The bold commitment of global offshore-wind market leaders, combined with the American drive to boost volume, as already demonstrated in onshore wind, offers great opportunities to all stakeholders.
With Deepwater Wind’s Block Island, the US now has its first commercial offshore wind farm. The list of projects with power purchasing agreements (PPAs) progressing along a development timeline is growing, such as the 90MW South Fork, 248MW Maryland and 120MW Skipjack sites, all with construction starts between 2019 and 2021.
To date, the Federal Bureau of Ocean Energy Management has auctioned 12 east coast lease areas, amounting to 4,900 square kilometres.
Encouraging as these developments are, the relative lack of scale at this early stage is preventing the economies of the European cost base to be realised.
This initially limited project pipeline does not yet deliver a sufficiently sustainable revenue stream to build a significant local offshore-wind supply chain. This challenge can be mitigated by strategically balancing global sourcing with a volume-driven step-by-step localisation.
The initial lack of scale can be addressed by maximising vertical integration through comprehensive offerings in design, manufacturing, installation and operations and maintenance, ideally supported by large industry stakeholders.
Europeans have been deploying offshore wind at commercial scale for more than 20 years. Considerable knowledge has been built, enabling cost reductions to occur at a much faster rate than anticipated. The ability to apply hard-earned lessons helps to open up new global markets, like the US, as offshore wind generation is now competitive as well as profitable for developers.
The business case in the north-east US is strong: high energy prices, coastal load centres with limited onshore transmission, good capacity factors and a favourable political climate with state-driven energy initiatives, such as enabling 1.6GW in Massachusetts and 2.4GW in New York.
While this area will lead the ramp up, each state will develop its own political, environmental and commercial approach to best suit local circumstances.
Best of both worlds
For the US to develop a successful offshore-wind industry, it needs to leverage the European learning curve while making the most of the many domestic advantages it has.
The European experience does provide a potential shortcut for the US, but the marine-logistic, political and economic differences between the two markets indicate that a "cut and paste" job would be both ineffective and unwise.
For continued growth, the benefits of offshore-wind development must be seen to largely flow back into the US economy, enabled by the much-needed coastal infrastructure investments.
The decentralised nature of the US energy market and the numerous stakeholders at federal, state and local level add to the complexity — and therefore uncertainty — of any potential US offshore-wind development.
For example, permitting and engineering, procurement and construction (EPC) execution factors are vital to secure viable PPAs and reduce the financial risk inherent in delivering these large-scale construction projects. The US is a commercially and contractually demanding territory to run large projects.
The European experience is of little relevance in these areas, but US supply chains’ EPC capabilities and risk-mitigation processes are well developed and transferrable to offshore wind.
Of course, any offshore activity in the US needs to deal with the challenge of the Jones Act, which restricts the transportation of merchandise between two "points" in the US to qualified, US-built, US-flagged vessels. This is a key area for the synergies with US oil and gas to deliver cost-effective marine logistics.
The US oil and gas supply chain has developed world-leading technology and logistic processes over many years to meet the challenges of operating in the hostile marine environment.
Offshore wind provides an attractive opportunity to diversify and secure a place in renewable energy to maximise utilisation, establish a stake in a growing market and maintain fleet profitability.
Combining the European learning curve with the inherent domestic expertise will deliver a successful US offshore wind industry — a success that will manifest itself in US jobs, sustainable financial results and gigawatts of clean energy generated.
Andy Geissbuehler is a managing partner at Virginia-based Renewable Resources International and an advisory director at UK-based BVG Associates