Permitting, supply chain issues flagged as US charts offshore wind expansion – S&P Global

Power industry observers were optimistic about prospects for the US to meet its bold target of 30 GW of offshore wind by 2030 but permitting hurdles and potential supply chain obstacles were common threads of concern during Reuters' US offshore wind conference May 26.

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Federal and state policy seem to have aligned on the importance of offshore wind to US energy and climate goals at a time that industry and public support are also favoring the technology, Xizhou Zhou, vice president and global managing director, global power and renewables, at IHS Markit, said. "But we also cannot ignore the challenges that lie ahead."

Among those are a fairly complex regulatory approval process that has caused frustration among some pioneering project developers and the lack of a dedicated supply chain, Zhou said. He also noted the need for more coordination and investment in transmission as well as port and Jones Act vessel restrictions that could hamper US offshore wind development.

Ruth Perry, a business environment adviser at Shell, said a major obstacle to offshore wind development was the lack of predictability created by the current regulatory process. And Joshua Bennett, vice president of offshore wind at Dominion Energy, flagged five areas in which the US would need to improve upon if it wanted to build a supply chain capable of meeting the demand of building 30 GW by 2030.

"The offshore wind industry at present is very policy- and target-driven, as the economics compared with other forms of renewables is not competitive in most US locations," Manan Ahuja, S&P Global Platts Analytics' manager of North American power analytics, said in an email May 26. "Also, we have seen in recent experience that it is not easy to site and get approvals for offshore wind construction and related transmission needed."

Platts Analytics' latest long-term forecast, published prior to the recent offshore wind announcements for California, expects 13 GW of offshore wind to be built by 2030 in the US Lower-48, incorporating commitments made by various states.

"We have to get better, both industry and government, at really setting expectations in terms of the permitting process," Shell's Perry said. "Unfortunately, we're having to build the plane as we fly it a bit, and we have to get better at doing that."

Doing so will require "enabling technologies, refocusing how we look at consultations and permits and [figuring out] what can we do to make those efforts more efficient," she said.

Further, "as that plane is being built, ... we need to have the next team on the ground that's building the second, more technologically advanced model, and that's where we really look at [the Department of Energy]."

DOE, for instance, could be starting to address concerns and challenges surrounding floating wind turbines so hesitations are eliminated and permitting processes are more efficient by the time that technology is ready for commercial scale, Perry said.

"I think if we can make some improvements but also really build our coordination and collaboration, we will see innovation in the government processes and we'll see efficiencies in the regulatory reform," she said.

Zhou suggested that it was important to remember that the US' offshore wind aspirations were not happening in a bubble. Globally, about 35 GW of installed offshore wind capacity exists today, with about 285 GW of offshore wind projects in the pipeline, according to IHS Markit's latest data.

About 70% of existing offshore wind capacity is located in Europe, Zhou said. And the US, with 33 GW of proposed offshore wind projects, accounts for about 11% of the global total of project proposals, as a number of European countries, China, Japan, Vietnam, South Korea and Brazil also have plans for significant offshore wind capacity growth.

"On one hand, global-scale collaboration can help spur technological progress and then reduce costs for everybody, and we've seen that in the onshore wind, solar industries and many other sectors," Zhou said. "But on the flip side, there could also be times when there are limitations and bottlenecks in that supply chain. And when that happens, developers will have to compete with each other."

Because projects around the world are already competing for the same equipment manufacturers, engineering and construction capacity, "US developers will need to pay attention to what's happening in the global marketplace to make a judgment about how to pace project development and supply chain buildout in this country," Zhou said.

Still, he said IHS Markit was "relatively optimistic" about offshore wind's future in the US and expected the Biden administration's medium-term goals in 2030 and 2035 would "largely be met." Beyond that, IHS Markit's long-term outlook put US offshore wind at more than 60 GW by midcentury, Zhou said.

Asked about building a US supply chain, Dominion's Bennett pointed to project certainty among the necessary steps.

"Now that the projects are moving along in the permitting process, it's sending a very clear message to industry to finance, design and build and manufacture capacity to support the growth of the offshore wind industry," he said.

Bennet also asserted a need to form partnerships with existing companies with experience in the sector and potentially European counterparts looking to expand into the US market, as well as to form business alliances across the different areas of the supply chain, from shipbuilding to import services, to foster regional growth.

Port infrastructure development, including upgrades to manage load density and marshaling space requirements and increase the capacity and efficiency of the port, and reviving manufacturing tax credits would also be important, he said.

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Permitting, supply chain issues flagged as US charts offshore wind expansion - S&P Global