Simply adopting the European model of offshore wind won’t work in the US market.
Offshore wind provides utility-scale generation close to major population centres, and the European market has shown that the electricity it produces doesn’t have to cost more than that from legacy forms of generation. But the growing US market cannot reap the benefits of offshore wind simply by trying to copy the European model. Key differences between the markets and supply chains must be addressed, something that will require a relentless focus on driving down costs.
The current state of play
The US saw its first commercial project, The Block Island Wind Farm off Rhode Island energised in 2016. Meanwhile in Europe, after 15 years of implementing projects, wind power has reached zero subsidy or parity with well-established forms of generation such as Combined Cycle Gas Turbines in the UK.
Could the US catch up by copying Europe’s successes, which include technology such as large-scale wind turbines, subsea cabling, offshore foundations and installation vessels as well as commercial and finance systems? It's not that simple; Europe's experience is not a direct fit.
” Cameron Dunn Associate
Who takes the risk?
Europe has learned (sometimes through painful experience) that to deliver projects efficiently, risks need to be aligned with the parties that have both the ability to control them, and the balance sheets to back them. Low pricing in Europe has been achieved, in part, to contracts for large-scale projects with full engineering, procurement, construction and installation (EPCI). These contracts put the financial risk onto the EPCI contractor. Conversely, the contractor will be rewarded on successful completion.
This approach relies on regulatory requirements that are well understood and structures, equipment, markets and designs that are all proven. This allows the EPCI to be competitive and limits the financial risk associated with the project.
EPCI contracting would have fewer advantages in the US, because the levels of risk would be higher initially. With just one completed project, a separate regulatory system in each state and an underdeveloped supply chain, each development faces significant unknowns.
So to begin with we would expect to see developers take on more of the engineering, development and management themselves. This will ensure the owner and their investors manage the unknowns and the risks directly. Once these are managed, then the project can procure the equipment and structures with much lower risk and therefore at a lower cost.
Bringing new suppliers on board
The supply chain for offshore wind is one area where the US market could look to Europe. Much is made of the existing oil and gas supply chain in the US. While this delivered the Block Island development, the project’s market cost of generation supply was several times higher than target US markets. Considerable cost savings will need to be found on future developments if offshore wind is to be competitive. Europe took a different approach. It didn’t use its well-established oil and gas supply chain. Instead, other marine operators, contractors and designers developed the offshore wind supply chain from scratch – relentlessly pursuing lower costs and innovative ways to standardise developments.
Whoever develops wind farms off the US east coast will be faced with some very different conditions to those in Europe.
This is no surprise, but perhaps the implications of those differences are not fully appreciated. For one thing, monopiles, used for 90% of European developments, may not be suitable. Simple and robust, a monopile is effectively just a large diameter steel pipe that is hammered or vibrated into the seabed. This process requires a seabed soil consisting of sand, silt, clay; or a mixture. But off the north-eastern US, gravel and boulders are scattered through the soil strata below the seabed.
There are alternatives, and choosing wisely can mitigate risks and prevent costs escalating. Self-installing gravity-based structures, which require no piles, no specialised installation vessels and can use local labour, could be the best option for the northeast US.
Sea mammals pose another challenge, with the east coast home to many species of whales – including the endangered North Atlantic right whale. Installing monopiles creates underwater noise that disturbs sea mammals. To avoid this, piling operations are typically stopped if a mammal enters a monitored perimeter – an approach that could create significant delays.
Moving the US market forward
In summary, while the European market can offer vital experience and technologies, care must be taken to evaluate and understand US conditions; including the commercial, supply chain and technical challenges - and develop suitable solutions. Marrying the best of European experience with US opportunities should unlock the potential of the markets huge 80GW resource.
The only question that remains is: Who will have the vision and ability to do this?