Wind power executives worry over US offshore ambitions

The Biden administration wants to spark an American offshore wind power boom, growing the industry from less than 1 gigawatt today to 30GW by the end of the decade — enough to serve 10mn homes.

But executives are increasingly concerned that a myriad of challenges facing the sector are pushing that target beyond reach: permitting is too slow, leases are too expensive, equipment is in short supply and inflation is soaring, they say.

The mix of trepidation and excitement was on show at the ACP Offshore Windpower conference in Providence, Rhode Island, in the past week, where 2,000 delegates gathered to discuss the industry’s future.

“I think you could paint a picture — if there continues to be significant delays and projects that are already in the pipeline getting pushed back — then it will be more difficult to meet that 30 by ‘30 target,” said Molly Morris, incoming US offshore wind chief at Equinor, the Norwegian energy group.

The offshore wind industry, powered by turbines installed at sea, is well established in Europe. The US federal government and coastal states have more recently embraced the technology, with president Joe Biden making it a pillar of his drive to decarbonise the country’s power grid and put it on a path to net zero emissions.

Turbine blades are set to begin spinning next year at the 800-megawatt Vineyard Wind development off the coast of Massachusetts, the first commercial-scale offshore project in the US. Dozens more are set to follow as investors rush for a piece of the action.

Obtaining permits was a central worry for many developers gathered at the Providence event, who said environmental reviews needed to be speedier and carried out with more consistency and transparency.

“Our concern is that this could end up being a very difficult bottleneck,” Morris said. “If we don’t get these projects that are in the forefront . . . permitted, then it’s very difficult to really get this industry off the ground.”

Executives also pointed to problems with the process for leasing. An auction for a section of federal waters off New York and New Jersey in February generated high bids totalling $4.4bn, more than any offshore oil and gas sale. But some developers said the high price point sapped capital and made it difficult to turn a profit.

Companies including Equinor and Denmark’s Orsted pulled out of the bidding process as prices escalated. David Hardy, head of Orsted’s North American business, told the FT at the time that the auction was a “missed opportunity”.

“I don’t think it’s healthy to have these super-high lease prices,” said Mark Mitchell, senior vice-president for project construction at Dominion, a US utility building a wind farm off the coast of Virginia. “Right now that money just goes in, and it doesn’t necessarily benefit those customers that ultimately take that power.”

Dominion is also embroiled in a regulatory stand-off over Virginia’s insistence on a performance standard that would force it to cover the costs of replacement power if the wind farm underperforms targets. The company has threatened to pull the plug over what it describes as “untenable” costs associated with the provision.

The Biden administration says it is working with developers to resolve concerns as it looks to build the industry up “from the ground floor”. Amanda Lefton, director of the US Bureau of Ocean Energy Management, said: “We have significantly evolved our processes and continue to do so.”

“We are absolutely going to achieve the goals of this administration for 30 gigawatts of offshore wind by 2030. We are also poised to go well beyond that,” she told the Financial Times.

Availability of equipment is a growing challenge for the industry — a problem being exacerbated by some states’ insistence on the use of local parts and labour as a condition of winning power sales contracts.

“There are only so many resources that are available that can support the size of the turbines that we’re going to be installing here in the US,” said Amy McGinty, head of offshore construction at turbine manufacturer Vestas. “Whether it’s vessels, cranes, transport capacity, factory capacity — we are having to make commitments now . . . for projects that we’re going to be building in ‘25, ‘26, ‘27 and beyond.”

US law prohibits the use of foreign-flagged vessels to transport parts between domestic ports. This restriction could be tightened under legislation being considered in Congress that would also require installation vessels, which operate away from ports, to also be crewed by US mariners. Developers say this could stop the industry in its tracks.

“I think people need to weigh all the factors to make sure there’s transition times to make sure you don’t immediately strand the market,” Mitchell said. “Because these large vessels and resources, they’re just not swapped overnight. You’ve got to have time to do it.”

For equipment manufacturers, global inflationary pressures are adding to anxieties. “We’re in this industry that’s taking off like a rocket ship,” said Steven Dayney, head of turbine maker Siemens Gamesa’s offshore wind business. “Yet, many of us across the entire value chain are struggling to do it at a profit that allows us to continue investing . . . technology.”