The US offshore wind industry could fall well short of the Biden administration’s goal of installing 30GW of turbines by the end of the decade, due to a combination of a slow and complex permitting process, underdeveloped supply chain and lack of Jones Act-fit installation vessels, according to new calculus from IHS Markit.
This “crucial lack of infrastructure” – including the nation-wide issue of America’s antiquated power transmission system – could mean only 21GW is set turning by 2030 despite the more than $100bn in investment forecast to this date, according to the Paris-headquartered analyst group.
“Over time and with scale, as more and more offshore wind farms in the United States are consented, equipment manufacturers will be more willing to invest and build local supply chains and new installation vessels,” said IHS Markit clean energy technology principal analyst Andrei Utkin.
“But it will be a gradual process as the industry needs to see a rich pipeline of consented projects and a clear regulatory framework before committing to invest billions of dollars in local factories.”
In a new report on the sector, the analyst group said: “The evolution of the US offshore wind market is being driven by an increase in state-level policy commitments, federal lease sales, offtake agreements, and supply chain activities. But bottlenecks in the market and a crucial lack of infrastructure mean that President Biden’s optimistic [2030] offshore wind target will almost certainly be missed.”
It also spotlighted the “further impediment” of the Covid-19 pandemic along with delays expected in constructing the first wave of projects caused by the Bureau of Ocean Energy Management’s (BOEM) “lengthy investigation of the implications from the project build-out”.
Expansion to 21GW from the 42MW currently in operation would nonetheless be “impressive” given the US’ share of the global total installed offshore wind capacity would grow from “close to 0%” to around 9% in 2030, said IHS Markit, noting that the pace of developing of offshore wind farms cold pick up “as the industry matures [and] the permitting process may ameliorate”.
Massive infrastructure investment will help “lay a path for growth”, said the analyst, pointing to capital expenditure of more than $500m planned for port upgrades and supporting “shore-side wind energy activities”, such as storage, laydown, and docking areas, as will the flagship wind turbine installation vessels currently being built in US shipyards, each representing a spend of between $250-$500m.
Cost for offshore wind in the US today is high compared to other carbon-free generation resources, the analyst stressed: “Current unsubsidised costs for bottom-fixed and floating wind projects are estimated at $125-$225/MWh respectively, well above wholesale electricity prices and costs for both onshore wind and PV.”
“While costs are expected to decline sharply in the coming decades and the cost gap between bottom-fixed and floating is expected to narrow, offshore wind will remain a relatively expensive resource,” it added.
Utkin said: “Looking beyond the levelised cost of electricity, offshore wind offers alternative benefits over less-expensive onshore wind and PV, including higher capacity factors and greater capacity value.
“Onshore wind and PV are increasingly constrained by availability of land, particularly in the US Northeast and Mid-Atlantic. Moreover, offshore wind projects are located close to load centres, generating large volumes of clean electricity for major coastal cities.”
Still, he added, “vast investment opportunities [await] once initial hurdles are overcome”, with a $2.5bn capital spend already announced by developers “in a variety of projects”, including infrastructure upgrades, ports and factories for foundations, towers, blades and cables, “and the first offshore wind nacelle assembly facility by GE Renewables that will assemble nacelles for [Orsted’s] 1.1GW Ocean Wind 2 project off the coast of New Jersey.
Other analysts have voiced concern that the 2030 target will not be reached on schedule, with BloombergNEF forecasting 23GW of turbines in the water by the end of the decade.
But Ross Gould, vice president of supply chain development at US industrial advocacy body the Business Network for Offshore Wind (BNOW), suggested recently in Recharge opinion column that the Biden 30GW goal “will be met because the goal has been set”.
“For years offshore wind was confined to the halls of state capitols, but still experienced significant behind-the-scenes progress that set the industry up for today’s growth. Now we are seeing the Biden administration’s “whole of government” approach kick the industry into high gear, showing what extraordinary progress is possible with federal support,” said Gould.
