Biden’s Big Bet on Offshore Wind
The Biden administration has already made a big bet on offshore wind, elevating the technology among the suite of options that deserve strategic attention. This support recognizes its potential to lower greenhouse gas emissions, create good jobs, and drive investment in associated infrastructure, especially along the Eastern seaboard of the United States. Such a correction was long overdue: at year-end 2020, the United States accounted for just 0.1 percent of the world’s installed capacity for offshore wind (versus 17 percent for onshore wind). For years, projects had languished in a regulatory process that was too slow, leaving the United States far behind China and several European countries. This may finally be changing.
On March 8, 2021, the Bureau of Ocean Energy Management (BOEM) released the Final Environmental Impact Statement for the Vineyard Wind project off the coast of Massachusetts, a project that the industry has long treated as a harbinger of the industry’s fortunes. Then, on March 29, the White House announced a bold target to deploy 30 gigawatts (GW) of offshore wind capacity by 2030—a thousand-fold increase relative to 2020 levels and roughly equal to the total installed capacity worldwide in 2020 (around 34.4 GW). To support this goal, the administration proposes to set permitting deadlines, provide funds for ports, offer new loans for developers, and invest in additional areas that could facilitate deployment like research and development, data-sharing, and studies on the impacts of offshore wind. Such a focus makes sense: a landmark study by Princeton University suggested that a net-zero greenhouse gas U.S. economy could require between 200 and 400 GW of offshore wind by 2050. The White House is finally aligning federal policy to start to meet this challenge.
The Global Offshore Wind Picture
Most of the world’s installed wind generation capacity is located onshore. Relative to onshore wind, offshore capacity is trivial at 34,367 megawatts (MW), compared to almost 700,000 MW of onshore wind. Offshore wind is also geographically concentrated: 73 percent of total capacity is in Northern and Western Europe and 26 percent is in China (the balance is other parts of Asia). The United States has two operating projects with a combined capacity of 42 MW—a rounding error in the global total.
The International Energy Agency (IEA) sees the European Union and China continuing to dominate offshore wind capacity in 2040 in its Stated Policies Scenario, given their favorable policy environment and resources. The United States will likely take third place, although it is notable that the currently planned capacity in the United States is several times the capacity the IEA anticipates by 2030. India, Japan, and South Korea are all likely to become major players; other analysts have also mentioned Southeast Asia, South America, and Oceania as promising markets.
Meeting Biden’s offshore wind goal will take more than just moving onshore turbines into the water. Offshore wind is more technically complex than onshore wind, making it more expensive. The global average levelized cost of electricity for onshore wind is $0.053 per kilowatt-hour (kWh), whereas for offshore wind it is $0.115 per kWh. For a typical onshore wind farm, most of the costs are driven by the turbines themselves, while activities such as staging, assembly, and installation make up about 16 percent of the levelized cost. For a fixed-bottom offshore wind farm, these costs make up 34 percent, with the substructure and foundation alone making up 13 percent. Bigger turbines and better operations and maintenance strategies are already driving down costs for offshore wind, which could reach as low as $0.05 per kWh in 2030 and $0.03 per kWh in 2050.
There are siting considerations as well. Wind potential and a desire to limit visibility from the shore have led projects to be developed at least 15 miles from the shore. Most projects are anchored to the sea floor at a depth of between 10 and 50 meters. Floating turbines could allow developers to move into deeper waters, but they are still at an early stage of development. Transmission lines that bring power to shore are usually undersea cables that connect to an offshore substation and eventually to an onshore collector and substation. Lessons from Europe indicate that developers typically build a radial system, which goes directly from their farms to the grid or a network system, which collects power from multiple farms to transmit to the onshore grid.
The East Coast Is the Center of Gravity
Even though no major projects have started construction yet, several states are rushing to set ambitious targets in their states. New York leads with a target for 9,000 MW by 2035; New Jersey is close behind with a goal for 7,500 MW (also for 2035). Massachusetts recently increased its target from 3,200 MW to 5,600 MW by 2035 with the passage and signing of a major climate bill in late March. Together these state-level targets add to a little more than 30 GW of capacity, just over the 30 GW target announced by the Biden White House for 2030.
