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Wave of offshore hope fights against the odds

NORTH AMERICA: North America's first large-scale offshore wind energy conference and exhibition highlighted a curious dichotomy: while there is palpable excitement and hope for offshore wind in the US, there is no market yet to speak of and little expected soon.

The American Wind Energy Association (AWEA) hosted the October event in Atlantic City, New Jersey, in collaboration with the Canadian Wind Energy Association (CANWEA). Staffers and conference-goers alike said they were pleasantly surprised to see more than 1,700 attendees and over 100 exhibitors.

"For an industry that does not exist, this is quite a turnout," joked Scott Keating, general manager of offshore sales at Danish wind turbine supplier Vestas.

A common comment from attendees was that, even though hopes are dim for large numbers of turbines to enter US waters in the near future, the potential for US offshore wind is substantial. As the market develops, early birds want to build supply chains and develop service relationships, allowing them to move quickly when the market takes off.

But the scale of the event also exposed the sobering challenges facing offshore wind in North America. The fundamentals are simply not as compelling as in Europe, where high energy prices, supportive government policies and diminishing onshore development have helped put about 2.5GW of wind into the waters. And, unlike Europe, the US and Canada still have an abundance of onshore wind resources that can be developed at lower risk and cost than offshore wind.

Permitting delay

Attendees and speakers repeatedly cited the US government's permitting process for offshore wind as a main roadblock to development.

To the casual observer, the late-April permitting approval of the 468MW Cape Wind project and its lease signing ceremony at the offshore wind conference (Windpower Monthly, November 2010) would suggest that more projects will soon be along the way. But, on the contrary, the permitting process for the 20-30 projects currently under early development off US shores is expected to take between seven and nine years.

The main reason is that, under current rules, most offshore wind project proposals must undergo two exhaustive National Environmental Policy Act (NEPA) reviews. Rarely are projects in other energy industries subjected to more than one NEPA review.

"If we have an environmental permitting process that prevents us from putting projects online in a reasonable timeline, the utilities won't build it - and that is the current process we have," said Tim Oaks, renewable group leader for consultancy Kleinschmidt Associates. Government officials at the event accepted this is a problem and said they are evaluating ways to shorten the timeline while maintaining a necessary level of review.

Maureen Bornholdt, who manages the Alternative Energy and Alternate Use Program at the government's Bureau of Ocean Energy Management, Regulation and Enforcement, formerly the Minerals Management Service, told delegates: "Excessive and inefficient NEPA review can cause unacceptable delay, which can make (offshore) expensive."

Bornholdt added that parts of the ocean-leasing process are intended to increase competition in how sites are awarded, but have the unintended consequence of delaying the development process. Another issue is that the lease royalties prospective wind developers can expect to pay to the government are tied to average fossil-fuel prices. Developers argue that the requirement ignores the price stability benefit of wind projects.

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Bornholdt said the bureau is looking for a path forward, including legislative remedies, waivers on the competition components, or regulatory revisions within the confines of existing law. Congress could provide the solution, but the wind sector is not holding its breath.

Canada's own permitting hurdles are dampening the buzz over policies in the province of Ontario, which are otherwise supportive of offshore wind. The Ontario Green Energy Act includes a feed-in tariff (FIT) giving 20-year fixed contracts at C$0.19/kWh ($0.19/kWh) for offshore wind projects. More than 1.2GW of potential projects have been proposed in Lake Ontario and one 300MW project has received a formal FIT contract.

But this summer the government announced a fivekilometre shoreline exclusion zone. Speaking at the conference, Justin Rangooni, Ontario policy manager and legal council for CANWEA, said that if it is made permanent, "a lot of these projects in development will be mothballed". CANWEA has filed its opposition to the exclusion zone, but Rangooni expects it to remain.

Supplier outlook

The wind turbine manufacturers' forum was one of the best-attended sessions at the conference. There was resounding agreement that, for offshore wind to develop into a real market, visionary supportive policies must be put in place. Panellists said UK policies, in particular, provide a model for growth.

"There needs to be long-term commitment to have long-term production," said Michael Hannibal, head of offshore sales at Siemens. "The UK has shown the way to make it happen and that is with the clear driver of a fast approval process. It is about predictable incentives in place and clarity in the value chain and support for projects."

But the UK's success in offshore wind, while good overall for offshore wind, is not necessarily a net positive. The third and latest round of offshore project concessions saw the Crown Estate, which owns the UK's sea-bed, award preliminary concessions totalling 32GW. As much as 25GW may eventually be built.

"The threat is that this (North American) market is also competing against UK round three," said Rainer Mohr, vice-president of offshore sales at German turbine maker Repower. Offshore wind firms may shun the US due to its weak support policies and lack of offshore experience in favour of the more predictable UK market. "In an environment where Europe has more market security, we have to sort out market security here," said Mohr.

Seaworthy

Most offshore turbines offered today are onshore turbines adapted to maritime applications with extensive corrosion protection, and protection against the heavier rotor loads that can be encountered at sea.

"We have all basically been taking terrestrial turbines and putting them out to water," said Vestas's Keating. "The offshore industry is so immature that we have not built offshore-specific turbines," he continued. "It will be necessary to reverse that to bring costs down, and this will happen in the future as megawatt sizes get bigger and machines are built specifically to go offshore."

GE Energy's offshore platform leader Richard Reno was quick to note that GE's offshore offering uses a direct-drive design made possible through GE's acquisition of Norwegian turbine manufacturer Scanwind last year (Windpower Monthly, September 2009).

Siemens, too, is designing a direct-drive turbine, but its current flagship offshore machine is a conventional design. Clipper Windpower of the US plans to bring to market a 10MW machine that is an upscaled version of its onshore unit with four distributed generators.

Another important difference is the proportion of total project cost that the turbines make up. Amir Mikhail, Clipper's senior vice-president of engineering, said onshore turbines account for 60-65% of project cost while offshore turbines only account for about 25%.

He used this point to emphasise why offshore favours larger machines like Clipper's prototype. But it also highlights that cost reductions for offshore wind are more likely to occur in foundations, subsea transmission and other balance-of-plant requirements. "You can make a lot of innovations (with a turbine), but if you leave the other 75% off the table, you are not going to effect a big change in cost of energy," said Mikhail.

Now that projects such as Cape Wind are potentially nearing construction, a new concern has arisen. The US's lack of specialised vessels such as jack-up barges will further hamper the industry. Not only is the limited global supply of jack-up barges likely to be tied up in Europe for the next decade, but US law bars foreign vessels from this kind of work in its territorial waters. So new vessels will need to be built in the US at great cost - yet another challenge before the US can get many turbines out to sea.

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