Welcome to Our New Blog
This is the first blog post for the upcoming US Offshore Wind Conference and Exhibition (Boston, June 10-11, 2019):
We will be asking important questions and delving into the significant differences between the USA Offshore Wind market and its emerging supply chain and well-developed sectors elsewhere, particularly in Europe.
US Offshore Wind – what’s the big deal?
With its long coastline, the USA has a magnificent natural resource for wind generation. Estimates suggest 4,000 gigawatts (GW) of potential electricity generation will be available, which is actually around four times the maximum capacity of the existing grid. Shallow waters near coastal cities like New York, Boston, and Los Angeles could be home to large wind-farms delivering clean, renewable energy and reducing damaging carbon emissions.
“There is enormous opportunity, especially off the East Coast, for wind. I am very bullish,” said US Interior Secretary Ryan Zinke in June 2018. On a recent tour of coastal states, Zinke found "magnitudes" more interest in offshore wind than oil and natural gas drilling, particularly because the fear of oil spills is seen as deterring tourism.
What Is The Market Worth?
Global Market Insights estimated that the US Offshore Wind Industry would be worth more than five billion dollars in 2024. This represents a smallish figure – the UK’s industry was worth over $8 billion in 2017, because it is a much more mature industry. The US is coming later to the market, but that also means that it reaps the rewards of a great deal of innovation and best practice in other regions, particularly Europe.
Renewable energy markets represent a complex and evolving supply chain, where there are many participants: fabricators of turbines, cables, grid connection stations, supply vessels, human resources, ICT (including AR and advanced simulations), as well as insurance, legal and contractual management, regulation, and other administrative matters. So there will be openings for many different companies at every level of the business. Around 36,000 new US jobs will be created as the industry matures. The USA is potentially a giant market, and this makes it very attractive for existing offshore services to get a foot in the door.
Challenges and Barriers to Market Entry
There are some particular facets of the US situation which make it complicated and perhaps daunting to companies used to the defined space of the European energy market. Permitting is complex and can take up to ten years. This is not necessary, and we should see a considerable streamlining of procedures.
Stakeholders like fishing industries can be obstructive and resent the intrusion of different technologies into what they consider “their” waters.
But perhaps the most serious obstacle is the "Jones Act". Properly titled Merchant Marine Act of 1920, the law regulates maritime commerce in US waters and between U.S. ports. It requires that all goods transported by water between US ports be carried on US-flagged ships, constructed in the United States, owned by US citizens, and crewed by them. This is going to cause problems until a large domestic support fleet for offshore wind arrays is created. Oil and Gas industry vessels like jack-up rigs can be utilised, but it means that specialised European ships or crews are prohibited. The initial tranche of small projects will be insufficient to require the construction of dedicated vessels, and this could be a stumbling block for the industry, until there are sufficient projects available to support specialised US-built craft.
Location, Location, Location
Although the best wind speeds are off the central Pacific coast, other factors make the northerly Atlantic coast probably the best option for the first arrays: shallow waters, proximity to major population centres and ports, as well as the more direct routes for shipping large turbines from producers in Europe.
The first U.S. offshore wind project, the Block Island Wind Farm, became operational in December 2016. There are more U.S. projects in the pipeline, mainly on the Eastern seaboard. Wind farms are also being considered along the Great Lakes, the Gulf of Mexico, and the Pacific Coast.
The First Projects
The northern Atlantic coast is home to the first two projects. Block Island Wind Farm went live in 2016. This 30MW five turbine project developed by Deepwater Wind, recently bought by offshore wind developer Ørsted, is to be followed by a two-turbine pilot scheme by Dominion Energy 27 miles off Virginia Beach. There are around 20 projects in the development pipeline. Clearly, the sector will need some of the vessels, personnel, and logistics support from the offshore Oil and Gas industry for the foreseeable future.
Money Makes the World Go Around
Project funding for offshore is essentially provided by equity holders, which are usually the developers and owners of the projects, and debt providers, traditionally banks.
The US’s first and only commercial offshore wind farm so far, Deepwater Wind’s Block Island, was funded through a $290 million project financing package provided by Societe Generale of Paris, France, and KeyBank National Association of Cleveland, Ohio. The financing from Societe Generale and KeyBank was in addition to more than $70 million in equity funding provided by Deepwater Wind’s owners, principally an entity of the global investment and technology development firm DE Shaw Group.
An Exciting Future
The US offshore wind market offers companies with expertise and skills in this area an emerging market. It is not often that the US is behind the curve in technology, but it hasn't made much use of its vast offshore wind resource up till now. Rather than develop an industry from scratch, it makes much more sense to partner with experienced companies from Europe to speed up the long process from pilot projects to full commercial arrays.
“There is enough wind out there to generate all of the electricity needs on the East Coast,” said Stephanie McClellan, director of the special initiative on offshore wind at the University of Delaware. “You have the Saudi Arabia of offshore wind sitting there on the East Coast, waiting to be built and developed.”
Each year, project leaseholders, policy makers and supply chain players meet at the US Offshore Wind 2019 conference (June 10-11, Boston) to discuss matters relating to project development and supply chain expansion. It has become the world stage for the US offshore wind power industry and the premier networking destination for businesses that are looking to secure market share. If you want to invest, find partners, develop projects or enter the supply chain – the event has it all covered in just two days.
1300 delegates attend each year, from Active market players to New market players, including developers, financiers, legal, policymakers, EPCI’s, OEM’s, Vessels (design, construction and operations), shipyards, fabricators, geoservices, component manufacturers and technology providers.
By Julian Jackson.