US OFFSHORE WIND (OSW): Total 34 Projects and 28 GW in Development Pipeline
- Feb 25, 2021 12:40 am GMT
THE STATUS OF US OFFSHORE WIND PROJECTS and their implication on OSW industry is presented here. There are 34 projects with nameplate capacity of about 28 GW, that are currently in the development pipeline at different level of maturity (categories or phases). We will look at a classification system for the offshore project pipeline and provide the latest status of the US offshore wind projects based on this classification system. We will then briefly discuss the implications of this pipeline of projects.
There are several classification systems in public domain, broadly they classify projects in phases; with growing data availability and technical and commercial maturity as project moves along these phase. The classification presented below is from by NREL1, and has following phases:
- Site Control
Of the total 34 offshore wind projects, Twentynine (29) are in the east coast (see-slide) and five (5) are on the west coast (not shown). The total offshore wind capacity build up by these projects by 2030 is expected to be 28,521 MW (see table below).
Note: Based on latest available data (cut-off Date for table is Mar 2020), status may change in 2021 update
Following is the breakdown of these projects by category or phases:
- Planning: This phase starts when developer or regulatory agency initiates the formal site control process and ends when developer takes control of the site. At the end of Dec 2019, there were seven (7) projects in pipeline in this phase, with 4600 MW (4.6 GW) capacity. With exception of couple of projects in the NE coast, remaining five projects are in west coast and Hawaii. At this early stage, it is difficult to estimate the first commercial operation date. The uncertainties and risks are high at this stage.
- Site ControlThis phase starts after developer takes control of the site and ends with filing for the permit. For US, offshore wind, this phase has 12 projects in pipeline with estimated capacity of 17,440 MW. As no permit is obtained in this phase, commercial operation date cannot be estimated, and is expected beyond 2025. As these projects, will come online later, when significant experience in offshore wind would been accumulated in US, the average size (total capacity, MW) of the project is therefore large, on average about ~1400 MW. The uncertainties and risks are high at this stage.
- PermittingThis is phase is sometime subdivided in three separate sub-phases:
- Off-take Pathways: Starts with major permit application and offtake agreement for electricity production and ends when regulatory authorities approve the project.
- Approval: Starts when project receives regulatory approval for construction and after the offtake agreement.
- Financial Close: Begins with sponsor announcing a Final Investment Decision (FID) and has signed contracts for major construction work packages.
- For simplicity, the three sub-phase for US offshore wind have been combined into one Permitting phase; with a project pipeline of 13 projects with estimated capacity of 6439 MW.
- The earlier phases (front-end), developers typically face large uncertainty and higher risks (front-end risks) due to lack of data, and especially in USA, the nascent nature of the OSW industry. They are best managed and reduced by developing a stage gated process to manage uncertainty and risks with project design envelope (PDE), i.e. range of solutions and survey, deploy and monitor (SDM) strategy.
- For this reason, major investors like super-major oil and gas companies, avoid risk of participating in earlier phases of the project, and usually farm-in or acquire the project later, through M&A once the offtake agreement (PPA), approval and financial investment decisions have been made. For example; BP and Equinor are in partnership to develop offshore projects; Beacon Wind in Massachusetts and Empire Wind 2 project, in New York2. Similarly, Royal Dutch Shell Plc and EDF Renovaveis SA are partnering in Mayflower Wind off the coast of Massachusetts3.
- Construction: This phase, sometimes referred as under-construction starts when offshore construction begins, and ends when all the Turbine Generators (TBG) have been installed, connected to grid and have started generating electric power. At this stage execution risk dominates. At the end of 2019, there was only one project under construction in US offshore wind; the Coastal Virginia Offshore Wind (CVOW), with 12 MW capacity. It was full operational in 2020.
- Operations: The commercial Operation Date (COD) marks the transition from construction to full commercial operations. This phase may last 20-25 years, depending on the Power Purchase Agreement (PPA). The operational risks dominate this phase. European experience indicate that some projects had to be terminated early due to; lower capacity factors, mounting cost and negative returns. The Block Island project located offshore Rhode Island is the only operational project offshore USA at the end of 2019, with 30 MW installed capacity.
- Decommissioning/Restoration (D&R): Once the project is completed, it is decommissioned and site is restored to its original condition. The decommissioning cost may vary, a suggested rule of thumb is $0.5 Million/MW. The expenses are usually pit n a escrow account.
- On-hold/Cancelled: Some projects can be put on hold due to technical, economic, commercial, organization or political reasons. One UK farm, cancelled its second phase, due excessive cost to gather additional data to de-risk than expected returns from the project.
Implication & Impact
The project pipeline will have significant implication on technology, capabilities, regulatory efforts, investment and environment. Few are highlighted below:
- Regulatory incentives like feed-in tariffs and Renewable Performance Standards (RPS) are needed to reduce the risk
- M&A: oil & gas companies are looking for partnerships & M&A to meet climate change target
- EIA: Simplified but fast approval process & environmental impact assessment (EIA)
- Infrastructure: Port facilities need to be upgraded for wind turbine assembly & handling
- Compliance: Joan’s Act compliant offshore vessels for larger scale projects
- Technology: Turbine/foundations for harsher/deeper US waters to be developed
- Process: Processes and guidelines to be developed for US specific conditions
- Capabilities: Significant new capabilities need to be developed to manage; technical, commercial, organizational and political challenges.
1. Musial, W, et. al: “2019 Offshore Wind Technology Data Update.” Technical Report: NREL/TP-5000-77411, October 2020.
2. Web Article: BP, Equinor Formalize US Offshore Wind Partnership; Offshore Jan 29, 2021.
3. Martin, C.: “Shell, EDP Set Record-Low Prices for US Offshore Wind Power.” Bloomberg Article, Feb 11 2020.
Get Published - Build a Following
The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.
If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.