The Jones Act – Is it a drag-anchor on US Offshore wind?

The United States enforces a protectionist policy on vessels plying its coastal waters, which may be a significant problem for the young offshore wind industry.

The Jones Act is a federal law, enacted after World War One, that regulates maritime commerce in the United States. The Jones Act requires goods shipped between U.S. ports to be transported on ships that are built, owned and operated by United States citizens or permanent residents. Its proper name is The Merchant Marine Act of 1920.

The intention behind it was to boost US shipbuilding in the aftermath of the war and ensure transportation was being handled effectively, but that was nearly a century ago, and many US exporters and importers feel it is a considerable handicap, adding costs and delays in moving goods. For example, there are only two Jones-compliant bulk carrier vessels available to the mid-West’s grain and soya-bean farmers, which too few for their needs and often they have to ship by truck overland, which is inefficient, and increases carbon emissions and other pollution.

Specialised Vessels for the Offshore Wind Industry

Although many ships such as barges or jack-up vessels can be utilised for installing and maintaining offshore wind developments, there is clearly a necessity for specialised vessels with the capability to transport, erect, and maintain large wind turbines, often in difficult conditions.

A paper published in Ocean Engineering states “At the beginning of the Offshore Wind Farm (OWF) development in the UK in 2001, the vessels used for construction introduced bottlenecks and delays in construction. This was caused by a lack in availability of specialised vessels as these were predominantly used in the oil and gas sector, introducing competition for their services. In some cases, the vessels were oversized or not ideally suited to the operations, which were often sourced at overinflated charter rates. As OWF development increased, the industry began to manufacture purpose built offshore wind vessels that would offer more deck space, cope with more severe weather and reduce overall installation durations (Offshore-technology, 2012).”

Given that installation can be up to 30% of the costs of an offshore wind array, and the fledgling US  industry does not need to be hampered by extra costs – this is a topic that needs to be addressed. The Cato Institute estimated that the Jones Act increased costs in this sector by 2.7 times over those of foreign competitors.

Clearly “making-do” by utilising barges will not be sufficient.

The experience of Block Island Wind Farm

Offshore Wind developer Deepwater Wind (now Ørsted) hired Fred. Olsen Windcarrier’s self-propelled jack-up vessel Bold Tern for the installation of their turbines, but then fell afoul of the Jones Act. That ship was not allowed to touch the shore and separate barges had to rendezvous at sea to bring the turbines, piles and other materials to the site.

To build more specialised vessels compliant with the Jones Act to perform this task, meanwhile, will cost the sector greatly in terms of both time and money. An analysis conducted for the Department of Energy found that a U.S.-built wind turbine installation vessel would “likely cost 60% to 200% more than a comparable vessel built in an Asian shipyard,” while another report placed the price tag of such a ship at $222 million with a construction time of 34 months. This is when capable vessels and crews are available in Europe and elsewhere.

It is likely that a newly-built US vessel would not be economically viable because there would be insufficient projects for it, until the industry is mature enough – a classic “chicken and egg” situation.

Waiving the Jones Act

It is permissible for the Jones Act to be suspended under certain circumstances. During Hurricane Maria in 2017, President Trump waived the Jones Act for 10 days, allowing ships with disaster relief to reach Puerto Rico with essential supplies.

In the last fortnight, Trump has proposed waiving the Jones Act for LNG carriers for ten years, which would benefit the Oil and Gas industry. It would seem possible that to spur growth, this should also be considered for the US Offshore Wind Industry. Unfortunately, the law was originally drafted as a measure of national security legislation, so repealing it is more difficult than otherwise. It seems an anachronism which will hamper the development of a vibrant US counterpart to the offshore wind sector in Europe.

Next steps

This will be a topic discussed at the upcoming US Offshore Wind Conference and Exhibition (Boston, June 10-11, 2019)

 by Julian Jackson


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