Why a European takeover could boost American offshore wind

Source: Benjamin Storrow, E&E News reporter • Posted: Wednesday, October 10, 2018

Danish wind giant Ørsted A/S said yesterday it will acquire Deepwater Wind LLC for $510 million, reshaping America’s nascent offshore industry just as a series of Northeastern states prepare to test the waters of the Atlantic with major new projects.

Ørsted is the world’s largest offshore wind developer, but it risked being locked out of a series of big projects in New England, thanks in large part to Deepwater, which has snapped up a series of highly sought-after state contracts in recent months.

The Providence, R.I.-based company has emerged as arguably the most successful American offshore developer. It recently inked deals with Connecticut and Rhode Island for a 600-megawatt project, building on a portfolio that already included long-term contracts for projects in New York and Maryland and the 30-MW Block Island Wind Farm in Rhode Island.

“It makes sense for the sector as a whole and especially for Ørsted after they failed to win any of the bids in the Northeast earlier in the year,” said Anthony Logan, who tracks the industry at MAKE Consulting, a division of Wood Mackenzie.

The deal means America’s offshore wind industry will be dominated by a handful of large European players, at least in the early years. But while the agreement may reduce competition, it is still a welcome sign for an industry that remains in its infancy in the United States, Logan said.

The larger a company’s pipeline of projects in the United States, he said, the more likely it is to move operations here. So far, many developers have proposed using European installation vessels to build their projects, a plan complicated by the Jones Act, a U.S. law that requires ships docking at U.S. ports to be built, flagged and crewed by Americans.

Ørsted will now be more likely to order a U.S.-flagged installation vessel if it wins an upcoming solicitation for projects in New Jersey, Logan said.

“They’re trying to build up scale,” he said. “If they build up scale in New England, they can be more competitive in New Jersey.”

The U.S. offshore industry has seen costs tumble in recent years, even as developers have pushed farther away from the coast in an attempt to avoid the type of opposition that has stymied past projects (Climatewire, Aug. 1).

The improving economic outlook for offshore wind has provided a boost for Northeastern states with ambitious climate goals, prompting a flurry of activity along the Eastern Seaboard.

New Jersey is pursuing plans to build 3.5 gigawatts of offshore wind, while New York has a goal to develop 2.5 GW. Efforts in both states remain in the early phases of development, though Deepwater has a power purchase agreement for the most advanced project in either state: a 90-MW development 35 miles east of Long Island.

Deepwater was also one of two companies to receive offshore renewable energy credits in Maryland, where it is pursuing a 120-MW development (Climatewire, May, 12, 2017).

“With this transaction we’re creating the number one offshore wind platform in North America, merging the best of two worlds: Deepwater Wind’s longstanding expertise in originating, developing and permitting offshore wind projects in the US, and Ørsted’s unparalleled track-record in engineering, constructing, and operating large-scale offshore wind farms,” Martin Neubert, CEO of offshore wind at Ørsted, said in a statement.

But nowhere has the American offshore wind market developed more quickly than New England, where a series of states have doled out contracts in recent months. Ørsted struck out on contracts in Massachusetts, Rhode Island and Connecticut, despite making a major push in all three states.

Massachusetts granted Vineyard Wind, a partnership of Avangrid Inc. and Copenhagen Infrastructure Partners, a contract for 800 MW in May, the first in what is expected to be 3.2 GW of offshore wind developed in the Bay State (Climatewire, May 25).

In tandem with that announcement, Rhode Island said it was entering negations with Deepwater Wind for a 400-MW development to be known as Revolution Wind. Connecticut then handed Revolution Wind a further boost in June, awarding the company a deal for an additional 200 MW.

Deepwater is owned by New York investment firm D.E. Shaw & Co. The deal is subject to the approval of U.S. regulators. If approved, Ørsted’s American operations will do business under the banner of Ørsted US Offshore Wind. Deepwater CEO Jeff Grybowski will stay on, serving as co-CEO with Thomas Brostrøm, who leads the Danish company’s American operations.

“Ørsted is one of the world’s great clean energy companies and real pioneers in the offshore wind sector,” Grybowki said in a statement. “We could not be more pleased with this combination, which will bring together two great teams to realize an enormous clean energy resource for coastal populations in the US.”