Economic and Social Benefits of Offshore Wind Industry

Offshore wind energy presents a compelling opportunity for California to advance its clean energy goals while stimulating economic growth and improving public health. By diversifying the state's energy portfolio and reducing reliance on fossil fuels, offshore wind can mitigate the impacts of price volatility, enhance energy security, and contribute significantly to carbon reduction targets.

The creation of a robust offshore wind industry has the potential to generate substantial economic benefits, including job creation, supply chain development, and increased tax revenue. Moreover, the industry can foster a skilled workforce, revitalize port communities, and promote equitable economic development.

While challenges remain and investments are required, the potential rewards of offshore wind energy for California are substantial. By strategically planning and implementing offshore wind projects, the state can position itself as a leader in clean energy innovation and reap the associated environmental, economic, and social benefits.

Economic Benefits

Offshore wind is a clean and cost-effective energy source for California, protecting the region from energy price shocks, contributing to climate goals, and reducing the health impacts of air pollution. The chart below shows that the economic benefits of land-based wind energy far exceed the costs. Offshore wind (OSW) energy is expected to have even greater benefits due to stronger offshore winds and lower costs per kilowatt hour of electricity produced due to the economies of scale of the larger turbines that can be used for OSW.

Renewable energy projects have the potential to create significant benefits by stimulating economic growth, generating revenue, creating jobs, improving local infrastructure and services, and providing energy security and resilience. They can also provide substantial environmental, climate, and public health benefits to California while avoiding the price volatility of fossil fuels such as natural gas. Unlike increased investments in gas and gas pipeline infrastructure, offshore wind helps to comply with the state’s climate mandates and provides myriad public health benefits by reducing emissions from the combustion of natural gas, oil, and other fossil fuels for electricity.

For current information, details, and research references on OSW economic benefits in the US, we recommend the People and Economics Section of Offshore Wind Facts, a project of the Special Initiative on Offshore Wind (SIOW) which is funded by Multiplier, a tax-exempt nonprofit 501(c)3 umbrella organization funded by private foundations that do not offer memberships, and have no contractual obligations to any members in the offshore wind sector, all of which support its objectivity and unique approach.  Multiplier accelerates impact for initiatives that protect and foster a healthy, sustainable, resilient, and equitable world. 

Avoided Costs from Offshore Wind in California

Offshore wind most consistently offsets the demand for solar and for energy storage, which is needed to shift excess solar generation into evening hours, when it is needed most. As the grid becomes increasingly solar saturated in future years, the amount of storage needed to shift midday solar production to meet peak evening hour demand increases. Hence, 8 GW of offshore wind offsets 7 GW of storage by 2045. This savings from avoided investment in storage is one reason that offshore wind increases in projected value over time in every scenario. Another reason is carbon value: offshore wind generates during the non-solar evening hours when most remaining carbon emissions occur, which becomes increasingly valuable in a context where state GHG policies call for increasingly steep future GHG reductions.  See “California Offshore Wind: Workforce Impacts and Grid Integration” Berkeley Labor Center, p. 63.

 Assembly Bill 525 (AB 525) laid the groundwork for California to harness offshore wind power as a renewable energy source.  It required the California Energy Commission (CEC) to:  

  • Evaluate and quantify the maximum feasible offshore wind energy capacity.  
  • Establish offshore wind planning goals for 2030 and 2045.  
  • Develop a strategic plan for offshore wind energy development.  

For detailed economic information specific to California, we recommend the three volumes of the California Energy Commission Offshore Wind Strategic Plan that was required by AB 525:

Job Creation

The industry is expected to create a wide range of good-paying jobs. Most jobs are expected to be in the local and regional supply chain and manufacturing sectors, although other jobs, such as dock workers, turbine maintenance, and watercraft operators would also be created. The AB 525 Workforce Development and Readiness Plan (Workforce Plan) projects workforce requirements by project area during the construction and operations phases for three different scenarios - baseline, medium, and high requirements.  The medium scenario on Page 12 of the Workforce Plan projects approximate job numbers as follows: 

  • 8,000 jobs during peak offshore wind construction, with many being unionized;
  • 3,000 jobs ongoing from the commercial operation date through the expected 25 year duration of the project in the areas of maintenance, watercraft operation, and ocean monitoring.

