Scaling-up Offshore Wind to 30 GW: Part 1
Part 1: Examining the Biden Administration’s Ambition to Jumpstart Clean Energy
Last March, the Biden Administration announced an ambitious effort to rapidly expand the almost non-existent domestic offshore wind sector: 30 gigawatts (GW) by 2030. That is 10 million homes powered by a resource that lights up only a few thousand right now from two small scale projects off the coasts of Rhode Island and Virginia. It is a massively audacious goal that would cut 78 million tons of emissions if successful.[i]
Now, with many ambitious emissions-reduction policies in the Build Back Better bill scaled back or eliminated during negotiations with moderates in Congress, building out this resource is likely to be an even more important element of the Biden Administration’s efforts to fight climate change via executive action. The Biden Administration has already taken steps in that direction, with the implementation of fast-track permitting and opening up vast new areas for leasing.[ii]
It’s been nearly a year since President Biden set forth this 30 GW goal – is he any closer to meeting it?
The sheer scale of offshore wind projects underscores the challenges this industry will face—much like those the traditional oil and gas sector has faced. Developers and end-users of renewable energy will need to address regulatory hurdles, environmental justice concerns, and labor challenges as it grows into a mature global industry. The headwinds the Biden Administration will likely face here are a microcosm of larger fights over the particulars of the energy transition that will shape President Biden’s climate legacy.
This piece is the first in a series dedicated to the offshore wind industry’s advancement in the U.S. We will explore other issues throughout the year.
A Promising Technology Facing Headwinds
Offshore wind has historically struggled in the U.S., partially due to low natural gas prices, permitting requirements that are not specifically designed for renewable energy, and staunch opposition from local fisherman and those that want to protect their viewshed. Building a homegrown offshore wind industry from scratch will also mean building an entire domestic supply chain and labor force from the ground up while trying to reform a baroque approval system and getting states on board. Nevertheless, a major buildout of offshore wind in the U.S. has been a long-term goal for clean energy advocates for more than two decades.
In many ways, offshore wind is ideally positioned to overcome some of the disadvantages of land-based renewables. According to the Center for Sustainable Systems, wind speeds are faster and more consistent offshore than onshore leading to a capacity factor (the amount of time a turbine is producing energy at its highest level) that is roughly 30 percent higher than onshore wind. Turbines can also be built significantly higher offshore to take advantage of higher air speeds and with fewer hurdles in terms of siting. Furthermore, 58 percent of the estimated wind resources in the U.S. lie in depths greater than 60 meters. Rich offshore wind resources are also located within a hundred miles of most major population centers on the East Coast, while the best land-based resources are largely in the Great Plains.[iii] The proximity to major load centers, ready access to existing transmission, and increased efficiency makes offshore wind deeply attractive from the standpoint of those responsible for bringing power to homes, businesses, and industrial users across the country.
Years-long regulatory headaches and local opposition doomed some early projects, including Cape Wind, the first major project proposed for the U.S., which was officially abandoned in 2017, when the technology was still largely in its infancy here. But the advantages of offshore wind from a climate and electric grid standpoint were enough that development has continued steadily in Europe with Germany, Denmark, the Netherlands, and the U.K leading the way. More than 25 gigawatts are installed across Northern Europe with several dozen more in the pipeline.[iv]
While opposition remains, it has been largely overcome through a combination of better collaborative planning, infrastructure siting outside the traditional viewshed, which eliminates the concerns about disrupting views or creating noise, and improved technology that allows for a smaller number of taller turbines to generate more power. Levelized costs of offshore wind energy also plummeted by 28-51 percent between 2014 and 2020, even as competitors like gas have suffered from rising fuel costs globally.
Projects approaching or exceeding 1 GW are becoming the norm in Europe and at least eight farms larger than 750 MW have already been announced for the East Coast of the U.S.[v] At this size, offshore projects are approaching or exceeding the size of traditional, fossil-fuel fired power plants.
Building a Supply Chain from Scratch
The Biden Administration’s 30GW goal for offshore wind capacity by 2030 represents a significant challenge for the existing supply chain, but also a potential opportunity for President Biden to build on his promises to develop American manufacturing and increase jobs.
Offshore wind requires highly sophisticated precision manufacturing and advanced materials. Continued innovations in the space are driving new demand for carbon fiber composites, advanced magnets, and large-scale 3D printing. A group affiliated with the University of Delaware studying the economics of offshore wind in the U.S. found that building and operating the supply chain will be worth $109 billion to businesses over the next 10 years.
