Governors' Wind Energy Coalition

For the U.S. offshore wind industry, 2018 was the year when big-money developers began lining up to get into the market.

Undergirded by renewable energy mandates in Northeastern states, the shift came into relief most dramatically in the closing weeks of 2018, during a federal auction for three leases off the coast of Massachusetts.

Winning bids for those leases totaled over $405 million, dwarfing those of previous years (Energywire, Dec. 17, 2018). And the cast of participating companies was made up of oil and gas giants and big European utilities with significant experience in offshore wind.

“That’s where you can start to glean who’s really chomping at the bit to get into the U.S. market,” said Stephanie McClellan, who directs the University of Delaware’s Special Initiative on Offshore Wind.

But what will it mean for 2019? Here are a few areas to watch.

States want to buy offshore wind power. Who’ll sell it to them?

Perhaps the top objects of industry anticipation are upcoming contests for state contracts, particularly in a Northeastern triumvirate — New Jersey, New York and Massachusetts — with significant offshore ambitions. Those three states either have put out calls for project proposals or plan to do so later this year.

In New Jersey, authorities want to sign up to buy some 1,100 megawatts of power — or its equivalent in offshore wind energy credits — in the biggest single solicitation yet. They say they’re aiming to make a final decision on who gets the contracts by July 1, so developers can meet deadlines for a federal tax credit that is slowly being phased out. New York is on a similar timeline to award contracts for 800 MW. And Massachusetts officials say they’ll issue their second call for proposals sometime before the end of the year.

How cheap are the electrons?

Among the specs that developers have to provide, as part of the competition, is how cheaply they’ll be able to generate power.

Europe’s pedigreed firms bring years of experience and deep pockets. But a central question for this year, said McClellan, was what their involvement “is going to mean for the cost of energy.”

Last summer, energy authorities in Massachusetts said the Vineyard Wind project under development off Martha’s Vineyard would generate power for an average of 6.5 cents per kilowatt-hour.

That was about a cent and a half cheaper than if utilities had simply bought renewable energy in the market at wholesale prices — shockingly low, for most analysts. As the tax credit phases out, they say, it will be harder to deliver those kinds of pleasant surprises.

But virtually everything state and federal officials do to boost the industry is linked to a broader quest to drive down costs.

Readying the next wave of technologies

That includes research and development. In December, a five-member consortium headed by federal energy authorities identified priorities for R&D work, in anticipation of a first research-funding solicitation this year.

Walt Musial, principal engineer and manager at the National Renewable Energy Laboratory (NREL), estimated that it would probably take five or six years for research to be commercialized. “Basically, they’re ideas that need to be addressed, in order to ultimately continue the cost declines,” he said.

One of the priorities for development is making improvements to floating wind systems, which have so far only been deployed in a single small-scale pilot project located off the coast of Scotland.

Instead of mounting the turbine atop a foundation resting on the seafloor, floating wind systems are moored to the floor by lines, which could allow for projects to be sited in much deeper water. The consortium wants researchers to come up with better — and cheaper — mooring concepts.

Aside from harnessing more powerful winds in deepwater areas, floating projects would theoretically have fewer conflicts with fishermen, real estate interests and other commercial activities, particularly in the Northeast and Mid-Atlantic.

“If the deeper-water projects can exist and we can do it, it could be more advantageous for everybody,” said Musial.

NREL officials are also paying close attention to the status of floating wind pilots in other countries, he added. “There’s several that I think will make progress in getting turbines in the water,” Musial said.

Ports come first, supply chains later

Part of the reason why Northeastern neighbors are racing to launch new projects is because they see themselves as being in competition for jobs. It goes beyond simply installing and operating the wind farms: Those states have their eye on manufacturing the components.

As the industry grows, companies will want to make the turbine foundations — which can easily weigh a ton — close to the site where they’re going up, said Patrick Fullenkamp, an Ohio-based supply chain consultant and adviser for the Icebreaker offshore project near Cleveland.

Such large components are “the major driver for manufacturing at states quayside versus shipping across the ocean,” he said.

Few think those kind of manufacturing facilities, requiring investments in the hundreds of millions of dollars, will be built over the next few years.

But ports near lease areas could see a continued infusion of dollars this year, said Bruce Hamilton, director with Navigant’s energy practice.

In New Bedford, Mass., the staging ground for the Vineyard Wind project, local and state authorities have dedicated a marine commerce terminal and are creating extra port space for offshore work. And developers, said Hamilton, tend to use local investment as proof of their projects’ economic benefit.

“As part of selling each project, they commit to a certain amount of port and other infrastructure investment,” he said.

Will BOEM hold another auction?

The Bureau of Ocean Energy Management won’t say definitively whether it’s going to auction off any leases to federal waters this year. But it’s gathering public comment on projects proposed in the New York Bight, between Long Island and New Jersey.

The same goes for the deep waters off California, where floating turbine developers submitted unsolicited proposals to BOEM for three projects that would be completed in the late 2020s, although the military’s claim on the state’s crowded waters will have to be resolved.

If BOEM does hold another auction, it will probably be toward the end of 2019, say officials.

“We do hope we’ll be in a position a year from now or so, give or take, to be able to have another,” said BOEM acting Director Walter Cruickshank in December.