The first ones in

Referred to as first movers, the developers, investors and government agencies creating an offshore wind industry in the US believe that in some locations their work may soon pay off.

Deepwater Wind, the company that built the country’s first project off the coast of Rhode Island, is already developing its second. In New York, a utility and developer recently completed the country’s first offshore wind power purchase agreement, while a company called LEEDCo sees manufacturing potential in its project near Ohio. Overall, the Bureau of Ocean Energy Management, a federal agency tasked with awarding offshore wind development leases, has 11 agreements with companies planning projects, almost all on the East Coast.

Offshore wind is finally starting to emerge where conditions are right in states with strong government support, private sector interest and an energy demand not easily met by other sources.

However, cost is still an issue. There is a lack of supporting industry, stretching developers’ supply chains and driving up costs for the technically intensive projects.
In Europe, this problem has been solved as manufacturers open plants near projects and technology improves. A decade ago, the price per kilowatt-hour for an offshore wind project was around 20 cents. A more developed industry has led to over 12GW in operation and prices in the 8-cent range.

This compares to the US’s 30MW in operation from its first and only project at Block Island. Europe’s total offshore wind potential is around 30,000 terawatt-hours, according to the European Environment Agency, while the Department of Energy reported 44,000 terawatt-hours of untapped potential in the US.

“There are a lot of first-mover costs in the United States that have to be overcome,” Christopher Namovicz, a renewable energy analyst at the US Energy Information Administration, explains. “It’s hard to see offshore prices being widely competitive even in fairly expensive markets.”

Will the US ever have widespread use of offshore wind generation? It is possible, Namovicz says, but projects are more likely to first show up where there is a specific energy demand to fill and state governments provide support.

Ambitious clean energy initiatives have driven New York and Massachusetts to be ‘seabed’ zero for offshore wind in the US. Stable policy is giving utilities and developers confidence to push through projects that can take years to be approved and built.

“Decisions made today, those projects are going to come in the 2022-23 timeframe,” says Thomas Falcone, chief executive of the Long Island Power Authority, a New York utility working with Deepwater Wind to build a 90MW project. “You’ve got to be working on it now.”

Falcone adds that a big reason why LIPA was able to recently complete the nation’s first offshore wind PPA for the Deepwater Wind project, planned for the eastern tip of Long Island, is federal approval and state government support.

Without BOEM’s permission to build the project in federal waters 30 miles from the coast, the farthest Deepwater Wind could have gone in state waters is three miles out.That means it would still be visible from the shore – a major cause for why some projects have been halted.

Clean energy, and specifically offshore wind, initiatives set by New York have also given LIPA assurance to go forward with the project, Falcone says.

New York set a goal in 2013 to meet 50 percent of its energy needs with renewable sources by 2030. On top of that, Governor Andrew Cuomo announced in January a mandate to build 2.4GW of offshore wind to help meet that goal.

“That’s the policy foundation,” points out John Rhodes, president of NYSERDA, New York’s energy research and development authority. He explains the state’s approach is to support clean energy sources based on the best price available, but some amount of offshore wind production has already been factored in to help meet the state’s ‘50-by-30’ goal.

“We believe that offshore wind is both possible and necessary, centrally important for reaching that standard,” Rhodes says.

This direction is what the private sector needs. Along with Deepwater Wind’s project, Norwegian oil company Statoil won a federal lease in December to begin the development process in an area of almost 80,000 acres south of Long Island.

Massachusetts has an offshore wind directive as well, calling for 1.6GW of production by 2027, which has led to European players like Copenhagen Infrastructure Partners and DONG Energy to vie for development leases.

LOAD POCKETS

Location matters for offshore wind in the US. Onshore wind prices have fallen to around 2 cents per kilowatt-hour, according to a report published last year by the Electricity Markets and Policy Group at Lawrence Berkley National Laboratory. Deepwater Wind’s PPA with LIPA for the project east of Long Island is for 16 cents per kilowatt-hour, meaning offshore wind is not yet an unconditionally cost-effective resource.

“Location on the transmission grid is an important determinant of where some of these near-term projects might be economical to locate,” EIA’s Namovicz stresses. “[Offshore wind] will most likely be developed in places that have transmission or other kinds of market constraints that produce a very high value of electricity in any area that’s accessible to the coast.”

Known as load pockets, this is why a state like California, with a clean energy goal similar to New York, is not a first mover for offshore wind. Waters off the West Coast are deeper than the East and California’s solar capacity is far greater than in the North-East.

But for New York, Rhodes believes conditions for offshore wind are just right.

What he called the “New York Bight” is as good as it gets for offshore wind locations in the US thanks to “steady, strong winds”, a shallow continental shelf and dense, urban and coastal load pockets in New York City and Long Island, Rhodes explains. “Those are the economic and geophysical and meteorological realities that say it should be here,” he adds.

LIPA’s Falcone agrees, adding that Long Island’s location in New York’s electricity grid was instrumental in making Deepwater Wind’s project economical. “We’re in Long Island, suburban New York. That would be the equivalent of around 450 acres of solar. Where can you site 450 acres of solar on Long Island?” he asks. “The reason it works here is we are able to deliver the energy to the right part of the transmission grid.”

Nearby industry to support a project’s construction is another factor for where offshore wind works in the US. This makes the Great Lakes an attractive option. In Ohio, Lorry Wagner believes the region, which has long been a manufacturing hub for the US, has the potential to develop part of the offshore industry that is just as crucial as market demand.

LEEDCo, a company he is president of and funded by Norwegian conglomerate Fred Olsen & Co and the Cleveland Foundation, is working on an offshore wind project with a goal larger than just delivering power to a hard-to-reach area.

Wagner and his team seek to tap the offshore potential of the Great Lakes while establishing a domestic supply chain. LEEDCo is currently in the development phase for a six-turbine, 21MW project in Lake Eerie, an area with around 50GW of offshore wind potential, Wagner says.

“We had a mission from day one to build the US supply chain for our project, and really other projects,” he explains.

According to Wagner, if offshore wind were to take off in the Great Lakes region, manufacturers would see an opportunity to produce turbines and foundations in the area, which could then be shipped to the East Coast as well.

“Everybody talks about the Atlantic, but when you look into it, they have a lot of infrastructure that needs to be built,” Wagner claims. “If we’re successful in what we’re doing, in building the foundations here, that helps these manufacturers also do work on the East Coast.”

LESSONS FROM EUROPE

It is hard to say offshore wind has arrived in the US, and until costs decrease the energy source will continue to be met with scepticism.

NYSERDA’s Rhodes suggests it is worth studying how Europe’s industry scaled to where it is today. “There are a couple of ingredients that got Europe to the position of enjoying this very cost-competitive source of energy,” he says. “It was very clear there was going to be a lot of offshore wind projects being built that allowed the industry to invest, to supply that demand.”

Those are the conditions the US will have to replicate and there are some hints that may happen. For now, though, the fate of offshore wind rests in the hands of its first movers, but soon it is likely others will be making their moves too.