Posted on December 13, 2023
This blog is part of NRDC’s year-end series reviewing 2023 climate and clean energy developments.
It’s been a blustery year for offshore wind energy. On the one hand, South Fork Wind, the first U.S. utility-scale offshore wind project in operation in federal waters, just started delivering power to the grid. Other projects have run into headwinds, however, with canceled contracts, companies rescinding plans to deepen the American supply chain, and perhaps most disconcerting, Orsted’s recent decision to cease development of New Jersey projects Ocean Wind 1 and Ocean Wind 2 (collectively, Ocean Winds). Despite these recent hiccups, there’s good reason to be optimistic about the future of the industry.
2023: The good
This year was a historic one for U.S. offshore wind. In February, the U.S. Department of the Interior held its first-ever offshore wind sale in the Gulf of Mexico. From the Gulf of Maine to the coast of Oregon, work is underway to identify areas for potential offshore wind development. Off the coast of Virginia, the Biden administration approved the largest offshore wind project in the nation, capable of providing power to 900,000 homes.
Perhaps most exciting, with the support of the Biden administration, the United States has finally put steel in the water for two utility-scale offshore wind farms. Leading the charge, Vineyard Wind installed its first offshore wind turbine in October, making it the first-ever installed turbine of a utility-scale offshore wind project in federal waters. As part of its South Fork Wind project, Orsted also installed its first offshore wind turbine off the coast of New York, which started delivering power to the grid just last week. Once completed, these projects will be set to provide power to more than 470,000 homes, solidifying offshore wind’s contribution to creating a clean energy grid.
We’ve also seen critical investments onshore to support the industry’s manufacturing supply chain. In Texas, an offshore facility is being built by an independent, Black-owned business and will provide 4,000 construction jobs and 150 permanent jobs. In Virginia, Lyon Shipyard is expanding its capacity to help maintain commercial ships and vessels that service offshore wind farm operations, resulting in 134 new jobs. The progress being made on offshore wind continues to attract investments and job opportunities both on the water and onshore.
2023: The bad
It wasn’t all positive, though, for offshore wind, with recent developments stealing the wind from the sails of progress. The nascent industry faced numerous growing pains this past year: Avangrid canceled its contract to sell power to Connecticut; Shell and Ocean Winds paid a penalty to cancel its contract with Massachusetts; and reports out of New York suggest that market conditions are impacting the viability of Sunrise Wind, Empire Wind 1 and 2, and Beacon Wind. The supply chain has taken a hit as well, with Siemens Gamesa canceling its plans to build a $200 million offshore wind blade factory in Virginia. While the stumbling blocks faced by each individual project are unique, some common themes have emerged: rising interest rates, high inflation due to the global pandemic and international conflicts, and a challenging global supply chain. These macroeconomic factors weighed heavily in Orsted’s decision to cease development of Ocean Winds.
The decision to cease development of Ocean Winds was perhaps the most disappointing outcome for offshore wind in 2023. This project was set to bring immense benefit to New Jersey: power to more than one million homes; avoidance of 110 million tons of carbon dioxide air pollution; $6 billion of net economic benefits to New Jersey; and an increase of clean energy union jobs in the state. But, just as the company cleared the final federal process to begin construction, the project came to a shuddering stop that sent shock waves through the state and the industry. The future of Ocean Winds in New Jersey is now in limbo as Orsted decides the best path forward for these lease areas.
2024: Reasons to be hopeful
Despite recent stress, all signs point to a solid 2024 for offshore wind. Progress on projects is expected at nearly every level: from lease sales and construction to project completion and operation. Lease sales are expected for the Gulf of Maine, off the coast of Oregon, and in the central Atlantic Ocean off the coasts of Delaware, Maryland, and Virginia. Projects that may begin onshore or offshore construction include Revolution Wind off the coast of Rhode Island, MarWin 1 off the coast of Maryland, Coastal Virginia Offshore Wind off the coast of Virginia, and Atlantic Shores off the coast of New Jersey. And finally, it is expected that Vineyard Wind and the rest of South Fork Wind will come online and provide clean power to the grid in 2024.
While there is plenty to be excited about with these projects in the pipeline, the success of 2024 for offshore wind can be furthered by the Biden administration and the implementation of the Inflation Reduction Act (IRA). The passage of the IRA included clean energy tax credits to incentivize the manufacturing of domestically made clean energy components as well as the production of clean energy. The administration continues to release guidance on how clean energy companies can take advantage of these credits, most recently releasing guidance surrounding investment tax credits, which companies have applauded.
While this is a step in the right direction, the Biden administration can go further by including crucial energy infrastructure—such as operations, maintenance, and marshalling ports—for eligibility to receive the energy community bonus tax credit adder, as echoed by the governor’s offices of Connecticut, Maryland, Massachusetts, New Jersey, New York, and Rhode Island. This change would be a positive development for clean energy and provide an economic boost to the communities that this bonus tax credit was designed to benefit.
Despite the headwinds that faced the industry in 2023, offshore wind is poised for long-term success. There is real promise for offshore wind to become a mainstay clean energy source in the United States, helping to decarbonize the grid and avoid the worst impacts of climate change. While turbulence should be expected in the development of any nascent industry, it is vital that we move quickly and decisively toward a responsibly developed offshore wind industry in the United States in 2024.