While much of the activity so far has been around the East Coast, the country’s potential extends far beyond. A 2020 National Renewable Energy Laboratory study found that the California coast has the potential for about 200 gigawatts (GW) of offshore wind. Another NREL study found that the Gulf of Mexico could see 508 GW. Alaska’s potential is even greater at almost 3,000 GW of offshore wind. Hawaii has seen some interest from floating offshore wind developers, but BOEM has not leased any areas there yet. However, these areas have characteristics that make them more difficult for offshore wind development—extreme weather in the Gulf of Mexico, deeper waters off California and Hawaii, and a dispersed grid in Alaska. These factors do not preclude development in these areas, but they explain why the locus of activity has been the East Coast.
A Complex and Lengthy Regulatory Process Has Slowed Deployment
The process to build an offshore wind farm in federal waters is complex. The federal government requires developers to obtain leases, submit plans, and document environmental protection measures. BOEM, a division of the Department of the Interior, sells lease areas and grants permits. Thanks to a 2009 agreement with BOEM, the Federal Energy Regulatory Commission does not assert jurisdiction over siting or transmission but does oversee the markets into which the offshore wind farms seek to sell their power.
BOEM has a process for permitting offshore wind. First, the developer must acquire a lease in a BOEM auction. Next, the Bureau approves the developer’s site assessment plan, which lays out how the company will carry out resource assessments and test technology. Last, the developer must submit a construction and operations plan, which details all construction and activities planned for the site, including decommissioning. BOEM conducts an environmental impact statement as required by the National Environmental Policy Act, and if the project passes this review, the bureau approves the plan, and the developer can begin construction.
While going through federal permitting, the developers must also secure supply agreements with utilities and obtain permits from the relevant states to build transmission lines in state waters and connect to the grid onshore. States require developers to have a BOEM lease, although these processes typically proceed concurrently with BOEM permitting. Usually, a state or its utilities will issue a request for proposals to procure capacity from planned offshore wind farms, leading to power purchase agreements (PPAs) between developer and the participating utilities. The developers must still obtain separate permits from the states to prove they are following environmental regulations governing processes such as coastal development and onshore road work.
Developers must navigate the concerns of various stakeholders. A high-profile, 16-year fight over perceived visual impacts from shore killed the Cape Wind proposal off Cape Cod, but now the fight is focused on how offshore wind might disrupt other activities in federal waters. The fishing industry has concerns about offshore wind, and the National Oceanic and Atmospheric Administration’s Fisheries division has clashed with BOEM on the adequacy of its environmental reviews. If much capacity is built, there might eventually be concerns about shipping routes. Although developers and BOEM contend that they have each appropriately dealt with these issues, litigation over environmental reviews could further delay projects.
The Competitive Landscape
The United States has about 42 MW of offshore wind in operation but another roughly 12,000 MW in development. The following table shows the projects in operation or in the permitting process.
The most significant players are Danish wind developer Ørsted, which until 2017 was known as Danish Oil and Natural Gas, and New Hampshire-based utility Eversource Energy. In recent years, the U.S. offshore market has attracted the interest of several European oil and gas supermajors like Shell, Equinor, and bp. These companies have statedpublicly that they believe their expertise in offshore oil and gas positions them well for offshore wind.
There are a few projects and lease areas that are under development but have not begun the permitting process yet. In Connecticut, Avangrid and Copenhagen Infrastructure Partners (Vineyard Wind LLC) are waiting on state regulators to approve the PPAs for their 804-MW Park City Wind project. EDF Renewables and Shell have submitted a bid to New Jersey regulators to supply up to 2,300 MW from a lease area they own. Many of the projects in BOEM permitting are planned to have expansions in the future—Avangrid’s 800-MW Kitty Hawk farm, for example, is the first phase in what could add up to 2,500 MW of offshore wind. Up north, the University of Maine has partnered with Mitsubishi and RWE to design a 12-MW floating wind demonstration project off the state’s coast.
