).
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Renewable Energy: 17% (total, broken down as follows):
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Hydroelectric: ~5% (conventional hydroelectric power).
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Wind: ~2% (onshore wind farms in western Maryland; offshore wind not yet online in 2023).
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Solar: ~4% (growing due to the Renewable Portfolio Standard [RPS] requirements).
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Biomass/Landfill Gas: ~6% (includes landfill gas, municipal solid waste, and wood waste).
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Maryland’s Renewable Portfolio Standard (RPS), updated in 2019, mandates 50% renewable energy by 2030, with 14.5% from solar and at least 1,200 MW from offshore wind.
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In 2023, Maryland generated 37.8 TWh of electricity but consumed 61.8 TWh, importing significant power from out-of-state sources.
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Wind energy (onshore) accounted for about 1.4% of in-state generation in 2016 and has grown slightly since, but offshore wind projects like MarWin and Momentum Wind were not yet operational in 2023.
2. Cost of Electricity Before Offshore Wind Project
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Residential Electricity Price (2023): Approximately 14.5 cents per kWh (EIA average for Maryland residential customers).
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Standard Offer Service (SOS) Rate: Around 8 cents per kWh for a mix of fossil fuels and nuclear power, as cited in reports analyzing potential offshore wind impacts. This rate excludes delivery fees and other charges.
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Wholesale Electricity Price: For 2023, wholesale prices in the PJM Interconnection (Maryland’s regional grid operator) averaged around $30–$40 per MWh ($0.03–$0.04 per kWh), though spikes occurred due to capacity auction price increases.
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Context:
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Maryland’s electricity prices have been rising due to fossil fuel plant closures (reducing 6,000 MW of capacity since 2018) and reliance on imported power (1,000–6,000 MW hourly).
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The Electric Customer Choice and Competition Act of 1999 deregulated Maryland’s electricity market, leading to higher consumer prices compared to pre-deregulation rates, which were more tightly regulated.
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The SOS rate of 8 cents per kWh is a baseline for comparison, as it reflects the cost of electricity from traditional sources (natural gas, nuclear, coal) before renewable mandates increase costs.
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Residential prices (14.5 cents/kWh) include delivery charges, taxes, and other fees, making them higher than the SOS rate.
3. Maryland Offshore Wind Project and Cost Increases to Consumers
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Total Estimated Cost: $6 billion for the full project (FAST-41 Permitting Council estimate).
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Lease Acquisition: U.S. Wind won the lease for $8.7 million in 2014.
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Levelized Cost of Offshore Wind: Estimated at $35–$55 per MWh ($0.035–$0.055 per kWh) for generation, plus $5–$20 per MWh for transmission and interconnection, totaling $40–$75 per MWh ($0.04–$0.075 per kWh).
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Subsidies: The Maryland Offshore Wind Energy Act of 2013 authorized $1.7 billion in subsidies over 20 years. The Clean Energy Jobs Act (CEJA) of 2019 mandates 1,200 MW of offshore wind, with consumer cost caps. However, the Maryland PSC approved 1,600 MW, potentially costing $4 billion in today’s dollars, exceeding CEJA’s subsidy limit of $1 billion.
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Projected Bill Impact (Maryland PSC, 2017): When initially approved, the PSC estimated offshore wind subsidies would increase residential bills by less than $1.40 per month and commercial/industrial bills by less than 1.4% annually.
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Critical Analysis:
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A 2022 Washington Post opinion piece argues the $4 billion cost (for 1,600 MW approved in 2017) is a “boondoggle,” as it exceeds CEJA’s subsidy cap by four times. This translates to an estimated $8 billion in contractual payments, offset by uncertain wholesale market revenues.
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The Institute for Energy Research (IER) noted that offshore wind is 2–3 times more expensive than non-renewable sources (e.g., $98/MWh for offshore wind vs. $30–$40/MWh for wholesale electricity).
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The Clean Energy Jobs Act is estimated to add $3–$4 per MWh to electricity costs, or $15,000–$20,000 annually for a consumer using 5,000 MWh/year.
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Potential Cost Reductions:
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A 2022 Gable Associates report, funded by environmental groups, claims that scaling offshore wind to 6,000 MW could reduce the SOS rate from 8 cents to 4 cents per kWh by 2031, due to lower fuel costs and economies of scale. This is speculative and depends on federal leasing and supply chain development.
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The Inflation Reduction Act (IRA) provides tax incentives for offshore wind, potentially offsetting some costs.
