Posted on April 11, 2024
The United States crossed a significant milestone at the end of 2023. For the first time, wind power turbines sent electricity to the power grid from commercial-scale offshore wind farms. A turbine in the South Fork Wind Farm 35 miles from Montauk Point, New York, sent power to the state’s grid. A few weeks later, a turbine in Vineyard Wind, 15 miles off the Massachusetts coast, delivered electricity to that state’s power grid.
Despite slow progress, these two commercial-scale projects will become the start of the emerging offshore wind power clean energy industry in the United States, following development delays and billions of dollars in write-offs.
Offshore Wind Farms Show Great Promise
Deeper water along the West Coast and other places requires floating foundations. The electricity from each turbine goes to a nearby substation, which transforms the power to a higher voltage and sends it to the shore grid.
Winds are typically stronger offshore than on land. As a result, a single turbine can generate 8 to 12 megawatts (MW), depending on the location, size and, wind conditions. When many machines sit together, it constitutes a wind farm that produces hundreds to thousands of megawatts of power, enough to power tens to hundreds of thousands of homes with lower emissions than carbon-based fuels.
Despite the technology’s promise, several hurdles, including barriers posed by political policies, prevented earlier adoption in the U.S.
Playing Catch-Up With Europe
Offshore wind power has been a reality in Europe for decades. In 1991, Denmark built the 11-turbine Vindeby Offshore Wind Farm, which generated approximately 5 MW of power. After 25 years of operation, the farm closed in 2017.
The industry has proliferated since the farm’s opening — 5 gigawatts (GW) were installed across Europe by 2012. Today, more than 30 GW of offshore wind power is generated from nearly 6,000 turbines on more than 120 European farms, with the United Kingdom leading the way. Other countries boasting substantial installations include Germany, the Netherlands, Belgium, and Denmark.
Most of technological advances in offshore wind power were European-based, passed on to the United States.
Challenges to Offshore Wind Power
Political resistance, the fishing industry, and some environmentalists worked for years to prevent or delay the U.S. from embracing the technology. Additionally, community resistance and litigation held up early projects.
However, the Biden administration has enthusiastically backed the idea and technology, overcoming initial resistance. They set a goal of generating 30 MW of offshore power by 2030. That’s enough electricity for around 10 million homes.
In addition, numerous states, including New York, New Jersey, Connecticut, Massachusetts, and Virginia, also set ambitious timelines. New York aims to transition to a carbon-free electricity system by 2040.
Unfortunately, elevated inflation in 2022, sky-high interest rates, and supply chain problems caused costs to balloon, resulting in several canceled contracts. However, these setbacks won’t slow adoption as states are accelerating contract rebidding.
New England and the Mid-Atlantic States Lead the Way
Compared to Europe, the industry is still in its infancy. 2016 saw wind turbines installed off Block Island, Rhode Island. In 2020, two turbines started operating off the coast of Virginia as part of a pilot project. However, the total output of these seven turbines is only around 41 MW, and they are not commercial-scale wind farms.
That is all about to change in 2024, with nearly 1,000 MW about to enter service in New York and Massachusetts.
New York Gov. Kathy Hochul said, “New York’s nation-leading efforts to generate reliable, renewable clean energy have reached a major milestone. South Fork Wind will power thousands of homes, create good-paying union jobs and demonstrate to all that offshore wind is a viable resource New York can harness for generations to come.”
The other approved projects will begin construction in 2024 and conduct power by 2026. Offshore wind power in America is on a rapid growth trajectory.
Investing in Offshore Wind Energy
Offshore wind power utilization in the United States creates an appealing investment opportunity, with Eversource Energy (ES) and Dominion Energy (D) involved in significant projects. But Eversource recently exited its 50% stake in the South Fork Wind and Revolution Wind projects.
Dominion still retains the other half after selling a 50% stake in Coastal Offshore Virginia Wind. Dominion reduced its dividend in 2020 but is still an income stock favored by some investors. Alternatively, investing in energy ETFs is another way to gain diversified exposure to offshore wind power.
The Bottom Line
Offshore wind power is a blossoming industry in the United States. Recent projects have faced elevated costs and supply chain issues. The Biden Administration’s push to jump-start the sector breathed new life into the potential for the first commercial power generation. With more construction and future project bids, Americans can expect more electricity sourced from offshore wind power.
