The US is set to be the next big market for offshore wind. But how big? Despite the huge commitment shown by states along the US east coast over the past couple of years, uncertainty remains around the timing and pace of the market’s growth.
To answer this the University of Delaware’s Special Initiative on Offshore Wind published a report, in association with the Renewables Consulting Group, last week that puts figures on the expected growth of US offshore wind.
The initiative’s director Stephanie McClellan is also set to discuss this with us at our Financing Wind North America conference on 24th and 25th April in Denver, Colorado. Register here to join us.
The report forecasts that US states are set to require $68.2bn of investment over the next decade to build a pipeline of 18.6GW of offshore wind projects by 2030.
Currently, 1.6GW of offshore capacity has been contracted off the coasts of Massachusetts (800MW), Maryland (368MW), Connecticut (300MW), New York (130MW) and Virginia (12MW). SIOW expects a further 17GW of offshore wind capacity to be contracted by six states between 2020 and 2030.
This includes power purchase agreements totalling 2.3GW, which are set to be signed this year by New Jersey (1.1GW), New York (800MW) and Rhode Island (400MW), as well as solicitations required by single state policy and expected future state renewable energy requirements.
This would bring the total of offshore wind capacity expected to be contracted by 2030 to 18.6GW (see table, screen-grabbed from the report, below).
Offshore Wind Power Contracts (in MW) Forecast by State
Source: SIOW, RCG
However, one major challenge that weighs on the future development of offshore wind projects is the lack of an established supply chain. That $68.2bn promise will be vital to get firms to make investments needed to get this supply chain up and running. The figure is based on 17GW of contracted capacity with around two years between power procurement and contract signing.
The study looks at the investment needed in seven major components of offshore wind farms including wind turbines, foundations, array cables, offshore substations, onshore substations, export cables and upland cables. This is based on an estimated flat rate of capital expenditure of $4m/MW.
Offshore wind turbines, towers and foundations would require around $45.8bn, with more than 1,700 turbines needed for this growth. This figure assumes rated capacity of each turbine of 8.5MW today rising to 15MW by 2030. This means that the turbines market alone would require an average annual expenditure of $3.2bn in the first six years and then an average $1.8bn after 2026.
The report does a good job at putting in figures the growth of the US offshore wind market in the next decade and we can see the benefits for companies in getting a clearer idea about the development of the market in the next decade. This data will help to give companies the insights over what investment will be needed and when.
More clarity is essential to secure investors’ confidence and, ultimately, to get the projects to financial close. This is relevant for both companies in Europe that have the necessary experience in offshore wind already, and for US businesses that are going to invest in growing their own offshore expertise. The expected size of the market would also help these companies decide on whether expand their presence in the US and help establish a local supply chain.
States may think that tendering the capacity was the hardest part, but there is a long way to go to get 18.6GW of projects to completion and big challenges to overcome. For example, regulatory processes are very lengthy and agencies and states need to work hard to refine a longstanding regulatory regime for offshore oil and gas projects to make it better-suited to offshore wind.
Also, the potential impacts of steel and aluminium import tariffs on offshore wind components are yet to be evaluated, and the industry is still to find a solution to the development of vessels compliant with the Jones Act. We look forward to keep discussing this in less than four weeks at our event in Denver.