Two weeks ago, we reported on the bottleneck that the lack of vessels is providing to the US offshore wind industry, at a time when enthusiasm is ramping up, and ambitious targets are being announced by states seemingly every five minutes. This week, the industry appeared to take another hit, with reports suggesting that the Bureau of Ocean Energy Management’s (BOEM’s) impact assessment may be delayed and extended into late 2020. With this “tap on the brakes”, it’s likely that several states will end up missing their capacity targets, but allowing the industry to prepare for an explosion of offshore wind will see costs plummet and the long-term scale of projects increase.
The review in question is the Department of Interior’s review of potential cumulative impact of East Coast offshore wind energy development, which was initially due for completion early next year. With BOEM controlling offshore leases in the US, the ability of states to meet their ambitious targets for offshore wind essentially hinges on permission granted as a result of this study.
As many as 15 leases could be up for grabs following the review process, which will also assess the site for the 804 MW Vineyard Wind project off Massachusetts that was announced this week.
The delay should only last a few months, which seems negligible in the time-frames typical of the industry. This does however give the US, which is only just waking up to the potential of offshore wind, time to prepare its supply chain.
As we noted last week, due to the Jones Act, the US will have to start making installation vessels of its own if it doesn’t want to have to incur the costs of importing parts across the Atlantic or Pacific. Similarly, alterations will need to be made to ports to accommodate these vessels, which will also require a trained US crew. In fact the offshore wind industry as a whole will need an injection of US jobs. The delay period does not provide a lot of leeway, but it does give proactive players a chance of getting ahead before states start the rush to meet their goals.
Ensuring that the review process is not rushed may also mean that a greater amount of capacity is made available to developers – especially as societal pressure to grow the industry increases. Having the review complete will also provide certainty for investment within the industry, with developers not having to run their own site assessments, which is what the floating wind industry in particular is crying out for.
“I actually see this as a positive,” said Liz Burdock, CEO of the Business Network for Offshore Wind. “We were moving so quickly that a lot of US businesses were not able to jump in.”
By allowing the US to develop a domestic supply chain, local content demands will be more easily met, to the benefit of Capex and Opex costs – the price of produced electricity will inevitably fall as a result. The delay will probably set the US industry back by 6 months and so we do expect targets to be slightly missed set by states such as New York in the 2030 to 2035 timeframe. However, if the supply chain can be developed without the panic of rapid capacity installations, this will stand the US in better stead to build out offshore wind in the long term.
A recent wave of policy announcements from individual states has seen the ‘planned capacity’ of offshore wind rise to over 25 GW by 2035. This includes ambitious figures of 9 GW for New York, 7 GW for New Jersey and 2 GW for Connecticut. Considering that the US only has 30 MW of capacity installed today, any delay in the process will be detrimental to such a rushed build out.
Many of these targets only address figures for a 2030 deadline, and we would expect that other states will soon follow suit in stating more ambitious targets for 2035, after all in 2017 targets for 2030 only amounted to 5.3 GW. However, due to the supply chain issue, our offshore wind forecast, which is released in January, predicts that the US will only just manage to surpass the current combined target of 25 GW, with almost all states missing their individual targets. The industry will however explode towards 2040, when we would expect to see an installed capacity of around 45 GW.