Dive Brief:
- State and federal stakeholders must do more to mitigate U.S. offshore wind development risks as the industry finds its footing, according to panelists at a May 7 session of the American Clean Power Association’s Cleanpower conference in Minneapolis.
- New York State Energy Research and Development Authorit President and CEO Doreen Harris joined executives from Avangrid and Ørsted to discuss offshore wind challenges and opportunities, including more flexible state procurements, better interstate cooperation, faster federal permitting and more efficient interconnection. Addressing these challenges should reduce preconstruction bottlenecks, improve developers’ learning rates and ultimately drive down costs for ratepayers, panelists said.
- “What we really need to do is build more projects [because] boy, do you learn when you build,” Harris said, encouraging industry participants and clean energy advocates not to get hung up on “early-stage churn” in the offshore wind space.
Dive Insight:
Panelists at the “Offshore Wind: Sustainable Commercial Framework” session acknowledged the industry’s recent difficulties, including persistent supply chain issues, cost inflation, federal red tape and local opposition in some onshore communities. Those challenges drove Ørsted to cancel its Ocean Wind 1 and 2 projects off New Jersey in November and BP and Equinor to scrap their joint Empire Wind 1 effort in January.
But they pushed back on the notion that the industry was in dire straits and characterized its problems as temporary and surmountable. Panelist Sy Oytan, Avangrid COO of offshore wind, noted that the U.S. Department of the Interior has approved eight U.S. offshore wind projects within the past four years and complimented improved state permitting processes.
“[Developers] complain that [permitting] is slow and complicated…but federal and state agencies have learned how to permit offshore wind,” he said.
The emerging U.S. offshore wind workforce has been another early bright spot for Avangrid. The union workers on the company’s 800-MW Vineyard Wind project “proved themselves” despite early concerns about their ability to work with new equipment in unfamiliar environments, Oytan said. Ørsted, meanwhile, transferred many of the workers who built its South Fork Wind project to Revolution Wind, which should install its first monopiles “any day now,” said David Hardy, Ørsted group executive vice president and CEO Americas.
Some of the challenges facing U.S. offshore wind are beyond direct human control and best solved through real-world experience, Oytan said. Developers more familiar with northern Europe’s sheltered offshore regions, for example, face very different weather and wave conditions in the open Atlantic Ocean off the northeastern and mid-Atlantic U.S., necessitating “different logistics,” he said.
But that still leaves plenty of difficulties that industry stakeholders, from state and federal regulators and policymakers to supply chain vendors, can address now, panelists said.
Offshore wind is inherently risky because projects take so long to plan and permit, and developers initially bore much of the downside, Hardy said. Without equitable risk-sharing by host states on those early projects, “we couldn’t absorb … the black swan events” triggered by the COVID-19 pandemic, he added.
New York has led the way in mitigating developer risk, according to Hardy. New York re-awarded contracts for Ørsted’s Sunrise Wind and Equinor’s Empire Wind 1 in February under an expedited solicitation with significantly higher, inflation-indexed per-MWh payments and “symmetrical” cost sharing for grid connections.
“[Offshore wind] projects need to be more durable, and we have worked to buttress them with adjustments for inflation” and other potential risks, Harris said. That process is ongoing, with New York’s recent request for information aiming to “get at this question” ahead of a planned offshore wind solicitation and supply chain request for proposals, she said.
New York also issued a more flexible offshore wind solicitation late last year with relaxed developer termination fees and a more streamlined bidding process. Felisa Sanchez, of counsel with K&L Gates’ maritime and finance groups, told Utility Dive in December that the solicitation could set a precedent for neighboring states to follow.
Likewise, a recent multistate solicitation from Connecticut, Rhode Island and Massachusetts was a positive signal for developers, though it’s not yet clear how each state will divvy up approved projects, Hardy said. Ørsted and Avangrid both submitted bids through the tri-state request.
By issuing more flexible, risk-aware solicitations now, states can reduce the risk of future cancellations and head off a scenario where the industry “is trying to build 20 GW [of offshore wind] at once, [which isn’t] realistic for the global supply chain,” Hardy said.
“Procurements are going to have to align for [a] very regional future,” Harris agreed.
But states need to be realistic about how the industry is likely to evolve as it grows, Hardy said. It’s understandable that every northeastern state wants a piece of the offshore wind value chain, but “we’re not going to have a blade factory in every state,” he said. State-level protectionism may be holding the U.S. supply chain back, he added, noting that growth “has been slower than we [anticipated] two years ago” and “it will take some coordination” to develop a robust U.S. vendor ecosystem.
States and the federal government also need to coordinate on interconnection to avoid “every project doing serial landfall connections,” Oytan said. NYSERDA is leading on this, he added, but the federal government should be involved as well.
“This is not something states can resolve on their own,” he said.
Better regional connections are needed as well to deliver offshore wind energy to the interior Northeast and beyond, Harris added. That will require cooperation between grid operators to avoid a less efficient “RTO-by-RTO approach,” she said.
