Posted on April 24, 2024
The century-old Jones Act requires domestic vessels to carry parts from U.S. ports to offshore wind sites. The first compliant ship, commissioned by utility Dominion Energy, has hit the water.
In order to make good on its ambitious offshore wind plans, Virginia electric utility Dominion Energy first had to get into the shipbuilding business.
The regulated monopoly is building Coastal Virginia Offshore Wind, a $10 billion, 2.6 gigawatt wind project 23.5 miles offshore of Virginia Beach. The project is tied with New England Wind for the title of largest of its kind approved by the federal government, and represents a pivotal step toward the Biden administration’s goal of installing 30 gigawatts of offshore wind by 2030. But to shuttle the necessary foundations, nacelles, and turbine blades from the port of Hampton Roads, Virginia, to the project, Dominion must obey a protectionist law from more than a century ago.
The Jones Act, formally known as the Merchant Marine Act of 1920, mandates that ships carrying goods between American ports must be made in the U.S., flagged in the U.S., owned by Americans, and staffed by an American workforce.
To satisfy that mandate, Dominion commissioned the first-ever Jones Act–compliant vessel for offshore wind installation, which hit the water in Brownsville, Texas, last week. The hull welding on the 472-foot vessel is complete, as are its four enormous legs, which will hoist it out of the water during turbine installation. This $625 million leviathan, named Charybdis after the fearsome sea-monster foe of Odysseus, still needs some finishing touches before it sets sail to Virginia, which is expected to happen later this year.
Charybdis’ completion will be a win for what’s left of the American shipbuilding industry. The Jones Act, after all, was intended to bolster American shipbuilders and merchant seamen in the isolationist spell following World War I. But a century later, it creates a series of confounding and counterintuitive challenges for America’s energy industry, which frequently redound poorly for most Americans.
Offshore wind is the latest and highest-profile example. Developers have had to contend with the fact that no Jones Act–compliant turbine-installation vessels existed, since the U.S. has only recently gotten into the offshore wind business. Existing vessels from the mature North Sea wind industry don’t comply, so developers have had to devise workarounds involving extra steps like using U.S.-built barges to ferry materials out to offshore-wind vessels. When Dominion built two initial test turbines in 2020, the Luxembourg-flagged Vole Au Vent carried the foundations down from Canada, then sailed back up north to grab the towers, nacelles, and blades, avoiding U.S. ports.
Jumping through these logistical hoops makes things even more challenging for the U.S. offshore wind industry, which is already struggling with soaring costs and supply-chain challenges. Several Atlantic projects have fallen through in the last year; three in New York got canceled just last Friday. Danish firm Ørsted specifically faulted a lack of available ships when it canceled two New Jersey projects last fall.
Elsewhere in the energy industry, the expense and difficulty associated with finding scarce Jones Act–compliant ships push certain American communities to rely more on foreign energy suppliers. Up until 2022, Hawaii turned to Russia for one-third of the oil that powered its cars and power plants. The Jones Act made it too hard or costly to import abundant American oil to the U.S. state, leaving Hawaii scrambling for other sources when Russia invaded Ukraine.
Over in New England, constraints on fossil-gas pipelines sometimes force the region to import gas via LNG terminals. The U.S. has plenty of fossil gas to tap in the Gulf of Mexico, but a lack of U.S. ships pushes Massachusetts and its neighbors to buy gas from other countries instead.
The Jones Act also limits shipments of gasoline within the country, said Ryan Kellogg, a professor at the Harris School of Public Policy at the University of Chicago. He studied the impact on fuel costs and determined that the Jones Act raised East Coast gasoline prices by a few cents per gallon, a seemingly incremental amount that nonetheless adds up to hundreds of millions of dollars per year.
“The Jones Act makes it relatively expensive to move any kind of energy commodity or things you would need to build offshore infrastructure” between locations in the U.S., Kellogg told Canary Media. “There’s a small set of people who are helped a lot by this law, and the costs are borne very, very broadly.”
In the case of the Charybdis, some 1,200 workers toiled on the ship at the height of construction, which consumed 14,000 tons of domestically sourced steel, per Dominion. The vertically integrated utility arranged lease financing with global banks to cover ship construction, said spokesperson Jeremy Slayton. Dominion’s electricity customers won’t pay for building the ship itself, though they will pay for the cost of using Charybdis for the installation, per a decision by Virginia’s State Corporation Commission, which regulates utilities.
Charybdis’ value goes beyond just complying with the Jones Act. Offshore wind turbines keep getting bigger, and the ship is one of very few anywhere that can handle turbines of 12 megawatts or larger.
“Given turbine technology was increasing, there were a very limited number of vessels in the world that could install those larger turbines,” Slayton said of Dominion’s choice to build its own ship.
The competitive developers building the other U.S. offshore projects haven’t opted to build their own vessels in the U.S. That opens up opportunities for Charybdis. It has already been contracted to serve two New England offshore farms, Ørsted and Eversource’s Sunrise Wind and Revolution Wind projects, per E&E News.
It’s not clear if offshore wind will provide enduring stimulus for American shipbuilding yards, but the U.S. fleet just got a little bigger.
