Recently installed foundations atDeepwater Wind's Block Island project.
Source: Deepwater Wind

Withthe blades of the first commercial U.S. offshore wind power facility expectedto start spinning off Rhode Island's coastline later this year, offshore winddevelopers still face huge hurdles to make the industry a reality.

Legal,political and economic challenges havealready derailed a few early demonstration projects trying to show thatoffshore wind can work in the Atlantic. And without early entries into offshorewind, industry believes the elements that can actually make this energy sourcecheaper may never materialize.

Developershope that these fledgling projects will spur on the infrastructure needed toachieve the economies of scale that can bring down the costs of electricityfrom offshore wind. State officials, meanwhile, are hoping to capture thedevelopment that would be needed to support such an industry. But jump startingsuch an industry will have huge upfront costs.

Themost prominent examples of this infrastructure comes from proposals for portsup and down the Eastern seaboard to support manufacturing and maintenance foroffshore facilities.

"Wind farms won't get built if we don't have theports and infrastructure to support them," Jay Borkland, program directorat environmental consulting firm Apex Cos., said at the annual meeting of theBusiness Network for Offshore Wind, held in May."The ports can't be an afterthought."

The idea is that at leastsome of these ports will become hubs for receiving, assembling and eventuallymanufacturing offshore wind turbine components, in the process substantiallycutting many of the costs that make offshore wind so expensive today."You won't see a significant depression in prices until you move thesupply chain to the U.S.," according to Paul Rich, director of projectdevelopment at U.S. Wind, a Baltimore-based company that wants to build a windfarm off the coast of Ocean City, Md.

Offshore wind turbinemanufacturers have mostly located in Europe, which has a head start of morethan two decades over the U.S. in offshore wind development. Shifting some ofthe supply chain across the Atlantic will likely take proof that multipleAmerican projects can be successful. "We need anywhere from 1,500 to 2,000MW of back orders of turbine purchases to entice them to move a manufacturingfacility to the U.S.," Rich said in an interview.

And the cost of even small projects has attractedsignificant pushback from ratepayers and officials.

Today, just one 30-MW wind projectis under construction, 'sfive-turbine 30-MW Block Island wind project, sited off the coast of RhodeIsland to the southeast of Block Island. Conversely, in Europe, morethan 11,000 MW are alreadyoperational, according to WindEurope, formerly the European WindEnergy Association.

'The biggest challenge'

Thelevelized cost of electricity — a measure that takes into account bothconstruction costs and costs of generating electricity — for offshore wind isnearly $200 per MWh, according to the U.S. Energy Information Administration.Compared to $73.60 per MWh for onshore wind, $75.20 per MWh for combined-cyclenatural gas and $95.10 per MWh for conventional coal-fired plants, thatestimate tags offshore wind as one of the most expensive forms of power.

Thecost gap between offshore wind and competing energy sources has served asammunition for opponents of some of the first offshore wind projects in thecountry.

FormerRhode Island Attorney General Patrick Lynch, who unsuccessfully appealed stateregulators' decision to approve a contract for the 30-MW Block Island project tothe state Supreme Court, has said the contract "will force us to buyoverpriced electricity for the next 20 years in order to subsidize one company,rather than jobs that are so desperately needed." Another lawsuit fromlocal ratepayers and the Rhode Island Manufacturers Association is pendingagainst the Block Island project in federal district court.

"Skepticspoint to the cost. That's the biggest challenge we face," Jason Folsom,the sales director for offshore wind in the Americas at Siemens Wind Powerowned by Siemens AG,one of the biggest wind turbine manufacturers in the world, said at the annualmeeting.

The location of that meeting is emblematic of the response theoffshore wind industry has for those skeptics. The meeting was held at SparrowsPoint, Md., at the site of a former steel mill on a tip of land outsideBaltimore where the Patapsco River meets Chesapeake Bay. That choice oflocation was not coincidental — the site is being redevelopedinto Tradepoint Atlantic, a private industrial and transportation complex thathopes to appeal to customers with a deepwater, international port.

Baltimore County recently applied for a $26 million federalgrant to redevelop part of Sparrows Point with a pier and other infrastructureto serve U.S. Wind, but that grant, if approved, is just a start. It is"just a fraction of what we need done," Rich said, estimating that itwould cost $60 million to $90 million to fully redevelop the port for offshorewind.

Up and down the Eastern seaboard, state officials may lookskeptically at the price tag of offshore wind, but there is also clear interestin the potential to tap a local renewable energy source and jump start activityin underused ports.

A ship on anassignment at an offshore wind power plant in the German North Sea.

Source:Siemens AG

Beyond Sparrows Point, otherexamples of potential ports include a temporary facility at the port of Providence,R.I., where workers assembled tower sections to be used in the Block Islandproject. Investors also met with New Jersey state government members about thepossibility of using a port at Paulsboro, N.J., to benefit projects likeFishermen's EnergyLLC's proposal to build a 25-MW wind farm off Atlantic City, N.J.

Further, at the Business Networkfor Offshore Wind meeting, several speakers mentioned that Brooklyn, N.Y.,could be another ideal place for an offshore wind port, especially consideringrecent aggressive moves by the federal government to lease about 81,000acres of ocean near Long Island, N.Y., for offshore wind development.

Such efforts, though, are notwithout risks. New Bedford, Mass., built what was promoted as the firstoffshore wind port in the country, but the project this port has been trying toserve — the 468-MW Cape Wind project from Energy Management Inc. subsidiary — has stalled.

A race

Only some, or possibly even only one, of these areas vyingto be offshore wind hotbeds may actually emerge. "It's a race. Whoevergoes first… [the] supply chain will build up around that high-capacityarea," Atlantic Grid Development Director of Analysis, Research and SystemsEngineering Deniz Ozkan said at the conference. Ozkan was theco-author of a March study from the University of Delaware that attempted toforecast the future costs of offshore wind, and found that the cost ofelectricity could fall from over $200 per MWh now to around $150 per MWh by2020 and just over $100 per MWh by 2030.

The potential ports in thisrace come from up and down the East Coast, and the areas wherethe federal government is planning to lease ocean waters to offshore winddevelopers are similarly scattered from New England to the Carolinas and inbetween. Despite those distances, one region may end up the assembly andmanufacturing nexus.

Rich used the example of Denmark, a country that became aleader in offshore wind by installing one of the first projects in 1991. Whenthe European offshore wind industry took off about 15 years ago, Denmark becamethe home to the bulk of the manufacturing for the industry in Europe, despitecountries hundreds of miles away, like the U.K., also growing their offshorewind capacity.

"As much as the industrialbase is in the U.K., it's not geared toward offshore wind," Rich said.

Rich views Denmark as instructivefor Baltimore, where U.S. Wind is based and where it has pushed for BaltimoreCounty's grant request to redevelop Sparrows Point.

"If we can make aninvestment, we can source in a shorter distance, Boston-to-Baltimore, than fromDenmark to the U.K.," he said.

The fact that Europe is the centerof the offshore universe helps explain why U.S. offshore wind projects are soexpensive, and also why starting a homegrown supply chain could make theindustry more economic. There are no turbine blades designed for marine usethat are currently manufactured in the U.S., so they must be shipped, typicallyacross the Atlantic, in vessels that can dock at deep water ports, according toFishermen's Energy COO Paul Gallagher. A project can spend around 30% of itscosts in Europe, he said.

Case in point, the Block Island project's 15240-foot blades, which arrived this month, were shipped in from Denmark.