The US offshore wind sector is ready and waiting

 

Jef Verdickt, Commercial Director

 

Albert Smulders, Sales & Strategic Director

The ‘sleeping giant’ that is the US offshore-wind market is coming round slowly.  But what role will European business play in it’s awakenening?

In 2013, Donald Trump filed a lawsuit and vowed to “spend whatever monies are necessary to see to it that these huge and unsightly industrial wind turbines are never constructed…” off the coast of his golf course, Trump Aberdeen, Scotland.

These personal sentiments appear to have had little bearing on the financial potential and growing excitement around the US market, which people in industry are calling the ‘sleeping giant’ of the offshore wind sector.

“Globally the image of offshore wind has changed dramatically since the last zero subsidiy bid options, in Germany and Holland. That has enormously boosted global ambition to develop offshore wind in nearly every part of the world…” says Smulders. “It’s now a CO2 free power generation possibility to produce energy without subsidy.”

The US Offshore situation

The US currently has just one offshore windfarm, the 30-megawatt Block Island Wind Farm off Rhode Island that started delivering electricity in December 2016. For a nation that prides itself on technological firsts and economic powerplay, it is peculiar to see how far behind the US sits in this sector: as Europe delivers 15,780MW across 4,149 grid connected wind turbines.

“We have a mature market. With a 15 year headstart; we have a lot of capacity installed and excellent infrastructure potential to build on… but there is tremendous potential in the US, especially along the North East Coast and great hunger to utilize renewables,” says Smulders.

“They’ll have to invest significant subsidies for the first projects but with the maturing of the market eventually driving down costs..it’s not a question of ‘if’ but ‘when’ for the US market,” says Smulders.

A helping hand from Europe

Jim Robo, CEO of leading U.S. renewable energy company NextEra recently said that projected development time of 5 to 10 years and uncertainty around permitting raised serious questions about prospects offshore.“It is a moon shot in terms of building, in terms of finding people who actually know what they’re doing from a construction standpoint,” said Robo.

This gap in experience would explain why since 2014, European-backed companies have won all eight of the U.S. government’s competitive offshore wind lease auctions. For Jef Verdickt, Commercial Director at Smulders, this is where mutually benefical relationships could bud between European offshore businesses and incumbent US start ups.

“European businesses want to develop a positon on the first projects, gradually expanding local content with a local partner and developing long term and substantial partnerships with US businesses,” says Verdickt.

Most of the early projects, according to executives, will rely almost exclusively on imports, from subsea cables to turbines that are not currently made domestically – a great opportunity for European businesses. “Developing offshore wind capabilities requires a substantial amount of investment and expertise and during this transitionary period, the first few projects will need a substantial amount of European content in them” says Verdickt.

Key to US offshore success is driving down the cost of electricity per megawatt-hour in the U.S with projections that in 2022 approximate costs will be $140 for coal, $110 for natural gas, and $157 for offshore wind — excluding any tax credits, which boost wind power’s competitiveness. Early European intervention could vastly accelerate the rate of cost reduction.

1920 Jones Act limiting progress

One of the factors that could limit European investment, reduce efficiency and slow rate of cost reduction is the 1920 Jones Act. This legislation requires any vessel transporting cargo between US ports, or between US ports and offshore facilities, to have been built and flagged in the US.

The issues for native US offshore wind businesses is that US built offshore wind specialist vehicles simply do not exist according to Smulders.“They need European vessels – bargers, feeder vessels, etc…ultimately they are performing in a suboptimal way.” says Smulders. The ‘Sleeping Giant’ Awakens?

So the question remains as to when the ‘sleeping giant’ will fulfill its long awaited potential; as Europe has over the past 15 years. For Smulders this process will happen much more rapidly, especially with the support of incumbent specialists in Europe, but not without it’s speedbumps. “Europe was a sleeping giant…where it slept and awoke, slept then awoke, multiple times before eventually waking up… the US sleeping giant will wake up… but he may have a short nap after breakfast,” says Smulders.