Americans who don’t obsessively follow the wind power industry were recently greeted with the news from mainstream media outlets that the United States has installed its first offshore wind installation. The 30 MW Block Island project off Rhode Island is developed by Deepwater Wind, and commissioning and grid connection will be finalized over coming weeks. The broader question to industry followers and the American public alike is whether this heralds the beginning of an offshore wind market in the United States.
The US wind market still lacks the long-term policy certainty and incentives that counterparts in Europe and China have implemented. By the end of 2015, total global offshore wind capacity reached nearly 12,000 MW. A remarkable 3,755 MW of that total came online in 2015 alone, driven largely by Germany, and China is expected to install over 1,000 MW of offshore wind this year. Those figures put the one 30 MW US project in perspective.
However, the foundations are in place to see a strong US market develop in the early 2020s when multiple large-scale projects in the 300 MW or above range are likely to be built. The following are key developments driving the US offshore wind industry now and in coming years:
- Federal Ocean Leases: More than 16,000 MW in the offshore wind project development pipeline is slowly advancing due to 11 offshore wind site lease auctions orchestrated by the federal Bureau of Ocean Energy Management (BOEM), plus favorable Northeastern state policies.
- Tax Credits Extended: Supportive tax policies in the form of the Production Tax Credit (PTC) and the Investment Tax Credit (ITC) were reinstated in late 2015, and critical new timeline flexibility announced in mid-2016 now allows wind projects that begin construction by 2017 to have 4 years to complete construction and receive 100% tax credit value. The next 3 years provide declining tax credit values (80%, 60%, and 40%) if projects begin construction in years 2018, 2019, and 2020, providing a window of policy enactment that will see wind projects being installed through 2023.
- US Department of Energy (DOE) Demonstration Projects: The DOE has awarded three Advanced Technology Demonstration Projects in New Jersey, Ohio, and Maine for the Fishermen’s Energy Atlantic City Windfarm, Lake Erie Energy Development Corporation’s Icebreaker, and the University of Maine’s New England Aqua Ventus I projects, respectively. All three are eligible for up to $40 million each, contingent on reaching milestones and congressional appropriations.
- Massachusetts: Legislation was passed in July 2016 requiring utilities to contract for 1,600 MW of offshore wind.
- New York: Long Island utility company PSEG has selected Deepwater’s 90 MW project as the winner of its all-resources RFP. NYSERDA will also participate in the upcoming BOEM New York lease auction to support a future offshore wind RFP.
- Carper-Collins ITC Bill: There is a current bill on the docket in the US Senate to extend the 30% ITC to up to 3 GW of offshore wind. Recent cost estimates have taken the cost of the bill from $3.5 billion down to $535 million, making it more attractive to lawmakers.
- Costs Dropping: A new cost analysis by the National Renewable Energy Laboratory shows credible scenarios for cost reductions below $100/MWh by 2025 in some areas of the United States. Results in recent European contract auctions are supporting this, including DONG winning a contract for 700 MW at €72.70/MWh (~$80.52/MWh) and Vattenfall winning a Danish near-shore tender at €63.8/MWh (~$71.15/MWh).
- Abundant Resources: Today, a technical potential of 2,058 GW of offshore wind is accessible in US waters using existing technology. This is equivalent to an energy output of 7,200 TWh per year—enough to provide nearly double the total electric generation of the United States in 2015. The DOE says US national wind strategy should and could successfully develop 86 GW by 2050.
Tags: Block Island, DOE, Investment Tax Credit, Offshore Wind, Production Tax Credit
| No Comments »