While the U.S. has a more robust supply chain for onshore wind compared to solar or battery storage, offshore is a different beast. As the Department of Energy reported in August 2021, “the initial phase of offshore wind energy installed on the Atlantic Coast is expected to rely heavily on international supply chains for major components, installation vessels, and engineering design work.”[vi]
Federal involvement is still taking shape. The most recent draft of the Build Back Better legislation would have extended the Investment Tax Credit, which is typically used for offshore wind, and offer a direct payment option that wind developers have clamored for. Under the current language, if companies meet certain domestic-content requirements, tax credits would be significantly higher.[vii]
The bill would have also offered an advanced manufacturing production credit for eligible components to help scale domestic supply chains—including credits for blades, nacelles, towers, and offshore platforms (both fixed and floating). While the bill’s future is highly uncertain, its clean energy provisions remain popular with moderates and may still find a legislative path forward.
The Jones Act brings its own set of challenges with its stringent requirements on vessels operating between U.S. ports. This rule, dating back to the 1920s, mandates that any ship bringing materials from one point in the U.S. to another must be American-built and crewed. That includes vessels needed to transport building materials to wind turbine building sites from U.S. ports. For offshore wind, that means challenges with higher costs and finding adequate supply, as there are currently no U.S.-built vessels designed to handle the highly specialized requirements of transporting and installing turbines and blades that can stretch hundreds of feet.
That means right now, offshore wind projects are relying on European-built vessels operating out of Canada to ship materials out to offshore waters, rather than closer U.S. ports. It remains to be seen what the Biden Administration can do to remedy the problem. Previous attempts to add flexibility to the Jones Act have met staunch resistance and waivers have been only granted in emergency situations. For their part, companies planning large-scale development see an opportunity. Virginia-based utility Dominion Energy, which is planning a massive farm off Virginia Beach, is currently building its own Jones Act-compliant installation vessel which it hopes to lease out to other projects after its own project is completed.[viii]
Already, states across the Eastern Seaboard are jockeying to claim parts of the offshore wind supply chain—hoping to reap the jobs and tax revenues that this sophisticated manufacturing can bring.[ix] State involvement could be a double-edged sword. Local content rules in this area could add burdens on top of federal domestic content requirements that the industry is already uncertain about meeting, but regional cooperation between states who can find ways to share could help build centers of innovation.
Channeling an Existing Workforce
The 30 GW goal is projected to create more than 44,000 direct jobs and another 33,000 supporting jobs. In many respects, offshore wind has significant commonalities with oil and gas work or other heavy industrial occupations. It is typified by well-paid, highly skilled, and specialized workers who are often unionized. This may be a crucial selling point for the Biden Administration.[x]
Providing new jobs in renewables for workers in traditional energy industries like coal, oil, and gas has been a perennial issue and the renewables sector has struggled to provide comparable high-paying skilled work at similar scale. Although some subfields like onshore wind do provide these kinds of jobs, the majority of clean energy jobs in the U.S. are currently in solar installation and energy efficiency—both lower paid fields that have more in common with roofing, painting, and other construction fields than with pipeline welding or offshore rig work.[xi]
President Biden is now looking to the offshore wind industry as a place to shore up support in organized labor—not just with wind itself but with the large expansion of transmission infrastructure that an East Coast buildout would require.[xii] Powerful Democrat-friendly unions like the International Brotherhood of Electrical Workers and North America’s Building Trades Unions are likely paying close attention.
There is a significant opportunity to increase existing labor capabilities on both the East Coast and the Gulf of Mexico. States like Maryland already thinking about workforce development—recently authorizing $2.8 million in funding for supporting local businesses in the supply chain, including those that are minority and women-owned.
A major buildout might help revitalize struggling small- and medium-sized ports along the Eastern Seaboard. New Bedford, Massachusetts is at the head of the pack right now as the main staging point for Vineyard Wind—the first significant commercial scale project to break ground in the U.S.[xiii] The enormous level of existing offshore infrastructure and skilled offshore workers in the Gulf of Mexico also offers an opportunity for a jobs transition, especially if the Biden Administration wants to win over states like Louisiana, who have been slow to pursue renewables.[xiv]
In contrast with supply chains, mobilizing the right labor force may be an easier lift for the federal government with states primarily taking the lead. The role of the Biden Administration is likely to be more about assessment and channeling funds into training. Existing disputes about unionization in the renewables sector are unlikely to go away, but if offshore wind can demonstrate a viable path to transition skilled fossil fuel industry workers to analogous work in a cleaner sector, that should be a strong data point for the Biden Administration as it works to sell moderates and cautious states on further expansion.
