The capacity of offshore wind energy in Europe grew by 18% last year, which means the United States has a lot of catching up to do. Although the U.S. offshore wind industry is in no competition with Europe, it does hold the promise of significant environmental and economic benefits for the country. And the thriving European market is in an ideal position to support the U.S., providing lessons learned and guidance to ensure a successful market.
Richard Baldwin, Principal Consultant at global environmental consulting firm Ramboll, recently shared his thoughts and insight about the offshore wind industry with Windpower Engineering & Development. Bladwin is a lead practitioner in the Ramboll’s U.S. offshore wind team, a firm with roots in Europe that’s also heavily involved with a few of the proposed offshore wind projects in East Coast the U.S.
Here, Baldwin answers questions about the current U.S. offshore pipeline, expected market size, challenges, and benefits. He also suggests the top lessons that the United States could learn from the Europe offshore industry.
Q. Could you please provide an overview of the current U.S. offshore wind pipeline and how it’s progressing?
A. To attract the supply chain players to the United States, we need a long-term pipeline of work – that is, a market for offshore wind (OSW) suppliers and manufactures to “sell to.” The Eastern States (Massachusetts, New York, New Jersey, Maryland, and Virginia) have or are planning to issue 16 GW of OSW power solicitations through 2030 and 2035.
These tranches give us the long-term pipeline needed to attract the supply chain players. The work will require new factories, which means a reliable pipeline is critical to making this cost-effective and feasible. It also means new marine infrastructure and jobs will be required to “make it happen.”
The 10 to 15-year pipeline is crucial to wooing manufacturers to come here. Much of the expertise and manufacturing capacity currently resides in Europe. As the industry matures in the U.S. over the next few years, we will develop our expertise, manufacturing capacity, port facilities and work force. As such, we anticipate that over time the industry will become more American-centric than Euro-centric.
Q. What challenges do you foresee for the U.S. as it welcomes a new wind market?
A. The biggest short-term challenge – and opportunity – is the lack of infrastructure to support the build-out of the wind farms, such as ports, harbors, lay-down facilities, strong quay-sides, required facility acreage, and facilities, etc. Until we have the manufacturing here in the U.S., very large components will be coming from overseas. Even if the majority of the components come from “across the pond,” we will still need lay-down and staging facilities. We will also need the very-specialized marshaling and erection ports where the components are assembled prior to being taken out to the offshore wind farms.
Another East Coast challenge is how the development of OSW is going to affect the commercial and recreational fishing industries. The commercial fishing industry is concerned about potential job displacement, navigation issues, gear damage, etc. They are currently one of the strongest opponents to the OSW industry along the East Coast. Recreational fishers are typically in favor of offshore wind as the infrastructure actually provides a high-quality habitat for many fish species.
Studies being conducted by the Federal Bureau of Offshore Energy Management (BOEM), developers and states indicate only minimal impact to offshore marine resources. But the fishing industry is worried about the big towers in the middle of their fishing /catch areas. Are they being displaced? If not, what if their gear gets damaged?
In some Euro-wind farms, fishing is actually prohibited. In the U.S., the goal is to continue fishing in the areas, as regulated by the U.S. Coast Guard.
Q. What are some of the benefits?
A. OSW is 100% renewable with nearly zero emissions once wind farms are completed and operational (there will be minor emissions associated with O&M vessels). OSW produces electricity during the hottest periods of the day, which means providing power at the highest need levels.
In the U.S., some of the power infrastructure is being shut down (e.g., coal and nuclear). OSW would replace existing infrastructure that is being taken off line. So, in the near term, the effect may be neutral, but in the future, OSW would result in a net gain in power capacity. Again, this is a renewable energy source that has very low to zero emissions.
The East Coast is an optimal location for OSW because of the strong, blowing wind; relatively shallow continental shelf; and adjacency to main load centers where the power generated is being used.
Q. What is or will be unique about the U.S. offshore sector that investors and developers should factor in and prepare for?
