Offshore

Biden backs offshore wind. But states are driving the market
Biden backs offshore wind. But states are driving the market
Rough seas near the Block Island Wind Farm offshore Rhode Island. (Image: Dennis Schroeder / NREL)

The federal government deserves some credit for the offshore wind industry's growth in the U.S.

President Joe Biden led the charge by setting a goal of generating 30 GW of clean energy from offshore wind farms by 2030. And through the Bureau of Ocean Energy Management, the Biden administration has jump started offshore wind development by opening up federal waters to development.

But it's state-level policies that are driving the U.S. offshore wind market, according to a new report on the state of the industry from the National Renewable Energy Laboratory.

Subscribe today to the all-new Factor This! podcast from Renewable Energy World. This podcast is designed specifically for the solar industry and is available wherever you get your podcasts.

Eight states have committed to procure a combined 39,322 MW of offshore wind capacity by 2040. Those goals give developers, like Jonah Margulis, senior vice president of U.S. operations for Aker Offshore Wind, the certainty they need take on projects.

State offtake agreements are "everything" for offshore wind developers, Margulis said in a RENEWABLE +Series webinar. As of May, 24 offtake agreements had been signed totaling 17,597 MW of offshore wind energy contracts.

California is the latest state to provide that certainty. In August, the California Energy Commission adopted a report that set planning goals of 2,000-5,000 MW of offshore wind by 2030 and 25,000 MW by 2045.

"These policies provide a pathway to achieving the national offshore wind target of 30 GW by 2030," the authors of the NREL report noted.

Courtesy: NREL

The pipeline for offshore wind projects in various stages of development in the U.S. has grown from 35,324 MW to 40,083 MW — a 13.5% increase — since May 2021. The expansion is due to BOEM's auction of eight new lease areas in the Atlantic and the announcement of two new wind energy areas off California.

In February, BOEM's auction of six leases off the coasts of New York and New Jersey represented a turning point for the U.S. offshore wind industry.

The New York Bight auction fetched a record total of $4.37 billion from developers vying to develop the waters. New York and New Jersey now have a combined estimated pipeline potential of more than 15,915 MW.

Two months later, the Carolina Long Bay auction brought in a combined $315 million from TotalEnergies and Duke Energy.

Next up: Five proposed lease areas offshore California are expected to be auctioned by BOEM this fall, entering the U.S. into the floating offshore wind industry. Auctions for the rights to develop offshore wind projects in the Gulf of Mexico, Central Atlantic, Oregon, and Gulf of Maine are expected to be held by 2024.

Courtesy: BOEM

Cost declines are also contributing to a positive outlook for offshore wind in the U.S.

Globally, the levelized cost of electricity for fixed-bottom offshore wind projects commissioned in 2021 was $91 per MWh, a 4% decline from 2020 and a 50% reduction since 2014, NREL found. Researchers believe there's even more room for costs to come down, estimating a LCOE of $64/MWh on average by 2030.

The macroeconomic trends remain optimistic, but developers still face cost and logistics headwinds, the report found. Developers Eversource Energy and Ørsted cited challenges due to disrupted global supply chains and inflationary pressures for commodities, like steel, and services, like foundations, in 2021 and 2022.

Soaring lease sale prices, seen in the New York Bight auction, are also likely to squeeze developer budgets. NREL said the average $763/kW lease price in New York Bight equates to 22% of the reported average capital expenditures for U.S. projects.

FILE - Two of the offshore wind turbines which have been constructed off the coast of Virginia Beach, Va. are seen on Monday, June 29, 2020. As Virginia-based Dominion Energy seeks to build what it calls the country’s largest offshore wind farm in the Atlantic Ocean, the company and its supporters have touted the economic development opportunities expected to accompany the 176-turbine project. But state regulators say the economic picture might not be so rosy. In testimony filed earlier this month, regulators said the company relied on a “stale” economic study that didn’t account for the impact of its Virginia ratepayers bearing the cost of the approximately $10 billion project. (AP Photo/Steve Helber)

While the U.S. offshore wind market is growing at a rapid pace, it still lags behind other regions of the world. Only two offshore wind projects totaling 42 MW are currently operating in the U.S.

The Block Island Wind Farm, developed by Eversource Energy and Ørsted off the coast of Rhode Island, was commissioned in 2016. A two-turbine, 12 MW test pilot for Dominion Energy's Coastal Virginia Offshore Wind is also operating. (Dominion has warned that a performance standard proposed by state energy regulators could tank the project.)

Meanwhile, global offshore wind generating capacity surpassed 50 GW in 2021 following a record year for deployment. New projects commissioned last year added 17,398 MW to the world's offshore wind supply.

China set the record for offshore wind capacity added in a single year at 13,790 MW. The United Kingdom had the next largest annual deployment (1,855 MW), followed by Vietnam (643 MW), Denmark (604 MW), the Netherlands (402 MW), and Taiwan (109 MW).