State and Federal Strategies and Policies
States along the East Coast are looking to leverage their infrastructure and coastlines to attract offshore wind developers. Sometimes, this results in friendly competition—New Jersey and New York appear to be jockeying for the top spot, periodically raising their ambitions and committing to spend more money on the sector. But a few of the lower-profile states—Maryland, North Carolina, and Virginia—recently formed the Southeast and Mid-Atlantic Regional Transformative Partnership for Offshore Wind Energy Resources (SMART-POWER) to promote a regional approach to offshore wind development. The states pledge to, among other things, pool their supply chains, align regulatory requirements, and share best practices.
New Jersey governor Phil Murphy has said that the jobs and economic development from the offshore wind industry will help the state recover from Covid-19. Developers frequently sweeten their bids with pledges to help train the relevant workforce, but states are acting on their own, too. EDF Renewables and Shell, for example, signed agreements with several New Jersey unions to support workforce development in the state as part of their Atlantic Shores bid. In New York, Ørsted and Eversource’s winning Sunrise Wind bid included a promise to invest $10 million in a National Offshore Wind Training Center at Suffolk County Community College. Also in New York, the state’s energy development authority is partnering with two state universities to run the $20 million Offshore Wind Training Institute.
The development and upgrading of infrastructure, particularly ports, is key, and several states argue that their ports give them a springboard for the industry. New Jersey’s strategic plan for offshore wind, for example, notes that the centrality of the state’s ports make them ideal hubs for the industry’s supply chain—both for projects being built off the coast of New Jersey and those being built elsewhere along the coast. In Maryland, Representative Dutch Ruppersberger (D-MD) praised a recent port upgrade for offshore wind as an opportunity to revitalize its surrounding community that has seen job losses in the manufacturing sector.
Much like with workforce development, winning bids often have port infrastructure upgrade requirements, while states are also moving ahead on their own. Equinor and bp agreed to upgrade two of New York state’s ports to handle manufacturing, staging, assembly, and operations and maintenance for offshore wind turbines as part of their winning bid for Empire Wind 2 and Beacon Wind. In New Jersey, Ørsted has partnered with German steel producer EEW to build a new factory to manufacture steel foundations for offshore wind turbines as part of its winning Ocean Wind bid, and construction started in January. Separately, the state of New Jersey is building what could be the country’s largest offshore wind port along the Delaware River, and the governor has proposed putting at least $200 million in state funding toward the project. The state of Rhode Island is devoting $20 million in voter-approved funds to expanding the Port of Providence with an eye toward supporting the offshore wind industry.
In one case, a site owner appears to be betting on a “build it and they will come” strategy. Several private investors in Massachusetts redeveloped the site of a former coal plant to create the Brayton Point Commerce Center, a hub for manufacturing, logistics, and transmission for the offshore wind industry. The port’s website touts its proximity to several offshore wind lease areas and a commitment by a transmission developer to build a 1,200-MW high-voltage direct current converter and 400 MW of battery storage on the site to entice offshore wind projects to interconnect to the center.
The state actions are complemented by federal initiatives. At the end of 2020, the Congress passed a raft of energy bills that included an extension of the 30 percent Production Tax Credit for offshore wind. To qualify, projects must have begun construction by 2026—a goal that seems plausible for most projects pending before BOEM. The announcement, in late March, of the 30 GW target brought additional support. BOEM pledged to evaluate 16 construction and operations plans by 2025, the Department of Transportation will commit $230 million for port infrastructure upgrades, and the Department of Energy will offer $3 billion in loans for project and transmission developers. These initiatives follow a January research plan from the Department of Energy to cut the levelized cost of fixed-bottom offshore wind from $0.086 to $0.05 per kWh by 2030 and floating offshore wind from $0.135 to $0.07 per kWh at the same time.
The common thread, whether in Washington or in state capitals along the East Coast, is the same: there is enormous appetite for offshore wind, and there is a recognition that this industry can act as a spur for economic growth or revitalization, infrastructure investments, manufacturing, and workforce changes. This speaks to the unique nexus evident in climate politics as of late, where decarbonization is wrapped around broader social and political goals—thus raising the stakes of success far beyond the reduction in greenhouse gas emissions.
Stephen Naimoli is an associate fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C. Nikos Tsafos is a deputy director and senior fellow with the CSIS Energy Security and Climate Change Program.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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