The missing links in US offshore wind

IN DEPTH | How will the US build its gigawatts of planned offshore wind projects with no local supply chain, and what role can the offshore oil industry play, ask Rick von Flatern in Houston and Darius Snieckus in London

The US may have the potential for hundreds of gigawatts of offshore wind and so far leased 1.2 million acres of coastal waters for development — but how will this build-out take shape without an equipment supply chain, dedicated installation vessels and ports geared up for the sector?

Will projects be supplied from across the Atlantic, using European-built turbines and vessels — as the first US offshore wind farm, Block Island, was? Or can a local offshore wind industry spring up, creating thousands of manufacturing and service jobs?

According to more than one of the world’s leading offshore wind chiefs, a US offshore supply chain will happen — though only if there is long-term market visibility.

The US would need similar volumes to Europe — which saw 3GW of installations last year and has ambitions to double this figure by 2020, says Samuel Leupold, chief executive of the offshore wind business of Danish utility Dong Energy, owner of the world’s biggest pipeline of offshore wind plant and developer of the 1GW Bay State project off Massachusetts.

“A build-out of a couple of thousand megawatts a year, or at least some visibility over a couple of thousand megawatts towards 2025 [is needed],” he tells Recharge. “That’s the environment we need to create to motivate local or international suppliers to go and invest in manufacturing locally. For that, we need to create visibility. If we succeed in doing that, it will happen.”

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Many industry observers see the time as ripe for a boom in US offshore wind because of how low the European sector has managed to drive down prices in recent months. At Germany’s offshore auction in April, Dong and German utility EnBW won the right to build projects on a zero-subsidy basis — something that would have been inconceivable only a few years ago.

“The US understands that their supply chain isn’t there today, but there is a strong desire for open discussions and to find solutions,” says Stephen Bull, senior vice-president for wind at Norway’s Statoil, which was awarded a 1GW offshore site off New York earlier this year. “[The US] is looking for the jobs, the energy security and the infrastructure investments. Offshore wind ticks all the boxes. The supply chain will come. It just needs volume.”

There are, indeed, strong indications that the political consensus — certainly on the eastern seaboard — is staunchly in favour of offshore wind. In the past two years, huge swathes of acreages of Massachusetts, New York and North Carolina have been leased to developers, including Dong, Statoil and, more recently, Iberdrola-owned Avangrid. The Bureau of Offshore Energy Management sees tenders as a “multi-year effort”, with many gigawatts of offshore wind projects already in the pipeline in US waters.

But exactly how these projects will be built, where the equipment will come from and what the levelised cost of energy (LCOE) might be is still anyone’s guess. As Leupold says, the volume — and therefore supply chain — will inevitably be driven by the LCOE. While the US Northeast has some of the highest electricity prices in the country, and will see a big wave of retirements of conventional power plants in the coming years, offshore wind will be competing against low-cost natural gas and the growth of solar, and in some places against imported Canadian hydropower.

And with subsidies under threat from a Republican administration, the nascent US industry may have to become profitable at market prices sooner rather than later. To do so, it must mature quickly and lower its capital and operating costs through innovative technology and a robust local supply chain.

But from where exactly will this supply chain emerge? An obvious source might be the extensive onshore wind industry in the US, where many European turbine and parts manufacturers have their own factories, including several companies that also build offshore machines.

As Bob Harrell, director of operations at oil & gas contractor Houston Offshore Engineering, says, the US is flush with turbine expertise and manufacturing potential. But he points out that the large offshore models required are still available only from European plants. And turbine blades, while made domestically, are manufactured at locations in the US wind belt, far from coastal staging areas.

“Most land-based stuff is inland and getting that blade onto a boat to get it out [to an offshore project site] is next to impossible,” he states. “So that has a major impact on the supply chain and the infrastructure.”

Turbine installation is also a key issue, largely due to the notorious Jones Act — which requires all goods transported by water between American ports to be carried on US-flagged vessels. For the 30MW Block Island array, Norwegian contractor Fred Olsen Windcarrier sailed the project’s five GE turbines over from France and installed them off Rhode Island without ever anchoring in a US harbour. But such an approach is expensive and probably unsustainable with the gigawatt-scale projects looming.

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One answer would be the huge installation vessels built for the offshore oil & gas industry. If the oil price doesn’t rebound sufficiently to reboot flagging operations in the Gulf of Mexico, this US-registered fleet might be looking hungrily for offshore wind work.

“If the Jones Act proves insurmountable, competing developers will need to become strange bedfellows and align timelines while cooperating closely on the use of installation vessels to maximise their on-site time,” notes MAKE Consulting analyst Anthony Logan. “But even win-win co-operation among competitors is rare in wind development.”

There is one area, however, where the US oil & gas industry is more than capable of supplying the local offshore wind industry: turbine foundations.

Block Island developer Deepwater Wind awarded the landmark contract for the project’s jacket foundations to Louisiana-based Gulf Island Fabrication, which has been milling and welding together giant structures for Gulf of Mexico offshore oil platforms for more than three decades.

“There are a lot of the same principles and technology in the construction of wind and oil & gas platforms, and so we saw offshore wind as a potential opportunity,” says Roy Francis, Gulf Island’s senior vice-president of business development. “It is a different type of energy. But they still need steel piles, jackets and decks.”

"There are a lot of the same principles and technology in the construction of wind and oil & gas platforms"

Constructing fabrication facilities for both turbines and foundations on the US east coast, closer to the pipeline of projects, will be a challenge, says Harrell, whose company is also exploring opportunities in offshore wind.

“On the Gulf Coast, we are set up to weld and fit steel. We have cranes and yards and bulkheads. But in the Northeast the facilities are mostly shut down.”

Harrell says that the industry is talking about the shortage of quaysides and is working towards solutions. “We looked at a lot of quayside places to make these assemblies,” he explains. “They have old ones that are basically abandoned slips. There could be some areas but then you have all these bridges to get through, so the problem of getting equipment to open waterways is not trivial.”

Francis points out that the offshore wind industry also has other needs that can be met by suppliers and contractors in offshore oil & gas.

“There is also a call for various construction and support vessels, just as there is in supporting offshore rigs and platforms,” he notes. “They have to gather environmental and wind and other data and install the structure, lay a cable back to the beach and maintain the structures. All those tasks are similar to those that take place in traditional oil & gas industry.”

Logan points to the Gulf Island’s contract for the Block Island foundations as “a promising test case for the US offshore oil supply chain’s entering offshore wind, especially as suppliers in the field are struggling with a dearth of megaproject contracts as the onshore fracking boom drives ahead. But it’s just that, a test case”.

So while it will be up to the likes of OEMs GE, MHI Vestas, Siemens and Senvion as to when to take a leap of faith on a US offshore turbine factory, for foundations and other services, the offshore oil & gas industry seems keen to step into the breach.

And with more firm commitments from the densely populated energy markets in the Northeast, perhaps the development of a US offshore wind supply chain may not be that difficult after all. 

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