Current:Home > InvestOffshore wind in the U.S. hit headwinds in 2023. Here's what you need to know-DB Wealth Institute B2 Expert Reviews
Offshore wind in the U.S. hit headwinds in 2023. Here's what you need to know
View Date:2024-12-25 01:01:46
There's a lot riding on the nascent U.S. offshore wind industry: the ability to tap into a huge source of clean energy and reduce carbon emissions, the opportunity to create thousands of jobs, the unique chance to jumpstart a new domestic manufacturing industry.
For these reasons, President Biden has made the success of the industry a pillar of his climate agenda. His administration has set an ambitious target of getting 30,000 megawatts of offshore wind power flowing into the grid by 2030, which is enough electricity to power 10 million homes.
That goal is a long way off, and given the tumultuous year the industry just had, the future is anything but certain.
2023 has been marked by "headwinds" and "tailwinds," for the young industry. While some of the first large-scale projects in the Northeast started offshore construction and began sending power to the electric grid, the industry as a whole has been hit hard by rising interest rates, inflation, and global supply chain issues.
Making sense of the "whiplash" between good and bad offshore wind news is tough. But to get a full picture of where the industry currently stands, and what to watch for in 2024, here's what you need to know.
Offshore wind projects are moving forward
Until very recently, the U.S. had a total of seven operating turbines: five near Rhode Island and two near Virginia. Together, they generate about 42 megawatts, which is less than a small natural gas power plant.
That's about to change with the addition of the country's first two commercial-scale projects: Vineyard Wind and South Fork Wind.
Vineyard Wind — a 62-turbine wind farm located about 15 miles offshore from Martha's Vineyard — is set to deliver its "first power" to Massachusetts by the end of the year. Once the project is completed sometime next year, it will generate 800 megawatts, which is enough power for 400,000 homes.
South Fork Wind — a 12-turbine wind farm near Long Island — is also under construction and began producing electricity from its one completed turbine in early December. When the project is fully built out next year, its 132 megawatts will generate enough electricity to power about 70,000 homes in New York.
There are more than 10,000 offshore wind turbines in Northern Europe and parts of Asia. But adoption of offshore wind in the U.S. has been hobbled by NIMBYism and permitting delays. So industry experts and clean energy advocates say the progress on these first two American commercial-scale projects should not be understated.
"We should not lose sight of the fact that Vineyard Wind was not inevitable," said Amy Boyd Rabin, vice president of policy at the Environmental League of Massachusetts. "It is a very big deal and should be celebrated as such."
Progress in other parts of the U.S.
The Northeast is farthest ahead when it comes to U.S. offshore wind. But the last year was also notable for the fledgling industry elsewhere in the country.
In the mid-Atlantic, the federal government gave final approval to a 2,600 megawatt offshore wind project near Virginia Beach, the sixth and largest proposed project in the country so far. The Coastal Virginia Offshore Wind Project will consist of 176 turbines and is expected to begin generating power by 2026.
In the Gulf of Mexico, the government held the region's first auction to lease areas offshore for wind development. The results, however, were "underwhelming." Only one of the three proposed lease areas near Texas and Louisiana received any bids.
Building a west coast offshore wind industry will be challenging, in large part because the water is so deep that only floating turbines will work. But on the heels of a successful auction for five lease areas, California continued to plow ahead this year on its ambitious plan to get 3,000 megawatts of offshore power by 2030 and a whopping 25,000 megawatts by 2045.
In 2024, the federal government has scheduled another lease auction in the mid-Atlantic and is expected to hold auctions in the Gulf of Maine and off the coast of Oregon.
Economic woes and canceled contracts
A year and half ago, the U.S. offshore wind industry looked nearly unstoppable. But global financial challenges and supply chain backlogs of the post-pandemic era, followed by Russia's invasion of Ukraine, complicated everything.
The problems first surfaced in Massachusetts when two offshore wind developers announced that the large projects they had signed contracts for were "no longer viable" under the terms of their existing agreements.
Offshore wind farms cost billions to build, so even a small rise in interest rates or the cost of steel can send the price tag of a project soaring. The two companies unsuccessfully pleaded with Massachusetts the state to let them charge more for the electricity, and ultimately ended up backing out of their contracts. Both companies have promised to re-bid their projects, just at a higher cost, during Massachusetts' next round of offshore wind solicitations in early 2024.
Similar economic issues surfaced in Connecticut, New Jersey and New York. Even in Northern Europe, where offshore wind turbines have been in the water for decades, upcoming projects face unprecedented economic challenges and potential delays.
A major setback to the industry
For a while, offshore wind experts said the industry was simply undergoing a market correction and making up for overly optimistic bids — the projects weren't abandoned, people noted; they just needed new contracts.
Then, in late October, Ørsted, the world's largest offshore wind developer, canceled two projects it had proposed for New Jersey. The decision, which the company blamed on economic challenges and supply chain bottlenecks, shook the offshore wind world.
