Tailwinds and Headwinds: The U.S. Offshore Wind Market

Despite significant potential, the offshore wind sector remains largely undeveloped in the United States. As of 2023, there are a total of seven installed and operating offshore turbines with a combined generating capacity of 42 megawatts (MW). In 2021, the Biden administration looked to jumpstart the industry, announcing a target of 30 gigawatts (GW) of operation offshore wind capacity by 2030.

While there have been significant developments in the U.S. offshore wind sector over the past few years, the pace of development remains slow. Adding 30,000 MW (at least 2,100 turbines) of capacity in just seven years will be a difficult task to accomplish. The passage of the Inflation Reduction Act (IRA) will be a significant driver for further activity in the offshore wind sector as the bill expands investment and production tax credits for these projects. Establishing a clear view of where the industry stands, which challenges are most significant, and how federal and state governments can address this challenge can help to set the stage for successful and sustained market growth.

Where Offshore Wind Stands in the United States

With only 42 MW of offshore capacity, the sector has a long way to go to reach the U.S. 2030 goals. There are currently only two projects under construction—the 800 MW Vineyard Wind 1 development and the 132 MW South Fork wind farm. Vineyard Wind will begin commercial operation in 2024 and South Fork wind farm will begin commercial operation in 2023.

The majority of planned offshore wind projects remain in the permitting process. There is over 18,000 MW of planned capacity awaiting approval from the Bureau of Ocean Energy Management (BOEM). Thus far, these projects are all along the East Coast of the United States. In 2022, the BOEM conducted the first competitive lease auction along the Pacific coast. The sale drew five winning bids totaling $757.1 million for 373,367 acres. The West Coast holds significant potential for offshore power generation and will be an important region for the industry as it works toward 2030 goals and beyond.

BOEM plans to hold seven new offshore leases by 2025. The first of these occurred in February of 2022, when six lease areas in the New York Bight wind energy area (WEA) drew competitive bids totaling a record $4.37 billion for 488,000 acres. In May 2022, the BOEM sold two leases off the coast of North Carolina. In a recent notice of proposed rulemaking (NOPR), the BOEM announced plans to publish a lease schedule for all planned or potential lease sales in the next five years to provide greater transparency. The proposed changes could improve the leasing process; however, leasing, state procurement of electricity, and regional transmission remain siloed from each other. Creating a more integrated approach to leasing, procurement, and transmission could accelerate projects and reduce some of the barriers facing developers.

Concentrated Efforts to Develop Policy Accelerating Offshore Wind Development

The Biden administration has prioritized federal and state cooperation to accelerate offshore wind development. In June 2023, the administration announced the Federal-State Offshore Wind Implementation Partnership with 11 East Coast states to support collaboration, supply chain investment, and address regional challenges such as transmission and interconnection. The announcement included funding to support U.S. shipyards modernize facilities and build offshore wind vessels, and funding from the Department of Energy (DOE), New York, and Maryland for supply chain expansion.

Though the federal government controls leasing, states have a significant role to play in developing the offshore wind sector. Many states have independent targets for offshore wind growth and have leverage over the procurement process for power purchase agreements. Some states are also working on developing a strong supply chain for the industry. New York intends to invest $500 million in ports, manufacturing, and supply chain infrastructure to advance offshore development. A recent NREL report estimates that building a domestic supply chain capable of delivering 4–6 GW of projects per year will require an investment of at least $22 billion in ports, vessels, and manufacturing facilities. Aligning federal and state policies and fostering collaboration between regions will be a critical effort for the developing market and a secure supply chain.

Remote Visualization

Perhaps the most significant policy development over the past year was the passage of the IRA. The bill renewed a 30 percent investment tax credit for projects that begin construction prior to January 1, 2026. Projects meeting domestic content thresholds can qualify for a bonus credit. The advanced manufacturing credit will apply to a variety of wind components including blades, nacelles, towers, and foundation. For offshore wind vessels, the bill offers a credit of 10 percent of the sales price. There is uncertainty regarding the eligibility of transmission infrastructure and facilities for the tax credit that could have significant implications for the sector. While the exact impact of the IRA on offshore wind are unknown, it is likely that the incentives will help to accelerate growth in the sector and in the domestic supply chain.

Challenges to Achieving 30 GW by 2030

While there are many positive signs and initiatives for the offshore wind sector in the United States, challenges remain. Inflation is a significant threat for projects and development timelines. In Europe, inflation across the supply chain has been a challenge for turbine producers and wind farm developers, threatening the timelines and prospects for projects. These challenges are also impacting the burgeoning U.S. industry. Commonwealth Wind, a project under development off the coast of Massachusetts, filed a motion to withdraw from its contract with utilities due to increased costs and high interest rates. These macroeconomic challenges could slow down projects and reduce investor confidence in the space.

Permitting processes are another challenge for project developers. Both projects currently under construction illustrate some of the challenges surrounding federal, state, and regional permitting. Vineyard Wind won the rights to develop the lease area in 2015 through an auction held by the BOEM. The Construction and Operation Plan (COP) for the project was submitted in December 2017, initiating the final permitting process. The project received final approval three and half years later in July 2021. Similarly, the much smaller South Fork project also took over three years to complete the permitting process.


Along with the federal permitting process, projects must be approved by relevant state authorities. States oversee transmission planning, electricity procurement, and approve or reject the project plan. For the Vineyard Wind project, the Massachusetts Energy Facilities Siting Board (EFSB) reviewed the plans for offshore transmission and the project submitted an environmental impact report to satisfy the Massachusetts Environmental Policy Act (MEPA). State, regional, and local permitting was completed in the spring of 2020. Federal leasing, state electricity procurement, and regional transmission planning are all conducted independently. This could result in project delays and inhibit rapid development of the offshore wind sector.

While progress has been made in developing offshore wind in the United States, these and other challenges will require sustained attention and reactive policies. The United States had increased its focus on building an industrial strategy for a secure energy transition, and bills like the IRA will help to incentivize further investment. Reaching 30 GW by 2030 will prove challenging; policymakers’ and industry’s ability to weather emerging headwinds will be critical for market growth.

Joseph Majkut is the director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Allegra Dawes is a research associate with the CSIS Energy Security and Climate Change Program.

Allegra Dawes
Associate Fellow, Energy Security and Climate Change Program
Joseph Majkut
Director, Energy Security and Climate Change Program