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Time is right for US offshore wind, say turbine suppliers

The fledgling U.S. offshore wind sector is well positioned to build on lessons learned from more than two decades of development off the coasts of northern Europe, say leading turbine suppliers that have helped Nordic wind farms halve generation costs over the past two years.

"The timing is right for the U.S. to go into offshore," Michael Hannibal, head of offshore wind at Siemens Gamesa Renewable Energy, said last week during a panel discussion at a wind energy conference in Anaheim, Calif. Siemens AG, which created the new business through its recent merger with Gamesa Corporación Tecnológica SA, dominates Europe's offshore turbine sales, with a nearly 68% share of the roughly 12,600 MW installed in the North, Baltic and Irish seas by the end of last year, according to a trade group report.

Hannibal spoke at the American Wind Energy Association's annual conference, held May 22-25.

General Electric Co. and Deepwater Wind energized America's first commercial offshore wind farm last year, the 30 MW Block Island Offshore Wind project off the coast of Rhode Island. Moving forward, U.S. developers can reduce costs further by applying "the learning curve from Europe," Hannibal said. "The U.S. is quite well poised to actually take what's been done in Europe and extrapolate that," added Stewart Mullin, a director at MHI Vestas Offshore Wind, a joint venture between Vestas Wind Systems A/S and Mitsubishi Heavy Industries Ltd.

SNL Image

Deepwater Wind's Block Island wind farm off the coast of Rhode Island.

Source: Deepwater Wind LLC

Bigger, faster, cheaper

Vestas and Mitsubishi earlier this year introduced a 9-MW turbine in their bid to reduce costs for offshore projects. Thanks to bigger turbines, ever larger projects and faster installation times, the cost of offshore wind-generated electricity in Europe has dropped as low as €49.9, or $55.7, per MWh for Vattenfall AB's 600 MW Kriegers Flak project in the Baltic Sea, which won a Danish auction November 2016. That compares to costs that were still well over €100, or $112, per MWh in 2015. Several other proposed large-scale offshore projects off the coasts of Denmark, the Netherlands and Germany have won recent auctions by bidding projects in the range of €55 to €61, or $61 to $68, per MWh.

The pace of cost reduction on the other side of the Atlantic Ocean, however, is still uncertain as the U.S. industry and market evolve. While trade association WindEurope anticipates Europe's offshore wind sector will approximately double its installed capacity to nearly 25,000 MW by 2020, estimates for U.S. offshore wind installations are much more modest. Navigant Consulting, for instance, expects just 3,000 MW of U.S. offshore wind to be installed over the next decade.

Early U.S offshore wind development is centered on the East Coast, where Massachusetts last year set a target of adding 1,600 MW of offshore wind by 2027 and New York is seeking to develop 2,400 MW by 2030. Regulators in Maryland this month also approved two major projects, while the federal government is leasing offshore development areas, including off the coast of North Carolina. Siemens has partnered with Statoil ASA to develop floating offshore wind technology that could help to open up the West Coast as well, much of which is restricted by ocean depths too great for conventional, stationary turbines. The two companies are assembling the 30-MW Hywind floating wind farm off the coast of Scotland, and Statoil has expressed interest in taking the concept to California.

A ways to go

"Floating wind is absolutely working," Hannibal said. Siemens has a target of reducing generation costs for floating wind farms below $150 per MWh between 2020 and 2025, and ultimately to below $100 per MWh by 2030. "It can go quicker. It can go slower. It all depends on how quickly the industry is developing," he said.

But the creation of a robust U.S. offshore wind market will require more than technology advances and lessons from overseas, says renewable energy finance expert Keith Martin, a partner at Chadbourne & Parke LLP. "The scale economies that are being reached in Europe will take time to be reached here. We have impediments. We have inexperience. Everybody charges a premium," Martin said in a presentation at the conference in Anaheim. "Europe has almost 3,600 offshore wind turbines and 13,000 MW. We've got five and 30 MW. So we have a lot to go."

Moreover, unlike in Europe, U.S. offshore wind farms "are intensely political projects," Martin said, pointing to concerns both over project siting and cost. "If you are going to have a project with that high a power price you are going to need the support of the governor, you need the support of the state public utility commission, you also need to move quickly through the development process," he cautioned. "A well-funded and determined opposition group can kill the project."

U.S. developers must also seek assistance from engineering and construction contractors with experience building offshore oil and gas rigs, said Martin. Jan Willem van der Graaf, CEO of Seaway Heavy Lifting, agrees. The company, active in oil and gas projects in the North Sea, has worked on offshore wind projects for the past six years, developing faster and safer procedures over that time. "The sea is still, ladies and gentlemen, something to reckon with," he said in Anaheim.