US offshore wind opportunities expand

The new WEAs offer 9.8 GW of potential new lease area and promise to enlarge an already huge pipeline of offshore wind projects in the US. Moreover, while the pipeline is well primed at the back-end, shovel-ready projects are beginning to emerge from the front.

A major step forward in November was the second federal approval for a large-scale wind farm, the 132-MW South Fork project off Rhode Island. This follows approval for the 800-MW Vineyard Wind I farm in May.

Construction on South Fork could start early next year and, given its smaller size, it may well prove the first project to come online in a new era for the US wind sector, one likely to have a dramatic effect on US electricity markets and the realisation of the country’s climate change targets.

Despite having more onshore wind than any country bar China, the US has lagged offshore with only 42 MW completed. But, from this small start, development opportunities are now blossoming, promising a new multi-billion dollar, job-rich sector for the US’ green economy, one likely to eventually overtake in size even the most successful offshore wind sectors in Europe.

State-level ambition

US states on the country’s windy East Coast have taken the lead in creating offshore wind opportunities. In 2019, their procurement goals were already an impressive 23,698 MW by 2035, but by this year they had grown to 39,298 MW by 2040, according to the US Department of Energy’s Offshore Wind Report: 2021.

New York, for example, is targeting 9 GW by 2035, Virginia 5.2 GW by 2034, Massachusetts 5.6 GW by 2035 and North Carolina 2.8 GW by 2030 and 8 GW by 2040.

The eastern seaboard is leading the way, owing to large population centres providing demand, excellent wind resources and seabed depths suitable for conventional fixed-bottom installations.

Federal alignment

However, the majority of offshore projects are in federal waters, more than three miles offshore, requiring federal approvals.

US President Joe Biden’s announcement of a 30 GW by 2030 offshore wind target was a seminal moment for the industry as it indicated a new alignment of federal and state level support for the sector and the broadening of opportunities in federal waters for offshore wind development.

This has been followed by the establishment of five new WEAs in the New York Bight, a triangular area lying off the coasts of New York and New Jersey with average water depths of about 47 metres.

Under the US system, developers can make unsolicited lease applications, but if sufficient interest is shown by developers in a particular area, these applications will be superseded by a competitive process. The new WEAs, depending on the level of interest, are expected to be put out to competitive auction by the Bureau of Ocean Management (BOEM), following public consultations.

Geographical spread

There are now also nine active ‘Call Areas’ for offshore wind. These are precursors to the establishment of a WEA and provide an indication of how offshore wind might geographically diversify from the East Coast.

Two of the Call Areas lie off Hawaii and three off the Californian coast. Regulatory activity has also started off the Gulf Coast, with leasing possible by the end of 2022.

Each of the US coasts present different challenges, but each is large enough to host a major offshore wind market in their own right. In the Gulf Coast, hurricane risk is preeminent and wind speeds are generally lower than the East Coast. Off the west coast, the sea is deep and development is focussed on floating offshore wind concepts.

The potential is nonetheless huge. A BOEM study from 2020 put the Gulf Coast’s technical resource at 508 GW, around half of which is in water depths of less than 60 metres. California’s potential is estimated by the National Renewable Energy Laboratory at 192-201 GW.

Permitting pace

The BOEM is moving to speed up the permitting process, which has been identified in mature European markets as a major barrier to accelerated development.

Projects totalling 10,779 MW have progressed to permitting. The BOEM has set an aim of completing permitting for a further 15 offshore wind energy projects by 2025 and, in June, announced a cooperation agreement with the US Army Corps of Engineers, which should increase its capacity to assess and evaluate offshore WEAs and permitting applications.

Moving to FID

In addition to permitting, landing a deal to sell the power – known as an offtake agreement – is a critical part of the process because it allows a developer to raise finance, thus moving a project a big step closer to a final investment decision (FID).

As of end-May this year, 17 offtake agreements had been signed and three were in negotiation, including the two small wind farms already in operation, covering 8,971 MW of capacity.

Although the details of some off-take agreements are confidential, those made public demonstrate a clear, sharp downward trend in the cost to buyers of accessing offshore wind power, indicating that cost reductions achieved in European markets are being passed through quickly to the emergent US sector.

However, the growth of off-take agreements is creating another challenge: finding suitable grid interconnection points. Although other options are being evaluated, at present developers are responsible for planning individual offshore power lines to an onshore point of interconnection (POIs), joining a queue for coastal POIs that may become scarce as projects start to come online.

Pipeline tops 35 GW

Overall, in addition to the capacity in permitting, there are 11,652 MW where developers have acquired the rights to a lease area and a further 12,051 MW of unleased WEAs.

This has created a 35-GW-plus pipeline which promises to bring thousands of GWhs of clean energy into US homes, making a huge contribution to the achievement of both state and federal level climate change targets.