New Jersey Gov. Phil Murphy called the move "outrageous." Opponents of offshore wind jumped on the news, pointing to it as further evidence that building turbines in the ocean is bad policy and financially irresponsible. Meanwhile, environmentalists quietly worried that other cancellations would follow.
"The world has in many ways, from a macroeconomic and industry point of view, almost turned upside down," Mads Nipper, the company's CEO said at the time. But while Nipper reaffirmed the company's commitment to other U.S. offshore wind projects in the pipeline, headlines about doom and gloom for the industry were everywhere.
"I think the reason the Ørsted cancellations just seemed so astounding was because they never came out and said, 'We want to renegotiate our contracts, we want to rebid,'" said Samantha Woodworth, an offshore wind analyst with consulting firm Wood Mackenzie. "I think that it was the abruptness that caused the industry to sort of go, 'Oh God!'"
In her view, the Ørsted cancellations are part of a bigger story about the struggle to get a new industry off the ground in a challenging economic situation.
"I don't think the offshore wind industry in the U.S. is going to fail," she said.
Other experts agree; meeting Biden's 2030 goals is more a matter of "when" than "if," they say.
"I think we will see the continuous rise of offshore wind," said Jan Matthiessen, director of the offshore wind program at The Carbon Trust, which advises governments and industry. "It is a young sector. We are scaling up, we are growing. And that also means you have some bumps in the road that you need to overcome."
What to watch for in 2024
For many states, especially those in the Northeast, project setbacks and higher electricity prices in the future are significant challenges. But they're not backing down. States like New York, New Jersey and Massachusetts are banking on offshore wind to meet their renewable energy goals and their growing electricity needs. And they're doing what they can to help the industry.
Six East Coast governors recently penned a letter to the Biden administration, asking for more certainty on whether offshore wind developers can qualify for certain lucrative tax breaks, as well as a faster federal permitting process to help reduce project risk.
Many of these same states have also launched — or will soon launch — more solicitations to lock in future offshore wind projects. And government officials say they're doing things differently this time. Massachusetts, Connecticut and Rhode Island, for example, are holding a joint bidding process to reduce costs and risk for developers. And in some states, regulators are allowing developers to tie the price of their projects to inflation to help hedge against future economic uncertainty.
While no one quite knows what to expect from upcoming solicitations in New England, New York and New Jersey, experts say the results will indicate how optimistic developers are and what future projects may cost.
"It goes without saying that the global offshore wind industry is embattled right now, and that the U. S. market is hurting more than others," said Sunny Gupta, an independent offshore wind advisor.
But, he added, given the fact that projects are getting off the ground and states have reaffirmed their commitment to building out the industry, "I'm more bullish than ever before on the promise of offshore wind in the U.S."
veryGood! (547)
Related
- Officer injured at Ferguson protest shows improvement, transferred to rehab
- What to know about the 5 passengers who were on the Titanic sub
- Supreme Court rules against Navajo Nation in legal fight over water rights
- Scientists may be able to help Alzheimer's patients by boosting memory consolidation
- King Charles III celebrates 76th birthday amid cancer battle, opens food hubs
- Arctic Drilling Lease Sale Proposed for 2019 in Beaufort Sea, Once Off-Limits
- The Best Memorial Day Sales 2023: SKIMS, Kate Spade, Good American, Dyson, Nordstrom Rack, and More
- Priyanka Chopra Reflects on Dehumanizing Moment Director Requested to See Her Underwear on Set
- John Krasinski is People's Sexiest Man Alive. What that says about us.
- Ocean Warming Is Speeding Up, with Devastating Consequences, Study Shows
Ranking
- Powerball winning numbers for November 11 drawing: Jackpot hits $103 million
- How a 93-year-old visited every national park and healed a family rift in the process
- These Climate Pollutants Don’t Last Long, But They’re Wreaking Havoc on the Arctic
- How to cut back on junk food in your child's diet — and when not to worry
- Taylor Swift's Dad Scott Swift Photobombs Couples Pic With Travis Kelce
- Senate 2020: With Record Heat, Climate is a Big Deal in Arizona, but It May Not Sway Voters
- Why our allergies are getting worse —and what to do about it
- How Pruitt’s New ‘Secret Science’ Policy Could Further Undermine Air Pollution Rules
Recommendation
-
Katharine Hayhoe’s Post-Election Advice: Fight Fear, Embrace Hope and Work Together
-
His baby gene editing shocked ethicists. Now he's in the lab again
-
Afghan evacuee child with terminal illness dies while in federal U.S. custody
-
How Pruitt’s New ‘Secret Science’ Policy Could Further Undermine Air Pollution Rules
-
Philadelphia mass transit users face fare hikes of more than 20% and possible service cuts
-
Pfizer warns of a looming penicillin supply shortage
-
What to know about the 5 passengers who were on the Titanic sub
-
Swimmers should get ready for another summer short on lifeguards