The US offshore wind market is unique and needs a strategy to match

OPINION | The sector needs a more consistent and coordinated policy and regulatory approach if it is to achieve scale, writes Christopher Wiernicki

The offshore wind energy market in the United States is evolving and maturing, but it has been experiencing headwinds that are pressuring the industry. The troubles relate to policy, financial barriers, technology maturity, infrastructure, and issues related to public perception.

The US government rightly recognises renewable energy as a strategic component in the energy transition and in reducing carbon emissions. However, despite favourable government drivers and tax incentives, the industry is struggling with a notable list of challenges that threaten the viability of projects.

This list includes high interest rates that make project financing unaffordable, inflation costs for all of the equipment and labour needed for development projects, complexities and risks in power purchase agreements and limited US-based supply chains for equipment. There are impacts from US maritime policy requirements that can lead to shortages of compliant vessels and a lack of common infrastructure like an offshore energy grid that projects can leverage.

On top of these issues, developers in the US face a complex regulatory and oversight environment with sometimes unclear jurisdictional boundaries between Federal, State, Local, and even Tribal agencies. This overall environment is quite different to what developers have experienced internationally, especially in Europe.

At present we have a disconnect between the desire to strengthen national energy security and the ongoing challenges of making implementation of a national strategy for offshore wind energy a reality.

This makes it difficult to scale the infrastructure that is vital for sustained and safety-driven growth. Remember, the calculus to get to net zero by 2050 requires 10 times more renewable energy than we have today to produce the zero-carbon fuels necessary to drive the economy.

Unique US conditions

We also need to recognise that US conditions are unique, and we need to develop both policy and projects accordingly.

While financial challenges and supply chain barriers are a reality that will require restructuring of many projects, we see a number of critical policy and technical challenges that need urgent attention.

From a policy perspective, US offshore energy policies and regulations are built on a legacy of major offshore oil and gas developments. This has created a very distinctive regulatory structure and operating culture in the US offshore industry that may not address clean energy projects well.

Clean energy projects like development of offshore wind farms are changing the profile of risks in the offshore domain, dealing with potential gaps in regulatory authorities, capabilities, and implementation strategies.

Additionally, developers continue to face jurisdictional and coordination challenges among regulators and approval authorities in the US, including acceptance by key community and other stakeholder groups. Strategies and plans for development that worked in one location may not be effective in another location.

To achieve scalability, we need more consistent policy and regulatory approaches that promote and incentivise high priority developments in alignment with national clean energy development strategy rather than fragmented approaches that are individual project centric. Policy incentives to support more new construction vessels from US shipyards would also be welcome.

From a technical perspective, we see key challenges to current safety management frameworks. Offshore wind development projects will have to blend life cycle classification and certification strategies, especially with floating offshore wind projects, to help provide effective safety and environmental management performance.

This includes quality verification and validation in a developing US supply chain, which will be critical for key equipment and systems in a supply chain that is under significant cost and time pressures to deliver. We have seen significant recent incidents that appear to be supply chain related, and we need to do all that we can to maximise the lessons learned from these incidents. Third-party quality verification and validation will be critical throughout the supply chain.

Given the current level of maturity in the US offshore wind market, developers are blending European assets, resources, management strategies, and cultures with those of US partners. Our challenge is to not take a European-style model and assume it is going to work the same way in the US.

Early projects have seen the US industry favour a ‘technology transfer’ approach where the assumption was that developments would follow a similar pattern. The result has seen developers import processes from Europe that the US market is not set up for.

The lack of life-cycle touch points, understanding the role of certification and verification in a rapidly-developing supply chain under significant cost and time pressures have all been issues for project developers here.

There is a lot to learn from the European model for these projects, but failing to recognise the importance differences for US development work can prove costly.

Offshore wind energy projects have their own highly specific set of safety challenges and practical considerations across their construction and operations.

Boundary conditions for success

The three boundary conditions for success are safety, viability and reliability.

Building the infrastructure across manufacturing, logistics, port facilities, transport and construction is key to creating scalability that can deliver projects on time and to budget. Miss one of these components and the problems begin.

The contribution of safety to a successful project is critical and needs to be embedded across the project lifecycle.

Work has continued to develop and improve offshore wind standards – through updates to BSEE/BOEM regulations and enforcement strategies. However, current safety and risk management practices must be better understood and evaluated by developers, with ongoing assessment to ensure they are fit-for-purpose and in step with advancing technology.

Clearly, governments play a critical role in facilitating the energy transition, but they cannot achieve it alone. Collaboration with industry is vital across technology, safety and capital programmes to make real progress.

Now is the moment for the whole offshore wind energy industry to engage with the government agencies that are developing these strategies and ensure they are properly aligned with industry experience.

Reasons for optimism

Despite our challenges, we have reason for great optimism. We have added more than $34bn in new investments into our industry, including $24bn in supply chain alone. Overall state targets reach beyond 115 GW, while states have authorised developments to procure around 47GW and more than 15GW are now under contract.

There has been $1.7bn of direct investment into new shipbuilding and $4bn into steel production. BSEE has just approved their 10th project for construction with 15GW of production. One project is complete and four are under construction, including the second largest in the world, Coastal Virginia Offshore Wind.

Ports are building out infrastructure to support the industry, and we see the early stages of the floating offshore wind market developing for deeper water applications.

Classification and certification over the project lifecycle has a fundamental role to play in offshore wind energy, both in revisiting policy questions and in applying its safety-first focus to unite stakeholders around common operating procedures and safety standards.

By getting in on the ground floor of projects and staying involved across the lifecycle into operations and even decommissioning, we can make sure that safety is front of mind for all stakeholders.