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US offshore wind gets ready to join the party

A landmark deal marks the start of an exciting new era for US offshore wind, which looks to build on Europe’s successes

Danish energy firm Orsted's October purchase of Rhode Island-based Deepwater Wind represents a coming-of-age for the US offshore wind sector, which has previously lagged its European counterpart and the US onshore industry.

US offshore wind's slower progress thus far isn't entirely surprising. The country's onshore wind resources are some of the best in the world. Iowa, Kansas and Oklahoma alone are so rich with high, sustained wind flows, that wind power now accounts for 36%, 35% and 31% shares respectively of total generation in those three states, according to the US Energy Information Administration (EIA). The US was an onshore wind early adopter—and was also preoccupied with reeling in Europe's initial lead in solar across its vast drylands—diminishing the focus on the offshore sector.

But the offshore wind market has remained a tantalising prospect, not least for the simple truth that wind blows stronger for longer than on land. The difference can be measured in the capacity factor, i.e. what percentage of overall installed capacity translates into output. In 2017, the average capacity factor of all US onshore wind was 36.7%, according to the EIA. By comparison, the offshore wind capacity factor in Denmark (as the US has insufficient offshore wind to offer meaningful data) across a recent 12 month's data was estimated at 45.8%, according to the Danish energy agency ENS.

The increased capacity factor isn't, though, in the view of one US offshore wind expert, the key factor that has driven the rapid expansion of the European sector and will likely fuel a similar US boom. The drivers in the latest round of cost declines are advances in turbine technology, more efficient supply chains and lower cost of capital, according to Stephanie McClellan, director of the University of Delaware's special initiative on offshore wind. "You always want to optimise for the best wind speeds, but it's not the most important factor we've seen in recent cost reductions," says McClellan. "It's really the technology. We've gone from 3.5 Megawatts to 8MW, and now even 9.5MW turbines."

Falling costs

To track cost declines, McClellan prefers a standard energy accounting metric known as the levelised cost of energy (LCOE). The metric encompasses capital expenditure, cost of capital, operational expenditure, and finally annual energy output. And LCOE declines have been material. According to McClellan, the European offshore market saw LCOE drop by 50% between 2014 and 2016. "It was harder to analyse the US market at the time, because there were so few data points. Even as costs started dropping quickly in Europe, the US offshore market, at the time, was looking dismal."

But the US offshore market has begun to emerge, as Connecticut, Massachusetts, New York and Maryland seek to get in the game. Deepwater Wind's 30MW Block Island wind farm in Rhode Island, the country's first offshore facility-with a relatively expensive $300 per Megawatt Hour LCOE according to McClellan-started production in late 2016. Last year, the firm applied to the Maryland public service commission for approval of its proposed 120MW Skipjack facility, while competitor US Wind submitted a 250MW Maryland project for approval. McClellan puts LCOE for these larger developments at $135/MWh. And in August 2018, Vineyard Wind concluded an agreement with Massachusetts electric distribution companies to hook up its large-scale 800MW wind farm which, according to McClellan, has an LCOE of just $65/MWh. "Notice that, as we move from project to project, the price halves," she says.

Source: Petroleum Economist

When Orsted announced in June the completion of its UK Walney Extension project, at 659MW the largest offshore wind facility globally, the firm highlighted a map of the extensive European wind industry supply chain. "An important factor in kick-starting the industry on the eastern seaboard was the policy certainty these states sent when they decided, collectively, to start building offshore wind," says McClellan. "This gave the industry a future order book." With the European industry providing a concrete success story, large institutional capital is also now interested in investing in the US, she adds.

The US isn't keen to leave all the innovation to Europe, either. A team at the University of Delaware produced a paper last year which models new techniques for offshore turbine deployment, suggesting that-not content with just importing Europe's cost reductionsthe US industry may look to make its own contribution to greater competitiveness.

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