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What lies ahead for U.S. offshore
2022 to provide sneak peek into what lies ahead for U.S. offshore wind
Offshore wind activities that will be taking place in the United States throughout this year could provide early insight into what lies ahead for the country in terms of offshore wind deployment volume, reuse of oil and gas infrastructure, Power-to-X opportunities and, most importantly, readiness and capabilities of the domestic supply chain, according to the latest report from the Business Network for Offshore Wind.
As the first two utility-scale U.S. offshore wind farms, Vineyard Wind 1 and South Fork, are starting offshore construction this year, 2022 will provide “the first indicators as to whether the capacity of the domestic and global supply chain will be able to manage the volume”, the report reads. This is in relation to the country having multiple projects going through federal permitting process and moving towards having multiple large-scale offshore wind farms entering construction during the next several years.
Furthermore, this year will bring a better view of new developers, projects, project capacities, and economic impacts that await the country after its upcoming lease sales, from New York Bight, Carolina Long Bay, Northern and Central California, to Gulf of Mexico, with the latter viewed as an ideal location to reuse oil and gas infrastructure and to tap into Power-to-X possibilities, primarily green hydrogen.
With the 132 MW South Fork already having started export cable work last month and the 800 MW Vineyard Wind
1 set to commence offshore works this year, the U.S. market “will begin to gain significant data points and practical understanding of commercial scale offshore wind construction and installation in federal waters”, according to Business Network for Offshore Wind (the Network), whose report also points out that supply chain readiness for the country’s offshore wind industry remains a challenge.
Building two projects at the same time, and especially the large-scale 800 MW wind farm, located in federal waters offshore Massachusetts, will bring some important insights about logistics coordination and project execution while complying with US protocols and regulations, the U.S. Offshore Wind Market Report & Insights report states.
When it comes to the matter of supply chain readiness, the Network emphasised a lack of domestic capacity to meet the heavy manufacturing needs of offshore wind projects in U.S. waters, which the report attributes to the approach in offshore wind procurement that focuses on the lowest-cost criterion, among other things.
This affects the U.S. supply chain as the effect of lowest-cost-based procurement turns out to be making participation by domestic businesses almost impossible, according to the report, while the economic impact the offshore wind industry can bring should be delivered by “enabling robust participation of small business and mid-sized firms”.
The Network also pointed to the need for more planning, concrete timelines, clarity of permitting responsibilities, and clear and consistent governmental support, on both federal and state levels, to boost certainty and investor confidence, and industry planning and readiness.
This will, among other things, help domestic manufacturers to reshuffle and upgrade to be able to meet the offshore wind component manufacturing needs, which they currently cannot as they are reluctant to make significant investments in upgrades or new production lines without a clearly defined and well-understood revenue stream, which currently leads to the manufacturing needs for U.S. offshore wind projects being fulfilled by suppliers outside the country.
The U.S. is set to hold four offshore wind lease sales this year, starting with New York Bight, its largest ever offshore wind auction. In the New York Bight lease sale, developers will be able to bid on six offshore wind lease areas, which the Business Network for Offshore Wind expects to result in an influx of new market participants and cascading positive effects through the emerging domestic offshore wind supply chain, as well as in creating market conditions that can lead to reduction of project electricity prices.
Next to that wind energy areas in the Carolina Long Bay will be auctioned, which is set to drive additional economic development opportunities further to the south, the report says, highlighting the need for a rapid expansion of North Carolina’s offshore wind supply chain as the supply chain hubs now emerging in Maryland and Virginia could take on meeting the state’s projects’ demands. Later this year, the U.S. government will also organise lease sales offshore Northern and Central California. According to the Network’s report, these will “highly influence the shaping of California’s offshore wind goals and its offshore wind program”.
For the state that last year enacted its first offshore wind legislation which will
bring its targets for 2030 and 2045 by this June, the number of leases that the federal government will offer in the upcoming auctions and the successful bidders it yields will affect the level of competition in California’s solicitations seeking offshore wind generation.
In late 2022, the first offshore wind leasing is expected to take place for areas in the Gulf of Mexico, for which the report stressed that electricity market conditions are different as Southeast utilities are vertically integrated. The Network also pointed out opportunities for oil and gas infrastructure repurposing and the potential for this U.S. region to drive the offshore wind-to-hydrogen industry.
When it comes to the electricity market in the Gulf of Mexico region, the utilities’ model requires any investments they make to be rate-based which leads to price often being the main factor in power generation procurement. Here, the Network again emphasised that “a purely lowest-cost approach does not necessarily generate the economic development opportunities that a more holistic approach to offshore wind can deliver”.
On the opportunities Gulf of Mexico could offer, the report said there was an ongoing discussion regarding repurposing existing offshore oil and gas infrastructure for offshore wind deployment, which is most likely to result in using already-disturbed areas of the seabed for export cable routes while not interfering with the large amount of existing infrastructure in the region. This existing oil and gas infrastructure also positions the region to be a driver in scaling up the synergies between offshore wind and hydrogen, according to the report.
Yet, the Gulf of Mexico’s offshore wind market will depend on the decisions and targets of the region’s state governments, the Network said and added that Louisiana was the only Gulf of Mexico state that had publicly expressed an interest in offshore wind in any official capacity. To remind, the state recently set a target of 5 GW of installed offshore wind capacity by 2035 in its first-ever Climate Action Plan.
The Plan proposes enactment of the offshore wind power generation goal of 5 GW by 2035, which requires strategic collaboration across Louisiana’s state agencies and the federal government, transmission planning agencies, energy regulators, utilities, and the private sector to take additional steps to advance the development of offshore wind power generation.
“This clear signal of interest, in the form of a secure revenue stream and likelihood of return on investment, will help drive deployment of offshore wind turbines in the Gulf of Mexico”, the Business Network for Offshore Wind said in the report.
By Adrijana Buljan
