US offshore wind set for 'pivotal year' amid gigascale state procurement: Oceantic
Trade group sees some 14GW of capacity readied for installation and up to four federal leasing rounds, but “increasingly politicised” industry faces policy risk
The US offshore wind sector’s response to turbocharged state procurement and federal leasing this year will determine its long-term growth trajectory, trade group Oceantic Network observed in a report released Tuesday.
Cancellations and delays will likely see the US missing the Biden's administration’s target of 30GW by 2030 by a wide mark, with research consultancy BloombergNEF cutting its forecast to between 14GW-16GW.
The shakeout might not be over either, with analysts forecasting more cancellations this year as market turmoil continues.
“The year 2024 will be a pivotal year to the long-term success of the US offshore wind market,” Oceantic said.
“How well the industry takes advantage of the tail-end of this transitionary period to bank new investments and build resiliency in the power market will directly correlate to whether the market can accelerate deployment and develop a robust domestic supply chain,” it added.
States ramp procurement
Market confidence is underpinned by massive ongoing capacity solicitations, including the US’ first multi-state procurement for over 6GW by Connecticut, Massachusetts, and Rhode Island, as well as New York’s fourth round for 4GW to replace cancelled projects by Equinor, BP, and Orsted.
Including New Jersey’s recently completed 3.7GW round in January, “states could award up to 16GW in new power offtake agreements in 2024, and by next year’s report, the US market could see 20 to 25GW under contract,” Oceantic said.
Federal offshore energy regulator Bureau of Ocean Energy Management (BOEM) could hold auctions in four nascent wind energy areas (WEAs) off coastal Oregon, the Gulf of Maine, the Central Atlantic, and a second round in the Gulf of Mexico, to offer sufficient acreage to meet most future state procurements and spark supply chain investment.
BOEM is poised to approve a total of 14GW of capacity for installation, setting the sector up for gigascale construction.
“Consistent state demand, a visible pipeline of projects ready for installation, and a slew of new state procurement windows will drive substantial new supply chain investments into factories, vessels, and ports,” the trade group said.
This is welcome news for the sector that has seen investment stall as “inflationary pressures drove up construction prices and some manufacturers are experiencing global challenges impacting their planned US investments,” Oceantic noted.
Only two US-based primary component manufacturing facilities have come online of the more than dozen promised, “while the rest have yet to break ground”, the network said.
Looming federal elections likewise “could disrupt market confidence”, the network said, noting that offshore wind, like all renewables, has “become increasingly politicised in recent years and could become a national issue in 2024”.
“Some investors may choose to await the results of the election, but the strong market fundamentals could drive many new entrants” into the sector, the network said.
“The next twelve months has the potential to be a significant year for supply chain development, further investment, and renewed shipbuilding activity,” Oceantic said.
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