Offshore Wind: Have we Blown it?

Offshore Wind: Have we Blown it?

November 29 2022

Douglas McKeige, Editor in Chief of The Climate Capitalist was a featured speaker at an offshore wind industry conference in Stavanger, Norway last week, to provide the US perspective on offshore wind. Leading European offshore wind companies, including Equinor and Aker Offshore Wind, also spoke. We hoped to learn more about European OSW progress and economics, as they are the lead contractors to build offshore wind in the US. What we learned is concerning.


The shared goal between the Biden Administration and the east coast states is to build 30 Gigawatts of offshore wind power by 2030 in the Atlantic Ocean. The federal government leased the ocean plots, and the states are contracting with the European Companies to build the projects. Under the contracts, the states pay about ~ten cents per kilowatt for all the power the turbines produce, and the Europeans are subject to delay penalties. Ten cents per Kilowatt is a reasonable number, not too far off from electricity made from fossil fuel generation plants. (Americans presently pay between 15 and 25 cents per KW inclusive of distribution/grid charges). The projects have been billed as a panacea for affordable clean power for a region short on sunlight and open land acreage.


To get a sense of scale, the next generation of turbines produce 15 Megawatts of power during optimal wind conditions. At the top of the arc, each turbine is as tall as a 60-story building. The turbine’s hub and blades are attached to the top of a massive steel tube and leg structure installed by gigantic cranes. To create 30 Gigawatts of power, you need 2,000 individual turbines. If construction starts in 2024, you’d have to erect 333 turbines per year for 6 years to meet the 2030 goal or almost one turbine per day.


The Atlantic Ocean can be a brutal piece of water, even in Summer. We are also familiar with the harbors along the east coast and the scale of facilities needed to support these massive projects. We need lots of US-made specialty tugs, barges, crew boats, and thousands of skilled workers. There are some signs of progress but not nearly enough to come even close to 30 Gigawatts by 2030.


So, it was not a complete surprise this year that Avangrid, one of the lead European companies, notified Massachusetts that it needed to renegotiate its deal on the 2.2 Gigawatt Mayflower project, the first in the pipeline, because of inflation and supply chain problems. We suspect the original contracts were problematic from the start, but the Europeans are determined to lead this nascent industry forward for their struggling economies.


Europe already has roughly 30 Gigawatts of offshore wind power, so they should have a good idea about costs and progress for their pending US projects. One of the lead European presenters acknowledged that the “economic model for offshore wind is broken.” A 15 cents-per-Kilowatt revenue number was mentioned as the number to finance these projects vs. the 10 cents number in the US contracts. And that’s probably a cost number with no profit. They hope to bring this number down by using the 15-Megawatt turbines, but nobody has yet installed these colossal monsters in the ocean.


The good news is that the Inflation Reduction Act passed this year provides 30% incentives for the next ten years for these projects, bringing down the cost of a project by 30% and perhaps bringing the costs to close to where a 10 cent per kw revenue stream could work. We also must remember dirty energy from coal and gas plants still pollute the atmosphere with CO2 for free. If we charged dirty energy with a carbon tax for the damage it does, it’d be a lot more expensive than even the costliest offshore wind electricity.

May 3 2022

Last week we attended the largest Offshore Wind conference in North America. In short: we were blown away. The companies involved and emerging technologies on display all create a compelling forecast for investors.

January 27 2022

This week we take on those who say renewables are to blame for global energy shortages and Putin’s leverage over Europe. And we suggest how everything could be different with an alternative energy policy.

June 15 2021

In a ground-breaking recent report, the International Energy Agency signaled the end of the fossil fuel industry. This week, we delve into the media and industry reactions to their monumental proclamation.