On March 8, the Biden administration endorsed what would be the largest offshore wind project in the U.S., injecting some life in an industry that has remained in its infancy in the U.S., despite having already matured elsewhere.
Projects are growing larger, more competitive and more numerous around the world, but the $2.8 billion Vineyard Wind project off the coast of Massachusetts could be the first major offshore wind project in the U.S.
Stagnant in U.S., offshore wind grows in Europe
Offshore wind has run into repeated regulatory snags in the U.S., with powerful groups on opposite ends of the political spectrum derailing early projects in Massachusetts in the early to mid-2000s. To date, no region outside of New England has come close to matching that early momentum. After repeated setbacks, offshore wind never really got started in the U.S., and a decade of cheap natural gas didn’t help matters, as high-cost offshore wind struggled to compete.
After repeated setbacks, offshore wind never really got started in the U.S.
But offshore wind has flourished in Europe, particularly in countries around the North Sea, such as the UK, the Netherlands and Denmark. Europe has over 25 gigawatts (GW) of offshore wind capacity currently online, having added 2.9 GW in 2020.
In the International Energy Agency’s World Energy Outlook from last year, the agency sees offshore wind accounting for the largest source of electricity in the European Union in 2050 in its Sustainable Development Scenario. In that scenario, offshore wind accounts for a quarter of EU electricity generation, followed by onshore wind, nuclear power and solar PV.
Costs for offshore wind are expected to remain higher than onshore wind or solar PV for the foreseeable future. However, offshore wind has operational advantages over other renewable technologies. Capacity factors are much higher than onshore wind and solar – the wind in the open ocean is stronger and more consistent – offering big opportunities for major load centers near the coast.
Costs continue to come down. The IEA says that average offshore wind costs could fall to $50/MWh over the next five years, or about half of the costs of projects from 2019.
Last year saw a record for new offshore wind financings. More than 15 gigawatts of new projects around the world received financing, according to Bloomberg New Energy Finance. That was up 50 percent from the prior year.
One particular project stood out. The Dogger Bank project in the North Sea, backed by Equinor, is a 3.6-gigawatt project split in three phases of 1.2 GW a piece. The first two phases received a greenlight with $8 billion in financing last year. As BNEF notes in a report, the Dogger Bank project has a footprint in the North Sea the size of Greater London.
U.S. offshore wind receives a jolt
Even as Europe continues to see strong offshore wind growth, in the U.S., large-scale projects have been on the drawing board for years but have struggled to move into the construction phase. One project off the coast of Rhode Island is the sum total of what the U.S. offshore wind industry has to show for itself. And the Block Island project is only a paltry 30 megawatts.
That could soon change. On March 8, the Department of Interior finalized the environmental impact statement for the Vineyard Wind project, which, at 800 megawatts, would generate enough power for 400,000 homes. Backed by Avangrid Renewables and Copenhagen Infrastructure Partners, Vineyard Wind’s 800-MW project will be the first large-scale project in the country. The carbon-free electricity it generates will be equivalent to removing 325,000 cars from American roads each year. It still needs one final federal permit from the Army Corps of Engineers, which is expected to be issued within the next month or so.
East Coast states are aiming to have 25 GW of offshore wind by 2035.
More commitments are beginning to pile up. As of now, East Coast states are aiming to have 25 GW of offshore wind by 2035, a figure that may grow as costs decline and steel gets put into the ground. If a big infrastructure package is passed through the U.S. Congress – and the Biden administration is reportedly working on one for this year – it could supercharge the offshore wind sector.
“The demand for offshore wind energy has never been greater,” Laura Daniel Davis, principal deputy assistant secretary of land and minerals at Interior, told reporters in a news call. “The technological advances, falling costs, increased interest and the tremendous economic potential make offshore wind a really promising avenue.”
The other bright spot for offshore wind is the prospect of a new source of industrial employment. In a promising sign, Ørsted, a major offshore wind company that built the 30-MW Block Island Wind Farm in Rhode Island, announced an agreement with North America’s Building Trades Unions (NABTU) in November 2020, a labor union representing over 3 million workers.
The partnership between a big wind developer and a major building trades union is aimed at training and growing a unionized workforce to construct the array of offshore wind projects in the works for the East Coast. The agreement is a hopeful sign that not only will the sector offer new employment, but also that the jobs will be of high pay and high quality.
Nevertheless, despite all the promise, it is important to note that the offshore wind industry is only beginning to get off the ground, and remains far behind onshore wind and solar PV. There is still a long way to go.
Industry players welcomed the Interior Department’s approval of Vineyard Wind, but they want faster action. “Wind developers also need the certainty that comes with a clear timeline of future opportunities. It has been more than two years since the last offshore wind lease sale,” said Erik Milito, President of the National Ocean Industries Association, which represents both offshore oil and offshore wind industries.
“Wood Mackenzie determined that new, near-term lease opportunities could support 80,000 jobs annually and generate $166 billion in new investment by 2035, but the Bureau of Ocean Energy Management (BOEM) must first open the door to new leasing,” Milito said.