Clock is ticking for US offshore wind industry, developer says

Source: By Michael Copley, SNL • Posted: Tuesday, October 13, 2015

Deepwater Wind CEO Jeffrey Grybowski likes to hold up a chart showing an eight-year period, from 1993 through 2000, when Europe’s offshore wind industry hardly existed.

The point, says the chief executive in charge of building the first commercial offshore wind farm in the U.S., is that while Europe now dominates the global offshore wind market, with more than 10,300 MW of installed capacity and another 4,200 MW under construction, developers there faced the same slow, frustrating start that the U.S. is trying to overcome.

Others have delivered a more urgent message: that the clock is ticking, and the U.S. only has so much time to stand up a viable industry.

“This industry in this country needs to get somewhere within the next 10 years and get the price down as low as reasonable, or we will find ourselves much like the nuclear industry in that we went so far and that was the end of the game because we couldn’t play it,” Lorry Wagner, president of the Lake Erie Energy Development Corp., said Sept. 29 at an offshore wind conference in Baltimore.

The U.S. currently has about 15,650 MW of offshore wind projects in various stages of development, with approximately 3,305 MW due online by 2020, according to the U.S. Department of Energy’s “2014-15 Offshore Wind Technologies Market Report.”

Yet while the federal government has contemplated the development of as much as 22,000 MW of offshore wind capacity by 2030, after Deepwater Wind’s 30-MW Block Island project offshore Rhode Island is finished, the industry’s next best chance to build wind turbines in the ocean likely will come from a handful of small demonstration-scale projects backed by the DOE.

Three projects selected in May 2014 to receive up to about $47 million each in DOE funding have all requested more time to meet development milestones in order to remain eligible for government financing.

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One of those developers, Dominion Resources Inc., put its 12-MW project offshore Virginia Beach, Va., on hold while it tries to cut costs. After rejecting the one complete bid it received for work on the project, Virginia Electric and Power Co.d/b/a Dominion Virginia Power in September said it would seek new bids with an eye on dividing work among a number of contractors. Dominion should know by the end of the first quarter of 2016 how much money it can save through the new bidding process.

While the new approach is expected to attract more competitive pricing, it may expose the utility — and its ratepayers and shareholders — to more risk. “[W]e have to get comfortable with how we handle that,” Dominion Energy Solutions Senior Vice President Mary Doswell said, according to the Richmond Times-Dispatch.

Federal regulators expect to rule soon on the developers’ request for time extensions, Jose Zayas, director of the Energy Department’s Wind and Water Power Technologies Office, said at the conference in Baltimore. In the meantime, two other offshore wind projects that are being developed by the University of Maine and the Lake Erie Energy Development Corp. are receiving federal funds to work out “deficiencies” in their initial plans, Zayas said.

“Of course, both those teams [are] eager … to see the findings of the three consortiums,” Zayas said during a press conference Sept. 29. “Based on the approach that we take on the three existing consortia, that’s when we will reevaluate the opportunity to onboard one of the two alternates, pending, of course, a good review of how we could address some of their shortcomings.”

To build an industry large enough to maintain domestic supply chains and keep skilled workers, some say states need to adopt a regional development approach. “It is going to be key … especially in the early days, to look to our regional supply chain. This is nothing new. But we really need to get rid of this myopic, provincial view where every state has their own fabrication facility in order to get these first projects off the ground,” Benjamin Foley, general manager of offshore renewables at Keystone Engineering Inc., said in Baltimore.