IHS MARKIT LTD. Driven by $100 billion in investment, offshore wind capacity expected to hit 21GW by 2030, yet still miss White House target by 30%
July 28, 2021
The evolution of the U.S. offshore wind market is being driven by an increase in state-level policy commitments, federal lease sales, offtake agreements, and supply chain activities. But bottlenecks in the market and a crucial lack of infrastructure mean that U.S. President Joe Biden's optimistic offshore wind target of 30GW by 2030 will almost certainly be missed, a new report from the Clean Energy Technology service at IHS Markit (NYSE: INFO), a world leader in critical information analytics and solutions reveals.
IHS Markit expects U.S. offshore wind installed capacity to reach 21 GW by 2030, up from just 42MW at present, resulting from more than $100 billion investment in the industry in the next nine years. This would represent impressive growth in the U.S. share of the global total installed offshore wind capacity, from close to 0% to around 9% in 2030.
Bottlenecks make 2030 target unattainable
Complex and lengthy permitting processes combined with a lack of manufacturing facilities, specialized U.S.?flagged installation and service vessels, dedicated ports plus poor power transmission infrastructure continue to be the key bottlenecks hampering more rapid growth of the U.S. offshore wind capacity. The impact of the Covid-19 pandemic has been a further impediment with administrative processes delayed.
Delays are also expected for the pioneer U.S. offshore wind projects due to the U.S. Bureau of Ocean Energy Management's (BOEM) lengthy investigation of the implications from the project build-out. However, as the industry matures the permitting process may ameliorate.
Costs remain high but offshore wind offers attractive benefits
Costs for offshore wind remain high compared to other carbon-free generation resources. Current unsubsidized costs for bottom-fixed and floating offshore wind projects are estimated at $125 per MWh and $225 per MWh respectively, well above wholesale electricity prices and costs for both onshore wind and solar PV. While costs are expected to decline sharply in the coming decades and the cost gap between bottom-fixed and floating is expected to narrow, offshore wind will remain a relatively expensive resource.
'Looking beyond the levelized cost of electricity (LCOE), offshore wind offers alternative benefits over less-expensive onshore wind and solar PV, including higher capacity factors and greater capacity value. Onshore wind and solar PV are increasingly constrained by availability of land, particularly in the U.S. Northeast and Mid-Atlantic. Moreover, offshore wind projects are located close to load centers, generating large volumes of clean electricity for major coastal cities.' - Andrei Utkin, Principal Analyst, Clean Energy Technology at IHS Markit.
Infrastructure investment lays path for growth
The Biden Administration's 2030 target aims to significantly promote the build out of the domestic offshore wind fleet, driving capital investments and providing job opportunities. The plan aims to speed up project permits, including environmental reviews, and provide $3 billion in public financing for offshore wind projects through the Department of Energy.
Investment of more than $500 million is planned for port upgrades including reinforcing and modernizing port infrastructure and supporting shore-side wind energy activities, such as storage areas, laydown areas, and docking of wind energy vessels to load and move items to offshore wind farms. The sector will be further bolstered by plans to build four to six new wind turbine installation vessels in U.S. shipyards, each representing an investment between $250-$500 million.
Additionally, the 30% investment tax credit (ITC) extension will provide a major boost for projects that start construction by the end of 2025 and come online as late as 2035.
Vast investment opportunities once initial hurdles are overcome
Due to the lack of established offshore wind supply chain in the country, turbine components for the first commercial projects will be mainly sourced from mature European markets until OEMs invest and open up local manufacturing facilities. Pioneer arrays will also be installed by European installation vessels with the support of Jones Act-compliant U.S. feeder vessels.
However, the offshore wind sector offers a multitude of attractive investment opportunities into dedicated supply chain, manufacturing and port facilities, transmission grids, and installation and service vessels.
At least $2.5 billion in investments have so far been announced in a variety of projects. These include infrastructure upgrades, ports and factories for foundations, towers, blades and cables, and the first offshore wind nacelle assembly facility by GE Renewables that will assemble nacelles for the 1148 MW Ocean Wind 2 project off the coast of New Jersey.
'Over time and with scale, as more and more offshore wind farms in the United States are consented, equipment manufacturers will be more willing to invest and build local supply chains and new installation vessels. But it will be a gradual process as the industry needs to see a rich pipeline of consented projects and a clear regulatory framework before committing to invest billions of dollars in local factories.' - Andrei Utkin, Principal Analyst, Clean Energy Technology at IHS Markit.
The IHS Markit Global Clean Energy Technology service provides in-depth coverage of the supply chain economics and outlooks for batteries and energy storage, hydrogen and renewable gas, solar and wind. New areas of research under development include carbon capture and storage, geothermal and heating and cooling. For more information visit https://ihsmarkit.com/products/clean-energy-technology.html
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IHS Markit Ltd. published this content on 28 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2021 15:23:07 UTC.
