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BloombergNEF Analysts' Outlook on the US Offshore Wind Market

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  • Jun 20, 2019 3:38 am GMT

This item is part of the Special Issue - 2019-06 - US Wind Power, click here for more

Tom Harries is a senior associate at BloombergNEF, leading their global offshore wind research. He gives NewEnergyUpdate an insight into the financial, supply chain and other considerations applicable to the opening of the US offshore wind marketplace.

His role is to track offshore wind industry policy developments, technology, costs, market developments and use that to forecast the market size, costs, and to analyse the market players and strategies. He looks at who's doing what, who's investing where, what are the different approaches of different players, and any sort of key stories or analysis that BloombergNEF can provide, which could be looking at the implications of new policies, the risks and opportunities, including the broader role that offshore wind performs in the ongoing energy transition away from carbon-intensive fuels.

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Tom says, "We are very much focused on the new US offshore wind market, and how it's opening up, and what the opportunities are, In particular, the opportunities for European developers to get a foothold in this new multi-billion dollar marketplace." (see SIOW report blog here)

He lists the three critical inputs that he uses to analyse a market:

  1. How many sites are out there, how big they are, who has access to the seabed and how much capacity they could support?
  2. What is the Bureau of Ocean Energy Management’s (BOEM) position, what have they issued and what are the plans for new leases and permits?
  3. How long does it take to develop a project? How long does permitting take? How long does financial close take, and how long to construction and commissioning?

Is the US OW Process Slower Than In Europe Currently?

Tom Harries does not think so, "No, I'd say it's probably in line with European standards, you need to bear in mind it's very difficult to compare offshore wind markets against each other. If you look at somewhere like the Netherlands, Denmark, it's quicker there because the government does the permitting for you, whereas if you want to compare the US to somewhere like the UK, that's the most comparable market, so in the UK you find the site, you get this from the Crown Estate, as you doe from BOEM in the US, and then you develop it yourself, you build the grid yourself, as you do in the US, and you get the permits all yourself.  So in the UK it probably takes you about three and a half years to submit your full permits, maybe a year verdict window. The outcome is your permits take four to five years; it's roughly similar in the US." He continues, "In the US some developers are trying to accelerate that, but generally you're not going to get it quicker than three to five years."

What has changed recently in the US?

There are now obligated buyers in the US, and that is a dynamic behind the increasing push for offshore wind development. "This could be clean energy targets, or in the US renewable portfolio standards, or it could be an obligation on electricity suppliers to procure a certain per cent of offshore wind, you add all these up across the different East Coast states. When you add them up, that's a significant market - it's not about the sites really, but what's changed is this route to market, so projects now have a clear way to get them built and contracted, and then as a result of this increased activity in terms of routes to market this has brought in new investors, so initially two or three years ago in the US the market was dominated by what we call small IPPs, small developers, Independent Power Producers, entrepreneurial companies trying to make a few bucks I guess."  Now the market is maturing, the big players are interested, such as Ørsted, Equinor, Shell, EDF, who have the financial muscle to back large projects. 

Tom looks at the challenges of the US OW market, "You have to deploy a lot of capital to meet the targets that have been set. Bloomberg is forecasting around 11.5 GW of OW by 2030, which is a more conservative figure than the SIOW's 18 GW, but still a stretch target."

Risk Mitigation

He looks at the European situation, where a substantial amount of capital has come into the industry, especially low-cost capital from institutional players, because construction risk has been mitigated very heavily, through experienced operators, skilled crews, and dedicated, specialised vessels. This will initially be a challenge for the US, but one he sees as being overcome.

Banks in the US, though comfortable with onshore wind projects, will have to learn about OW, which are big-ticket items, millions to billions of dollars, and so will seem a new class of assets to them. Fortunately, many of them have European subsidiaries, so he thinks this will not be a critical issue.

Tax credits, in one form or another, will also aid the injection of liquidity into the process. "The value of the tax credit is going to be much higher, and that's unfamiliar for the tax equity market in the US where onshore wind projects are smaller, and the tax equity bills are smaller, so trying to deal with that will be an interesting challenge, but not insurmountable."

Skills and Training

He suggests that many of the softer skills will be found by initially transferring skilled personnel from elsewhere, and training people in the US to accomplish the tasks. There is a slight issue that many of the projects are close together in both space and time, which might complicate things – with shortages of personnel, and the need to coordinate cabling and onshore infrastructure in an efficient way. The costs of shipping turbines across from Europe, until there is a manufacturing base in the US, is a minor issue in comparison to other construction costs. US developers will want to buy the most competitively-priced turbine, whether it is locally-made or sourced from Europe or elsewhere.

Create Hubs of OW Expertise

What he does see the need for, is hubs of expertise, combining port and assembly areas, for production, installation and maintenance, as the UK and Germany have done – a significant driver of cost reduction. The recent announcement of the planning of just this sort of facility at New London harbour in Connecticut is a welcome development.

The West Coast Paradigm

Tom briefly discussed the West Coast, and the challenges of implementing plenty of floating wind out there (as the waters are generally deeper). California has very high clean energy targets by global standards, and he expects this to drive the push towards OW on the Pacific coast, but he expects that this will not get into its stride until 2030 and beyond.

About Tom Harries

Tom is a Senior Associate at BloombergNEF and leads the offshore wind research. He looks at policy, technology and finance. Most recently he has researched cost pathways into the next decade, the impact of auctions on the sector, and the viability, risks and challenges facing new markets.

Prior to joining Bloomberg New Energy Finance in 2014, Tom completed a PhD in Engineering at Cardiff University. His doctorate focused on tidal stream turbines. He also holds a Masters in Civil Engineering.

Tom Harries will be speaking at the 4th Annual US Offshore Wind Conference, June 10-11, 2019 in Boston. Find out more here

About BloombergNEF

BloombergNEF (BNEF), Bloomberg’s primary research service, covers clean energy, advanced transport, digital industry, innovative materials and commodities. They help corporate strategy, finance and policy professionals navigate change and generate opportunities.

Available online, on mobile and on the Terminal, BNEF is powered by Bloomberg’s global network of 19,000 employees in 176 locations, reporting 5,000 news stories a day.

BloombergNEF are an Official Media Partner for this year's 4th Annual US Offshore Wind Conference, June 10-11, 2019 in Boston. Find out more here

Produced in association with the 5th annual US Offshore Wind 2020 Conference & Supply Chain Exhibition, June 18-19, Hynes Convention Centre, Boston, MA.

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