Attracts a Diverse and Skilled Workforce 

Creating a durable domestic floating offshore wind industry in California will provide well-paying jobs and career paths for Californians, particularly those in communities near ports and waterfront facilities. To ensure these opportunities are realized, California will need to develop a skilled and trained workforce capable of developing offshore wind to meet AB 525’s offshore wind planning goals of 2-5 GW for 2030 and 25 GW for 2045. The skilled workforce will include jobs in construction, manufacturing, engineering, operations and maintenance, sales, and maritime services. Many other jobs will also be created, such as longshoreman and tugboat and other watercraft operators.  The analyses on pages 15 and 16 of the Workforce Plan shows the total projected jobs divide roughly equally between readily available workforce (ranging from skilled tradespersons to non-skilled labor) and highly skilled workforce (ranging from scientists, engineers, and managers to highly skilled trade specialists).  

A wide range of skill sets and occupational types will be required for the offshore wind workforce. The National Renewable Energy Laboratory (NREL) has determined that offshore wind jobs “represent an inclusive workforce, which requires many different occupations, roles, and skill sets.”  Manufacturing and supply chain positions will support plant-level workers, plant-level management, design and engineering, quality and safety, and facilities maintenance.  Plant-level workers typically are highly skilled roles, such as welders, electricians, machine operators, and assemblers.  Plant-level management oversees the plant-level workers and includes roles such as production engineers, manufacturing engineers, and plant and operations managers. Design and engineering roles support component design prior to production, such as design engineers, testing engineers, and supply chain analysts. Facilities maintenance workers are typically in supervisor and technician roles that ensure the plant is operating by performing preventative and corrective maintenance. Jobs related to environmental monitoring during the permitting, construction, operation, maintenance, and decommissioning of offshore wind farms can also generate economic benefits. 

Economic Multiplier Effect

The economic multiplier effect describes how an initial change in spending can have a magnified impact on the overall economy. Creating a new workforce will yield numerous types of economic benefits, where the impact of the thousands of good-paying jobs will ripple throughout the state economy. Offshore wind-related income will be spent back into local, regional, and greater state economies, bolstering economic activity throughout the state but especially around large supply chain facilities where hundreds of jobs could be created. In addition to the direct benefits of creating thousands of new good-paying jobs, systemic economic benefits can also be realized from workforce development. These types of benefits include improved quality of life, property value increases, and decreased unemployment.

Diversified and Resilient Energy Portfolio

Offshore wind can help diversify California's energy portfolio and make it more resilient during power outages.

Reduced Exposure to Natural Gas Price Volatility 

As California’s electricity sector phases out its older coal- and oil-fired resources, California has become increasingly reliant on natural gas power plants to provide electricity. In the winter when natural gas demand for heating surges, natural gas power plants must compete with residential and commercial customers to obtain fuel. This causes prices to rise and leaves the region vulnerable to natural gas price swings. These swings in turn produce electricity price volatility and negatively impact the regional economy. At the same time, continued use of natural gas and other fossil fuels for electricity generation also poses risks to the environment and health of the region’s residents.

          Lower Electricity Bills for Consumers

Adding renewable resources such as offshore wind to California’s generation mix can reduce the market price of electricity and avoid natural gas price fluctuations. This helps to reduce the cost of electricity in the region, and in turn, lower customer bills. OSW’s ability to lower electricity costs for Californians will continue, even accounting for recent increases in offshore wind development costs. Offshore wind reduces electricity prices through the interaction of supply and demand in the wholesale energy market. Offshore wind could save ratepayers $1–$2 billion in net present value (NPV) terms, with potential savings increasing over time.

The transition to renewable energy is driven by economic competitiveness and operational efficiency. Unlike combustion-based power plants, which incur substantial fuel and emissions costs, renewable energy sources like solar and wind have negligible operating expenses once installed. This cost advantage enables renewable energy to undercut the price of electricity generated from fossil fuels, driving a market shift towards renewables. 

Health Benefits from Avoided Air Pollution

Shutting down a gas-powered electricity generating plant can lead to several health benefits, particularly for people living nearby. Ideally, the replacement would be a renewable energy source like solar or wind power, which would have a significant positive impact on local health.

