A number of recent actions in the United States will better position the nation to meet its short- and long-term offshore wind energy targets, as outlined in the April 2023 U.S. Offshore Wind Report from Intelatus Global Partners.
April brings with it the news that the U.S. federal government is seeking to accelerate and incentivize investment in offshore wind technologies and the supply chain, whether it be for bottom-fixed or floating wind projects, for the transmission of large amounts of electricity from offshore to an onshore grid that was not designed with this scenario in mind, or for the development of electron storage (battery energy storage systems) or Power-to-X solutions through the production of hydrogen based low and zero emission fuels. Funding is already being rolled out with examples including developing industrialized manufacturing solutions for nine floating wind substructure technologies. This support builds on the approach of the Inflation Reduction Act and creates increased confidence that the U.S. will address the significant challenges that remain in deploying 30 gigawatts (GW) of offshore wind by 2030, 15 GW of floating wind by 2035 and 110 GW of offshore wind by 2050.
While the federal government creates the conditions for offshore wind capacity development, projects still need to market their power. Till now, U.S. wind electricity procurement has been solely led by the states. The states have employed two distinct purchase models: 1) competitive bidding of a fixed rate contractual instrument (offshore wind renewable energy certificates (OREC) in Maryland and New Jersey and power purchase agreements (PPA) in Connecticut, Rhode Island, and Massachusetts) and 2) an indexed OREC, which is a type of two-side contract for difference (New York). What we have yet to see are floating rate merchant PPAs, market-based agreements between private buyers and the wind farm operator, like several transactions executed in Europe and Taiwan.
In March, Rhode Island confirmed that it had only received a single bid, from Ørsted for the 884 megawatt (MW) Revolution Wind 2 project, in response to is latest request for offers. Maryland’s governor announced a new state offshore wind deployment target of 8.5 GW by 2035. As a result, North and Mid-Atlantic States have booked around 17.5 GW of offshore wind offtakes, plan an additional 16 GW of offtakes in the short- to mid-term and have identified as much as a further 26.5 GW of longer-term capacity goals.
South Atlantic states have identified 8 GW of long-term goals to date, and the Gulf of Mexico is studying at least 5 GW and the Pacific states are evaluating goals amounting to 30 GW.
In a positive sign in the vessel building segment, orders for three to five newbuilding crew transfer vessels (CTV) were identified in March. As a result of this activity, the U.S. CTV fleet will move from three active vessels today to at least 20 by 2025 and more than 25 if all options are exercised. 10 of these CTVs are expected to be delivered within 2023.
Despite the positive foundations, we remain concerned about escalating project costs and a federal permitting timeline, which is not expected to green light new capacity until September of this year. Federal authorities anticipate permitting over 14 GW in the first six months from September, which will have a significant impact on the supply chain. Despite building domestic turbine, foundation and cable manufacturing capacity, 14 GW of projects will not all be supplied from U.S. factories. Further, the installation of these projects relies heavily on foreign flag vessels. Those developers without capacity reservation agreement will find themselves competing with an increasingly active European and Asian market for assets.
Our forecast accounts for more than 70 projects that will install over 77 GW of capacity in this and the next decade and a total 110 GW by 2050. The 77 GW forecast capacity will require capital expenditure amounting to over $240 billion to bring onstream, a recurring annual operations and maintenance spend of around $11 billion once delivered, and close to $35 billion of decommissioning expenditure at the end of commercial operations:
Longer term, we have identified 35 projects with a total capacity of close to 45 GW, which support the installation of a cumulative 75 GW by 2035 and over 80 GW by 2040.