Americans owe Europe a thank you. Two decades ago, Germany’s new renewable energy feed-in tariff stimulated the market for rooftop solar power. A decade ago, Denmark, Germany and the UK began to build offshore wind farms that rivalled the output of conventional thermal power plants.
In both cases, billions of pounds of investment pushed the technologies down the cost curve until they could compete against coal, nuclear and gas. Europe pioneered innovations in project finance, built domestic supply chains and gained valuable expertise in how to complete large solar and offshore wind farms.
By the time the US solar market took off in 2010, installations in Europe had helped to make solar competitive with fossil fuels. The phenomenon is poised for a repeat with offshore wind.
The Danes built the first offshore wind project at Vindeby in 1991. A decade later, they built the first commercial-scale project, Middelgrunden, in Copenhagen’s harbour. By the end of the last decade, developers in Europe were building projects with a capacity roughly equivalent to a typical nuclear reactor, such as Hornsea 1, a 1,218MW wind farm off the coast of England.
Three-quarters of global offshore wind capacity is installed in Europe. Large-scale deployment has succeeded in making offshore wind power competitive with fossil fuel electricity. The cost of offshore wind power has fallen by 62 per cent since the 2015 Paris Agreement, according to Ørsted, the world’s largest offshore wind developer.
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Now the US is ready to enter the market. Many of the companies that built the offshore wind industry in Europe, such as the project developers Ørsted and Iberdrola, and the turbine makers Siemens Gamesa and MHI Vestas, are looking to the US for growth opportunities.
The US is one the world’s most promising offshore wind markets. The technical potential of the offshore wind energy resource is more than 2,000GW, nearly double the nation’s current electricity generating capacity, according to the American Wind Energy Association (AWEA), a Washington, DC-based trade group. “With stable policies in place,” notes AWEA, “the Department of Energy found the US could develop a total of 86GW of offshore wind projects by 2050.”
Despite the potential, the US has managed to connect just 42MW of offshore wind capacity to the grid to date. The country’s first commercial project, the 30MW Block Island Wind Farm, off Rhode Island, came online in December 2016. Ørsted and utility Dominion Energy completed construction in June 2020 on Coastal Virginia Offshore Wind, a 12MW pilot project, and the first wind farm in federal waters.
The US has fallen well behind Europe and China, the top market for new offshore wind installations last year, but its project pipeline is vast – equivalent to the cumulative global offshore wind power capacity installed by the end of 2019, 29.1GW. The Bureau of Ocean Energy Management (BOEM), the federal offshore energy regulator, has issued 15 commercial offshore wind leases for sites on the US East Coast.
An economic impact assessment released by AWEA in March 2020 found that developing 30,000MW of offshore wind capacity on the US East Coast could support up to 83,000 jobs and $25bn in annual economic output by 2030. Based on the history of US onshore wind development, AWEA believes such a build-out would nurture a domestic supply chain to service the offshore industry.
“In the early days of the US wind industry, many products were imported from Europe and other global manufacturing centers…” the authors of the assessment write. “Today, there are over 500 facilities across 42 states manufacturing parts for land-based projects and employing a workforce of over 25,000.”
The impressive US offshore wind project pipeline was developed largely without support from the White House or Congress. President Donald Trump, no fan of wind power, attempted to block an offshore wind farm from being developed within sight of his Aberdeen, Scotland, golf resort. Repeated delays during the Trump administration have likely pushed the final BOEM permitting approvals for Vineyard Wind, an 800MW wind farm to be located off the coast of Massachusetts, to the incoming Biden administration.
President-elect Joe Biden, meanwhile, is fully behind offshore wind development. Biden’s $2trn climate plan calls for carbon-free electricity by 2035, including the installation of “tens of thousands of wind turbines – including thousands of turbines off our coasts – in Biden’s first term”. Industry watchers hope that the wind-friendly incoming administration will streamline project approvals and broker a compromise to unlock offshore wind energy development in California, where the US Navy, state officials and lawmakers have been working to resolve military use conflicts in some of the most promising offshore wind energy sites along the Central Coast.
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The projects that have managed to advance to the permitting stage in the US represent a fraction of the capacity expected to come online over the next two decades. Fourteen projects with a combined capacity of more than 9,000MW are expected to be operational in the US by 2026, according to AWEA. Much more is on the way.
Federal lease auctions in 2021 and 2022 would add more areas to the US offshore wind energy development pipeline, including California, the Gulf of Maine, North Carolina and South Carolina. Potential BOEM lease auctions planned through 2022 could support 37GW of offshore wind energy and $166bn in capital investment by 2035, according to a study published last year. All that activity was announced before Congress gave the industry a Christmas gift at the end of last year by extending federal tax credits for offshore wind projects until 2025.
“American offshore wind is a generational opportunity…” said the president of the National Ocean Industries Association, Erik Milito. “Offshore wind development will support jobs throughout the entire US. The same shipbuilders, heavy lift vessel operators, steel fabricators and countless other companies who built the Gulf of Mexico oil and gas sector stand ready to lend their expertise to the American offshore wind industry.” The Gulf of Mexico is itself another promising offshore wind energy market.
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Europe and China are by no means standing still. The UK aims to install 40GW of offshore wind by the end of the decade. The European Union wants to build 60GW of offshore wind by 2030 and 300GW by 2050 – a 25-fold increase over the 12GW of capacity currently installed. China plans to add 52GW of offshore wind capacity by 2030. Elsewhere in Asia, new offshore wind markets are emerging in Taiwan, Vietnam, Japan and South Korea.
“1GW of offshore wind power avoids 3.5MT [of] CO2, making it the most effective available large-scale technology to avoid carbon emissions and displace fossil fuels in many geographies,” said Ben Backwell, the CEO of the Global Wind Energy Council, a Brussels-based trade group.
Europe likely won’t get a thank you from the US for its citizens’ willingness to shoulder the expense of paying down the cost of such a critical climate solution. But with so many European companies looking to cash in on their offshore wind know-how in the US, perhaps we can consider the debt repaid.