By Fitch Solutions
- Activity in the US offshore wind industry to remain concentrated on the eastern seaboard in the near-term with the first utility-scale projects scheduled for completion in 2023.
- Newly announced lease areas from the Bureau of Ocean Energy Management present growth opportunities on the west coast toward the end of the forecast period, particularly for the floating wind technology segment.
- In the Gulf of Mexico, BOEM is seeking comments on two potential wind areas off the coast of Texas and Louisiana to further support President Biden’s long-term offshore wind development goals, posing an upside risk to our forecasts.
Activity in the US offshore wind industry to remain concentrated in the near-term on the eastern seaboard with the first utility-scale projects scheduled for completion in 2023. New York and Massachusetts are set to have the first utility-scale offshore wind farms in the US market with the South Fork and Vineyard Wind projects expected to enter operations by the end of next year. US offshore wind capacity will grow from just 28.9MW in 2022 to 932.5MW in 2023 when these two projects are completed. We have revised up our offshore wind capacity growth forecast to 22GW by the end of the decade, driven primarily by developments off the east coast. However, we highlight that new lease areas and a supportive federal policy landscape pose an upside risk to this outlook. According to our Key Projects Database (KPD), 28.1GW of projects are located in east coast waters, accounting for 86.5% of the total US offshore pipeline.
After decades of lagging behind regional peers such as Europe, eastern states were the first to adopt offshore wind development policies in the US market. In 2009, Massachusetts and Rhode Island enacted legislation to support initial projects in the region. Since then, seven other states have set capacity targets or established specific offshore wind carveouts in their renewable energy standards. New York has led the region with its target of installing 9GW of offshore wind capacity by 2035. In addition to strong targets, states have implemented competitive solicitation processes on fixed schedules to attract investment from developers. Supportive policy environments, robust resource potential and a coastal geography suitable for fixed turbines has resulted in a substantial offshore wind project pipeline in the waters off the east coast. We expect continued growth in the project pipeline as states work to achieve specific offshore wind targets and broader climate goals. Supporting this view, New York has launched its third competitive solicitation for an additional 2GW of offshore wind capacity with awards expected in Q123.
Newly announced lease areas from the Bureau of Ocean Energy Management (BOEM) present growth opportunities on the west coast toward the end of the forecast period, particularly for the floating wind technology segment. According to the KPD, there are currently just three projects in the offshore wind pipeline off the coasts of California and Washington. However, recent leasing actions by the federal government support our view that the industry is set for expansion in the region. In May 2022, BOEM published a Proposed Sale Notice (PSN) for the first offshore wind lease sale off the coast of California. The PSN contains proposed auction details for lease areas within the Morro Bay and Humboldt Wind Energy Areas (WEAs) which combined consist of 1510 square kilometres. Included in the Morro Bay lease sale is the 1GW Castle Wind project which is expected to be completed by 2030. If fully developed, the two WEAs have the potential to support 4.5GW offshore wind capacity. Beyond California, a Call for Information and Nominations was issued in April to assess commercial interest in the Coos Bay and Brookings Call areas off the coast of Oregon totalling about 1811 square miles.
While states along to the west coast have some of the strongest support for non-hydro renewables in the US market, technology constraints have delayed offshore wind development in the region. Deeper coastal waters often require utilising floating turbines in wind farm construction as opposed to fixed turbines. The added cost of floating turbines has deterred investment from developers, however this is changing as the floating wind industry matures globally and technology costs continue to decline. Floating wind has reached commercial viability in Europe, with multiple projects currently operational including the 30MW Hywind project in Scotland and the 25MW WindFloat Atlantic project in Portugal. Increased offshore wind opportunities along the west coast presents a sharp upside risk to our wind energy forecast as we expect to see favorable policy environments for the sector in states throughout the region. In addition, improved project economics for the floating wind segment will allow for previously unviable projects to be developed in the deeper waters off the west coast. Supporting our view, California set a target of developing 25GW of offshore wind by 2045 and in interim target of 2-5GW by 2030 after BOEM’s announcement of the proposed auction details.
In the Gulf of Mexico, BOEM is seeking comments on two potential wind areas off the coast of Texas and Louisiana to further support President Biden’s long-term offshore wind development goals. Potential offshore wind development in the Gulf presents additional upside risk to our growth forecast in the long-term as lack of support in the region has resulted in a non-existent project pipeline to date. We expect to see completed projects toward the end of the decade as the region’s policy environment improves and federal action supports leasing activities. Furthermore, offshore wind growth is set to provide robust opportunities for green hydrogen production as the region’s existing industrial sector provides a large demand base for clean fuels. Two draft WEAs have been announced totalling a combined 2973 square kilometres which have the potential to support up to 14.8GW of capacity. BOEM expects to issue leases in the areas in early 2023 after comments are considered and the required environmental review is completed.
The advancement of the leasing process marks a notable shift for the offshore wind industry in the southeast which has historically been dominated by the offshore oil and gas sector. States in the region have shown little support for offshore wind development over the years resulting in subdued interest from developers. However, this is changing as Louisiana set a target of developing 5GW of capacity by 2035 in its first Climate Action Plan and has passed legislation allowing for offshore wind projects to be developed in state waters. In addition to an improving policy landscape, the southeast’s existing offshore oil and gas industry provides the region with the necessary infrastructure to support offshore wind development. Ports along the coast are equipped with suitable coastal manufacturing facilities for turbine construction and the region is home to a sizeable existing offshore energy labour force.
The article “East Coast States To Drive Near-Term US Offshore Wind Development, Growth Opportunities Presented By Federal Leasing Activities” has been sourced from Fitch Solutions and can be accessed here