A. The size of the market and pipeline of projects through 2035 will make the U.S. OSW sector unique. There will be a challenge at first because it’s a completely new, developing market in the U.S., compared to a mature market in Europe. However, we will not be doing business the European way, but the American way. Our federal government is not structured the same as European governments – here, multiple stakeholders must be included in the permitting and approval of a New York OSW project.
Developing EIA methodologies means much of the environmental information required to support the permitting process is to be acquired by the developers. This adds risk to the market sector for OSW developers. In the short term, we don’t have the shoreside infrastructure needed to support buildout – it is currently unclear who will pay for the development of such upgrades – individual states, OEMs, developers, etc.? The answers to this issue will be a driving factor in the final cost of energy for developing offshore wind farms.
Investment in the ports and harbors has to be fairly short term as they are needed to build out the offshore wind farms over the next three to four years. States are taking different approaches to this. Developers and OEMs will come to the states that provide the best economic incentives. In Europe, improvements to ports, harbors, quaysides, lay-down areas, channels, etc, are typically funded by the federal governments. The OSW developers and OEMs are not accustomed to having to pay for the port redevelopment. Hundreds of millions of dollars in upgrades will be necessary. Tax incentives? Grants? State funded? Other?
Q. What is the size of the market?
A. Sixteen GW of offshore wind energy facilities are currently planned for the East Coast. As the market matures over the next few years and becomes more self-sustaining, this number is likely to increase. The federal government (BOEM) identifies and puts out bids for lease areas, including those approved OSW farm development. Because lease areas are more than three miles offshore, they are in federal waters. The highest amount paid for a BOEM lease until recently was $40 million for a project off New York City (Statoil, now Equinor). BOEM just awarded three new lease areas off the coast of Massachusetts that went for $135 million each. This significant increase in the amount that developers are willing to pay for a BOEM lease area demonstrates the viability of the US OSW industry.
Holders of BOEM leases are not guaranteed a project, though. The actual solicitations of either power purchase agreements (PPAs) or offshore wind renewable energy credits (ORECs) are issued by individual state entities. As such, BOEM lease holders must prepare bids for individual state solicitations. Depending upon the state, the bid selection criteria typically include energy cost, local content requirements, environmental mitigation plans, etc.
For example, for a recent Massachusetts solicitation, there were three bids – Vineyard Wind, Orsted, and Deepwater – and only Vineyard was awarded a PPA.
The number of lease areas up and down the coast drives the pipeline, determined by BOEM. Then, the states let the solicitations. Both New Jersey and New York have very large solicitations for PPAs and ORECs, and both states have plans for significant solicitations out through 2035. BOEM is currently evaluating the possibility of establishing multiple new lease areas off the New Jersey and New York bight, south of Long Island.
Q. What are the top three lessons that the U.S. can learn from European offshore wind?
A. Focus on public communications and engagement constantly – and often – during the process of preparing to develop and permit. Don’t surprise the public and stakeholders – be open, be honest. Take into account various stakeholder concerns and recommendations. For example, when holding public meetings, avoid ignoring the information and recommendations provided.
Engage and work with the commercial fishing industry. European players in this space advised that this helped them a lot. Listen and be responsive. Try to make changes to accommodate this industry. The other fishing industries are actually positive – recreational and sport fishing like OSW because it creates more habitat.
Offshore wind is a huge job market booster. OSW creates both white and blue-collar jobs for decades, as well as science and engineering, but also vessel operations and repairs, ship hands, port operators, wind-turbine repairs, and O&M. Work to make it easy and economically viable for manufacturing to come to the US, be it by grants, tax incentives, job training programs, port facilities, etc.
Once our OSW project pipeline is established, the developers and OEMs will conduct cost-benefit analyses that will show they will be able to produce their electricity at lower costs once manufacturing activities are conducted domestically. Further, with domestic supplies and manufacturing, there will be less risk associated with keeping the supply chain going as the components will not need to be shipped across “the pond.”
Further, once the U.S. supply chain is fully established, it can also provide components to other county’s markets.
Be excited. Be positive. Don’t be defensive.