US offshore wind pipeline and costs both surged some 50%: NREL
National Renewable Energy Laboratory report said skyrocketing commodity prices and interest rates quashed short term development but deployment to 2040 still healthy
US offshore wind costs have shot up 45% through May since last year on rising commodity prices and interest rates that quashed short-term deployment expectations. Capacity pipelines also rose by 52% to 81GW and projects under construction increased by 300%, the National Renewable Energy Laboratory (NREL) said in a report released on Wednesday.
However, “macroeconomic hurdles facing the first generation of commercial offshore wind energy projects continue to linger, and ongoing challenges with the deployment of those first projects make the prospects for long-term growth of offshore wind in the United States more uncertain.”
The report assessed the industry from 31 May 2023 to the same date this year, a time of growth and tumult for the sector.
Federal regulator Bureau of Ocean Energy Management (BOEM) has ramped project approvals to nine totalling over 13GW, and with the most recent lease auction in the Central Atlantic that occurred after the report’s deadline, has now held five rounds holding over 30GW of potential capacity.
Costs surge to $125/MWh
Cost estimates for offshore wind skyrocketed by 45% year on year, to an average of $125/MWh, dependent on a variety of factors.
Looking closely at the New York sector which stands out for the scale of its capacity mandate of 9GW by 2035 (and unprecedented turmoil that saw as much as 8GW contracted and then voided over the past year), NREL noted commodity prices such as steel surged by as much as 63% for projects bid in 2019 and 2020, while copper increased up to 34% and labour costs 21%.
“Rising costs affect projects planned for commercial operation between 2023 and 2026 the most because of a lag of at least one to three years between the placement of supply chain orders and the start of commercial operations,” the report said.
“Project delays have contributed to lower estimates in offshore wind energy deployment through 2030,” the report observed.
Jocelyn Brown-Saracino, head of DoE's offshore wind programme, said in a LinkedIn post that rising costs should be looked at “against a backdrop of longer-term reductions.
“Even including recent cost increases, offshore wind costs have decreased by more than 50% since 2013,” she said.
The report offered several guidelines for mitigating market challenges, including “improving the path of permitting to offtake and improving the path for non-project-specific organizations to make targeted investments in infrastructure.”
NREL also offered suggestions on lowering transmission costs through economic incentives and interregional planning.