  • Reduced Air Pollution: Gas plants emit pollutants like nitrogen oxides (NOx) which contribute to smog and ground-level ozone. These pollutants can trigger asthma attacks, worsen respiratory problems, and even increase the risk of heart disease.
  • Fewer Respiratory Issues: Children, older adults, and people with existing respiratory conditions are especially vulnerable to air pollution from gas plants. Shutting one down can lead to fewer cases of asthma, bronchitis, and other respiratory problems.
  • Environmental Justice: California gas plants are often located in low-income communities and communities of color. Shutting down a plant can improve air quality and health outcomes in these underserved areas.

Socioeconomic Benefits of Central Coast OSW Development 

Central Coast OSW development will benefit job creation, the SLO County economy, and local workforce training resources. A report by Cal Poly SLO professors predicts that a 7 GW project could generate 684 annual operation jobs with 617 long-term jobs (20 years or more). The overall impact to California, including spill-over impacts to other regions, is $3 billion for 5 years (or $599 million per year).

  • Community Benefits Agreements

An important element of the OSW leases is the inclusion of bidding credits for community benefits agreements (CBAs), which include a collective commitment by lessees of more than $50 million to support impacted communities and ocean users impacted by the project. A breakdown of these CBA commitments and more information on CBAs can be found in Volume II, Chapter 7 of the AB525 Offshore Wind Energy Strategic Plan. Offshore wind leaseholders are required to develop community benefits agreements with local communities to fulfill their lease bidding credits, which may include training and educational programs and requirements for local hiring that would benefit port communities and California tribes.

  • Tax revenues

Offshore wind can generate billions of dollars in tax revenues for state, local, and federal governments. Potential sources of tax revenue include:

  1. Property Taxes: As infrastructure and equipment are installed, property taxes will be levied on the project assets.
  2. Sales Tax: Purchases of materials and services for the project will generate sales tax revenue.
  3. Income Tax: Salaries of project employees and profits of the project developer will contribute to income tax revenue.
  4. Corporate Tax: The project company will be subject to corporate income tax.
  5. Lease Revenue: The federal government will generate revenue from lease payments for the offshore area.
  6. Federal Excise Tax: A federal excise tax on electricity production from offshore wind facilities will apply.
  • Benefits From Avoided CO2 Emissions 

Adding 5 Gigawatts of offshore wind would have substantial benefits for the environment and California residents’ health. It would avoid over 10 million short tons of CO2 emissions annually. Using a 2 percent discount rate, this represents a social cost of carbon value of $3.8 million.

  • Energy equity

The California Energy Commission’s plan establishes guidelines for offshore wind and port projects that support communities, including:

  • Community Support: The plan emphasizes involving communities throughout the development process. This includes consultations with local residents, fishermen, and indigenous tribes to ensure their voices are heard and concerns addressed. Providing benefits like jobs, clean energy access, and infrastructure improvements can also be part of supporting communities.
  • Workforce Development Programs: Creating training programs to ensure local communities benefit from the new jobs created by the offshore wind industry.
  • Avoiding Environmental Injustice: Unlike oil and gas extraction, which can have a disproportionate negative impact on low-income areas and communities of color, the CEC's plan focuses on placing wind farms in areas with minimal environmental impact and ensuring construction and operation do not pollute local water or air, such as:
    • Strategic Placement of Wind Farms: Identifying areas for wind farms that minimize environmental impact on sensitive ecosystems and fisheries.
    • Port Infrastructure Upgrades: Upgrading existing ports instead of building new ones in pristine areas can lessen environmental damage.
    • Environmental Monitoring: Implementing measures to monitor and mitigate any potential negative impacts on marine life and ecosystems.
  • State Investments

Economic benefits of offshore wind are expected from investments in seaport and waterfront facilities. Plans are underway for renovations at the Port of Humboldt Bay with $10.5 million in funding approved by the CEC in March 2022.  In addition, the Port of Long Beach is being developed as a major wind port.

