US offshore wind Liftoff will see prices fall back to earth: DoE

The US Department of Energy (DoE) said that after surging inflation and interest rates that forced prices skyward, claiming half of all contracted capacity last year, the US offshore wind sector’s pipeline of 10-15GW of capacity in late-stage development will help deflate soaring costs.

“Cost increases were driven by rapid inflation of equipment costs, rising interest rates, supply chain constraints, and schedule delays,” it added.

DoE’s LCOE calculations are in nominal 2024 dollars, a “simplified metric” the department said, but valuable for comparing “costs across projects and markets”.

“Ultimately it's really a story of macroeconomic conditions,” said Jonah Ury, transaction manager for the DoE’s Loan Programme Office (LPO), noting that costs rose economy wide and globally for offshore wind.

Cost escalations are “not an intrinsic feature of offshore wind,” said Ury.

Deployment is “one of the key pathways to cost over time,” added Ury.

Along with flagship Vineyard that is currently under construction and South Fork that is completely installed and prepping for commissioning, over 4GW of projects have begun onshore work and over 10GW is looking at imminent approval.

“In the next few years, an additional 5-10GW of projects have a path to reach Final Investment Decision (FID)and begin construction,” the report added.

Early projects will bring valuable experience with development and construction processes, and “these early movers will help fund the key enabling infrastructure and supply chain investment necessary to facilitate long-term buildout,” DoE said.

LCOE below $100/MWh is possible for fixed-bottom projects by 2030, “enabled by project deployment and associated supply chain and infrastructure development,” the report said.

Ultimately, with the sector’s promise of gigawatt-scale clean energy and job creation, DoE sees pathways to 100GW in the water by 2050 and the possibility for doubling that.

Jocelyn Brown-Saracino, head of offshore wind for the department, told reporters at Oceantic Network’s International Partnering Forum: “Despite the challenges, the sector is adapting, that we're working to have improved risk mitigation moving forward, and we have confidence in the prospects of offshore wind moving forward, including the potential paths for cost reduction.”

Some 9.4GW of capacity has been awarded since October last year in New York and New Jersey, all with new offtake contracts that include critical inflation adjustment mechanisms to ensure projects don’t succumb to another round of surging prices.

States and developers are making “significant progress to refine best practices for project procurement, coordinated transmission upgrades and early supply chain development investments,” the report said.

However, New York was forced to void its entire 4GW round 3 due to disputes between the developers and tier 1 supplier GE Vernova over turbine size.