Europe’s investment in offshore wind is paying off — for the US
For years, a large-scale offshore wind industry in the US seemed like it was always somewhere off over the horizon.
But with the price of offshore wind power dropping quickly in Europe and the UK, policymakers in the US are increasingly looking at it as a viable option to meet renewable energy goals.
Right now, there’s only one offshore wind farm off the coast of the US. The small, five-turbine Block Island Wind Farm started operating off the coast of Rhode Island in December 2016.
But that small pilot project may soon get some company. More than 25 additional projects are being planned in the US, largely off the coast of the Northeast and mid-Atlantic. That includes two projects in Maryland that have already won purchasing agreements from the state, and proposed projects off of Long Island, New Jersey and North Carolina that are in the proposal and permitting phases.
It’s likely that some of those 25 proposed projects won’t ever get built, but even so, offshore wind appears close to a tipping point in the US.
Price drops in the UK make offshore wind look more attractive in the US
Cost is the single biggest reason for the growing momentum behind offshore wind in the US, according to the University of Delaware's Stephanie McClellan.
"Unless there was a large enough market in Europe that pulled to the market these innovations and these cost reductions, we would not be even be having this conversation today about offshore wind in the United States,” McClellan said.
McClellan has been advocating for the development of offshore wind projects off the coast of the US since 2014 as head of the Special Initiative on Offshore Wind.
For years, she said she would walk into meetings in governor’s offices and state legislators and hear the same question.
"'What is the cost of offshore wind? Is the price going to come down?'” McClellan said. “And then the next question would be, 'well how much is it going to come down?' Up and down the east coast, every state that I've worked with, either governor's offices or legislators, that's the question."
Policymakers in the US have historically looked to offshore wind prices in Europe, which has a quarter-century head-start in the industry and boasts 94 wind farms. And in recent years, prices there have been dropping fast.
Over the past two years, fueled by government subsidies and a guaranteed market for the renewable energy, the cost of offshore wind power has dropped by more than half in the UK, which is leading its European neighbors in new offshore wind installations.
Prices have come down faster than almost anyone expected, largely due to technology improvements, increased competition and the lower cost of capital. Today’s turbines can generate about twice as much energy as those installed even a few years ago and the cost of borrowing money to finance offshore wind projects has dropped as those investments are seen as less risky.
Plummeting costs of offshore wind make it an increasingly attractive option for leaders of coastal states that have set ambitious renewable energy goals and have to find sources for all that carbon-free energy.
"[Prices in Europe] certainly has been a key part of what New York State has been watching,” said Alicia Barton, president and CEO of the New York State Energy Research and Development Authority.
Last month, New York unveiled its plan to source 2,400 megawatts of energy from offshore wind by 2030, enough to power 1.2 million homes.
“The cost of offshore wind declining rapidly in recent years certainly has been part of the reason New York has felt comfortable making the case that offshore wind is a valuable resource as part of our mix of renewable energy,” Barton said.
Barton says New York also looked to Europe when developing its own plan to stimulate a home-grown offshore wind industry.
“The feedback from market participants, developers who are active in European markets, for example, is pretty consistent. You need to send market-sized signals in order to drive … long-term investment,” Barton said.
New York isn’t alone in hoping that providing a guaranteed market for offshore wind energy will spur private investment.
Maryland has committed to subsidizing two wind farms off that state's coast, and both Rhode Island and Massachusetts have passed laws requiring utilities to commit to buying offshore wind.
Technological improvements already translating to savings in the US
The US offshore industry is still in its infancy, but two data points suggest that the price drops seen in the UK are already translating to savings here in the US.
Electricity generated by the Block Island wind project off of Rhode Island will cost roughly $300 per megawatt hour over the life of the project. Last May, the state of Maryland issued contracts to two offshore wind projects that will start generating power as early as 2021 at $132 per megawatt hour. That’s a big drop, but even with those savings, offshore wind still wouldn’t be able to compete on cost with natural gas-fired power plants, solar, or even on-shore wind coming online in the same time period, according to current energy price projections.
Industry insiders will be watching closely to see if, and how much, prices fall this April as Massachusetts utilities award offshore wind contracts to companies vying to build projects there.
Another wild card in the future of US offshore wind is public opinion. A wind farm off of Cape Cod that might have been the first in US waters was canceled after a prolonged fight with powerful local residents.
Polls in coastal states show relatively high approval ratings for offshore wind. And technological improvements to offshore wind turbines that allow them to be sited farther off the coast may help limit opposition from residents worried about turbines ruining their ocean views. Both the embattled Cape Wind project and the current Block Island project are located five miles offshore, while the proposed projects farthest along in the planning process in the US would be built at least 10 miles away.
But some of those newer projects still face opposition, notably a project off the coast of Ocean City, Maryland, that local leaders worry will ruin beach views, and it's too soon to tell if the waters off of the US will ever be dotted with as many wind farms as the waters off of Europe.