In Part 2 of this series, we will take an in-depth look at the federal and state governments leasing and permitting processes, as well as regulations offshore wind project developers will need to comply with before construction can begin, and additional incentives Congress may implement in 2022.
References
[i] United States, Executive Office of the President, “FACT SHEET: Biden Administration Jumpstarts Offshore Wind Energy Projects to Create Jobs.” Office of the Press Secretary, Mar. 29, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/29/fact-sheet-biden-administration-jumpstarts-offshore-wind-energy-projects-to-create-jobs/
[ii] United States, Dept. of the Interior, “Secretary Haaland Outlines Ambitious Offshore Wind Leasing Strategy.” Dept. of the Interior, Oct. 13, 2021, https://www.doi.gov/pressreleases/secretary-haaland-outlines-ambitious-offshore-wind-leasing-strategy
[iii] Center for Sustainable Systems, University of Michigan. 2021. “Wind Energy Factsheet.” Pub. No. CSS07-09. https://css.umich.edu/factsheets/wind-energy-factsheet
[iv] S&P Global, “Offshore Wind: Powering A Net Zero Economy.” Sept. 21, 2021 https://www.spglobal.com/_assets/documents/ratings/research/100514969.pdf
[v] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Wind Energy Technologies Office, by NREL, “Offshore Wind Market Report: 2021 Edition”, Table 3, Pg. 16, https://www.energy.gov/sites/default/files/2021-08/Offshore%20Wind%20Market%20Report%202021%20Edition_Final.pdf
[vi] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Wind Energy Technologies Office, by NREL, “Offshore Wind Market Report: 2021 Edition”, Pg. 33
[vii] 117th Congress (2021-2022), “H.R.5376 – Build Back Better Act,” Sept. 25, 2021, https://www.congress.gov/bill/117th-congress/house-bill/5376/text
[viii] Dominion Energy, “Dominion Energy, Ørsted and Eversource Reach Deal on Contract to Charter Offshore Wind Turbine Installation Vessel,” June 1, 2021, https://news.dominionenergy.com/2021-06-01-Dominion-Energy,-rsted-and-Eversource-Reach-Deal-on-Contract-to-Charter-Offshore-Wind-Turbine-Installation-Vessel
[ix] Associated Press, Wayne Perry, “Report: Offshore wind supply chain worth $109B over 10 years,” Oct. 12, 2021, https://apnews.com/article/business-new-jersey-atlantic-city-university-of-delaware-wind-power-19b67ff8bf285cf74e5fd19b39037c9b
[x] United States, Executive Office of the President, “FACT SHEET: Biden Administration Jumpstarts Offshore Wind Energy Projects to Create Jobs.” Office of the Press Secretary, Mar. 29, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/29/fact-sheet-biden-administration-jumpstarts-offshore-wind-energy-projects-to-create-jobs/
[xi] Brookings Institute, Tomer, Kane, George, “How renewable energy jobs can uplift fossil fuel communities and remake climate politics,” Feb. 23, 2021, https://www.brookings.edu/research/how-renewable-energy-jobs-can-uplift-fossil-fuel-communities-and-remake-climate-politics/
[xii] United States, Executive Office of the President, “FACT SHEET: Biden Administration Advances Expansion & Modernization of the Electric Grid,” Office of the Press Secretary, April 27, 2021, https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/27/fact-sheet-biden-administration-advances-expansion-modernization-of-the-electric-grid/
[xiii] Vineyard Wind, “Vineyard Wind And Semco Aim To Establish Offshore Wind Service And Maintenance Hub In New Bedford,” Oct. 29, 2021, https://www.vineyardwind.com/press-releases/2021/10/29/vineyard-wind-and-semco-aim-to-establish-offshore-wind-service-and-maintenance-hub-in-new-bedford
[xiv] Drilled News, Sara Sneath, “Gulf Coast Oil Workers Are Building America’s Offshore Wind Industry,” April 20, 2021, https://drillednews.com/gulf-coast-oil-workers-are-building-americas-offshore-wind-industry/
| The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
©2022 FTI Consulting, Inc. All rights reserved. www.fticonsulting.com |