Mitigating Job Losses in the Fossil Fuel Industry Through OSW Economic Benefits

This is an overview of a complex subject.  For more detailed information see CHAPTER 3: Offshore Wind Potential Economic and Workforce Benefits and CHAPTER 7: Workforce Development of the Adopted Final CA Energy Commission Report - Strategic Plan Volume II: Main Report.

The transition to renewable energy sources, such as offshore wind (OSW), is essential for addressing climate change but it can lead to job losses in the fossil fuel industry. However, the economic benefits generated by OSW projects can be strategically invested to support displaced workers and facilitate a smooth transition.   

Few fossil fuel plants in the coastal communities will be impacted by OSW, with the exception of Long Beach.  As a result, the displaced jobs from retired fossil fuel plants are distant from the coastal communities that will supply most of the OSW employees.  For example, the only lost jobs in the fossil fuel plants on the Central Coast are at the Phillips 66 Santa Maria Refinery in Nipomo, which shut down in January 2023, as part of a planned conversion of Phillips’ San Francisco Refinery in Rodeo to one of the world’s largest renewable fuels facilities.  Also, the Santa Maria Refinery produced transportation fuel, not electricity, so there was no direct displacement by OSW. 

In California, environmental justice requires that some community benefits of OSW development be shared with inland communities with displaced gas plants.  Many coastal employees who live close enough to OSW port facilities may make voluntary decisions to move into a new and growing industry and therefore not experience any injustice.

However, just by displacing the highly polluting plants, OSW will provide a huge benefit to these communities, which will see their public health and property values increase as a result of gas plant closures.  Arguably, any damage done prior to the advent of OSW is the responsibility of the fossil fuel companies and perhaps the recipients of electricity from these plants (i.e. citizen rate payers).

The term “impacted communities” as used below includes both coastal and inland communities.  A method of equitable apportioning benefits should be devised.

Here are some potential strategies:

Direct Job Creation and Retraining

  • Offshore Wind Industry Jobs: Invest in training programs to equip fossil fuel workers with the skills necessary for offshore wind installation, maintenance, and operation. This can include roles in engineering, construction, marine operations, and project management.  
  • Supply Chain Development: Support the growth of domestic supply chains for OSW components, creating manufacturing and assembly jobs that can employ former fossil fuel workers.  The distances mentioned above are probably not prohibitive for this purpose.

Economic Diversification

  • Infrastructure Development: Utilize OSW project revenues to fund infrastructure improvements in coastal communities, such as port expansions, transportation networks, and renewable energy grids. This can create jobs in construction, engineering, and related fields.  Again, this does not help mitigate fossil fuel job losses that are generally not on the coast in California.
  • Tourism and Recreation: Invest in developing coastal tourism and recreation opportunities, which can generate jobs in hospitality, leisure, and related sectors.

Worker Support Programs

  • Wage Subsidies and Job Placement: Provide temporary wage subsidies and job placement assistance for displaced workers while they transition to new careers.  This should be focused on displaced workers, not workers from coastal communities who are voluntarily changing careers.  Local labor organizations may not like this, but they are usually part of state and national organizations that will benefit.
  • Early Retirement and Pension Support: Offer early retirement options with enhanced pension benefits for older workers in the fossil fuel industry.
  • Entrepreneurship Support: Provide financial and technical assistance to workers interested in starting their own businesses, particularly in the renewable energy or related sectors.

Community Development

  • Education and Skill Development: Invest in education and training programs for the local community, including programs focused on STEM subjects and renewable energy technologies.   These local communities should be those losing fossil fuel jobs, not coastal OSW communities unless local fossil fuel plants are closing.  
  • Affordable Housing: Use OSW revenues to support affordable housing initiatives in areas affected by job losses, helping to stabilize communities and prevent displacement.

Policy and Regulatory Support

  • Just Transition Plans: Develop comprehensive plans that address social and economic impacts of the energy transition, including provisions for worker retraining, job creation, and community support.
  • Tax Incentives: Offer tax incentives to businesses that create jobs in renewable energy and other emerging sectors in regions impacted by fossil fuel phase-out.

By carefully planning and implementing these strategies, communities, government, and business can mitigate the negative impacts of job losses in the fossil fuel industry while maximizing the economic benefits of offshore wind development.