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Counterarguments:
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Critics, including Rep. Andy Harris, argue offshore wind is expensive and may harm marine life and tourism (e.g., Ocean City’s concerns about viewshed and fishing).
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The Manhattan Institute highlights that offshore wind relies on subsidies (ORECs) and increases consumer costs due to high capital costs, transmission needs, and turbine degradation (4.5% per year).
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Short-Term (2026–2030): Residential bills may increase by $1–$2 per month due to OREC subsidies, assuming the PSC’s 2017 estimate holds. For a typical household using 1,000 kWh/month, this is a 1–2% increase from 14.5 cents/kWh (2023) to ~14.8–15 cents/kWh.
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Long-Term (Post-2031): If 6,000 MW of offshore wind is deployed, the SOS rate could theoretically drop to 4 cents/kWh, but total residential rates (including delivery) are unlikely to fall significantly due to transmission upgrades and ongoing subsidies. A more realistic estimate is a net increase of 0.5–1 cent/kWh by 2030, or $0.50–$1.00 per MWh, barring major policy changes.
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Establishment Narrative: Proponents (e.g., environmental groups, Maryland Energy Administration) emphasize offshore wind’s benefits: zero emissions, job creation (~3,000 jobs during construction), and potential long-term cost savings. The Gable Associates report is optimistic but funded by advocacy groups, raising bias concerns.
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Skeptical View: Critics argue costs are understated. The $4 billion estimate for 1,600 MW (2017 approval) and $6 billion for 2,200 MW (2024 approval) suggest significant subsidies, passed to consumers via ORECs. Offshore wind’s high capital costs, transmission challenges, and reliance on foreign companies (e.g., U.S. Wind’s Italian parent, Renexia) raise economic and sovereignty concerns.
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Reality Check: Offshore wind is costlier than natural gas or nuclear in the short term, but Maryland’s RPS and climate goals (60% GHG reduction by 2031, net-zero by 2045) necessitate renewables. Consumer cost increases will likely be modest but noticeable, especially for low-income households. Long-term savings are uncertain and depend on global supply chain trends and federal incentives.
5. Summary
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Energy Mix (2023): 40% nuclear, 34% natural gas, 9% coal, 17% renewables (5% hydro, 2% wind, 4% solar, 6% biomass). Offshore wind not yet online.
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Electricity Cost (2023): 14.5 cents/kWh (residential), 8 cents/kWh (SOS rate), $30–$40/MWh (wholesale).
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Offshore Wind Impact (2026–2030):
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Adds 2,200 MW, increasing wind’s share to ~5%.
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Costs $6 billion, with $4 billion in subsidies for earlier approvals.
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Increases residential bills by $1–$2/month (1–2%), raising rates to ~14.8–15 cents/kWh.
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Long-term SOS rate could drop to 4 cents/kWh with 6,000 MW, but this is speculative.
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US Wind’s wind project off Maryland is now clear to begin construction after receiving the final required permit from the state.
The final approval by the Maryland Department of the Environment was for the air quality permit application submitted by the company in November 2023.
Under the construction plan, the project, located some 15 km off Worcester County, can have up to 114 wind turbines and four offshore substations. US Wind has not proposed a specific wind turbine model, but it is considering turbine models with individual nameplates of up to 18MW. At most, the wind farm will have a capacity of 2,052MW.
“The Department has reviewed the application, and the comments received and has determined that the proposed construction and commissioning of the offshore wind project would not cause violations of any applicable air pollution control regulations,” the Department stated.
This was the last permit required from the state, while the final federal permit was awarded by the Bureau of Ocean Energy Management (BOEM) in December.
“US Wind’s projects will produce massive amounts of homegrown energy and will help satisfy the region’s critical need for more electricity,” said Jeff Grybowski, US Wind CEO.
However, further project development is still not clear-cut. Aside from the looming distaste for offshore wind from the Trump Administration, there is an ongoing lawsuit challenging BOEM’s approval.
Another issue lies in Sussex County in the state of Delaware, where US Wind power lines from the turbines are supposed to land onshore. The proposed substation is currently under challenge as well.
This brand-new Maryland permit can also be challenged through a petition with the Clerk of the United States Environmental Protection Agency’s Environmental Appeals Board.
The decision to grant the permit was immediately hit with opposition in the form of Maryland senator Mary Beth Carozza, who blasted the decision, and even the Ocean City mayor.
“The entire economy of our coastal resort town is dependent on tourism, our ecosystem, and commercial fishing, all of which will be significantly impacted if hundreds of these giant eyesores are constructed 10 miles from our beaches,” said Rick Meehan, Ocean City mayor.
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