US offshore wind set to grow over next decade


New Wood Mackenzie research shows that the offshore wind industry in the USA is set to grow in strength over the next decade. As the sector is ramping up from near-zero today, it could produce as much as 25 GW in 2029, capturing nearly half of the US demand for new wind power installations.

“While more than 9 GW of projects are already contracted or soon to be approved, and up to 6 GW more will be solicited through 2022, longer-term uncertainty could see total build this decade reach just 15 GW.”

Max Cohen, principal analyst and author of Wood Mackenzie’s US Offshore Wind Outlook 2020-2029.

Permitting delays and political instability at state and federal levels could hamper the long-term prospects of the sector, despite state moves to increase mandates and contract large projects.

However, expanding state renewable portfolio standard (RPS) carveouts and contracting calls for 34 GW of capacity to be added by 2035 mean that growth potential exists.

“The US federal government’s lease program currently supports about 20 to 30 GW, depending on turbine density, and areas supporting as much as 45 GW are under consideration for future leasing.”

Max Cohen, principal analyst.

This more optimistic 34 GW scenario would bring forth its own challenges , especially by integrating so much offshore wind into a restricted onshore transmission grid.

“Recent large-scale renewable energy-focused transmission projects have failed to move forward due to a combination of permit delays, NIMBYism and high network upgrade costs.”

Max Cohen, principal analyst.

Wood Mackenzie is expecting that almost 25 GW of offshore wind capacity will be added in the US from 2020-2029. States have already chosen a potential of 9 GW, representing more than 70 percent of the projected planned up to 2026. And 80 percent of wind build over this period will be located offshore in New England and New York.

“The US offers an opportunity for experienced European players and oil and gas producers, as well as domestic utilities and supply chain providers, as policymakers seek to boost employment.”

Max Cohen, principal analyst.

While federal tax credits and permitting schedules determine short-term growth, the marketing of floating technology is vital to extending the geographic scope of offshore wind to key 100 percent RPS markets such as California and Hawaii.

Offshore wind opportunities exist as over 39 GW of thermal power plants are due to be retired.

“Offshore wind can be deployed on a large scale, making it a powerful tool for policymakers to pursue more ambitious clean energy targets.”

Max Cohen, principal analyst.

In 2023, when the 800 MW Vineyard Wind project comes online to supply Massachusetts customers, along with around 260 MW of smaller projects supplying New York, Maryland, and Maine, the offshore wind sector will effectively begin.

Offshore wind will constitute more than a third of the wind capacity installations of the year in 2024, rising to near or even half of the wind build in each subsequent year up to 2029.

The rapid expansion of the market share of offshore wind is partly due to the expiry of the federal Production Tax Credit. This would see onshore installations decline from an projected 14 GW in 2021 to a standard amount of less than 5 GW per year in the decade later.

“The first few commercial-scale projects contracted in 2017 have prices in the $150-$170 per MWh range (levelized, 2019$). Vineyard Wind and Revolution Wind shocked with levelized 2019$ prices in the $65-80/MWh range. This substantial drop made the technology viable as a route to decarbonizing the Northeast’s power grid, and encouraged policymakers across the region to increase mandates.

“These low prices are made possible by the latest in offshore wind turbine technology, as well as the continued availability of the ITC. It remains to be seen if technology improvements and economies of scale can outweigh the rise in required prices the phase-out will bring.”

Max Cohen, principal analyst.
Nedim Husomanovic

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