This article is republished from The Conversation under a Creative Commons license.
America’s first large-scale offshore wind farm is set to begin sending power to the Northeast in early 2024, but a string of canceled wind farm projects and rising costs have many questioning the future of the industry in the US.
Several major players, including Orsted, Equinor, BP and Avangrid, have cancelled or sought to renegotiate contracts in recent months. The withdrawals have meant they face cancellation penalties ranging from $16 million to hundreds of millions of dollars per project. And Siemens Energy, the world’s largest maker of offshore wind turbines, expects a financial loss of about $2.2 billion in 2024.
The canceled projects through the end of 2023 were expected to provide a combined total of more than 12 gigawatts of electricity, more than half of the planned capacity.
So what happened, and can the U.S. offshore wind industry recover?
I direct the Wind Energy Science and Technology Research Center (WindSTAR) and Energy Innovation Center at the University of Massachusetts Lowell and am watching the industry closely. The offshore wind industry’s problems are complex but far from over in the U.S. and some policy changes may put it on more stable footing.
A series of issues surrounding approval
Obtaining permits and approvals for offshore wind projects in the United States takes years and involves more uncertainty for developers than in Europe or Asia.
Before companies can bid on U.S. projects, developers must draw up procurement plans for the entire wind farm, including purchasing reservations for components such as turbines, cables, construction equipment, ships, etc. Bids must also be cost-competitive, so companies tend to bid low and not anticipate unexpected costs, which increases financial uncertainty and risk.
The winning U.S. company will purchase expensive offshore leases worth hundreds of millions of dollars but will not yet have the rights to build the wind farm project.
Before construction can begin, developers must conduct a site survey to determine what foundations are possible and identify the scale of the project. Developers must also sign agreements to sell the electricity generated, identify connection points to the power grid, and prepare construction and operation plans that undergo environmental review. All of this will take about five years, and this is just the beginning.
To move forward with a project, developers must obtain dozens of permits from local, tribal, state, regional and federal agencies. The federal Bureau of Ocean Energy Management, which oversees seabed leasing and management, must consult with agencies responsible for regulating different aspects of the ocean, including the military, the Environmental Protection Agency and the National Marine Fisheries Service, as well as commercial and recreational fisheries, Native American groups, shipping, port authorities, landowners and other groups.
