Thomas H. Belknap Jr. and Lauren B. Wilgus
Just when it was looking like the offshore wind industry was finally about to take off in the United States, the COVID-19 pandemic has introduced one more significant layer of uncertainty upon an already very complicated playing field. There are currently 15 active offshore wind projects in the planning stages that, if completed, could add approximately 25 gigawatts of electricity to the power grid.
The State of Play
Things were hard enough already. Cape Wind, the United States’ first—and very ambitious—130-turbine offshore wind project, died under its own weight after years-long delays and caused its energy providers to end power supply contracts for the project in 2015. Indeed, just one project—the five-turbine (30 megawatt) Deepwater Wind farm off Block Island—is up and running so far. But, there are a slew of other projects in the pipeline. The two-turbine (12 megawatt) Coastal Virginia Offshore Wind facility—a “test” construction in advance of the planned 2,640-megawatt Dominion Energy Wind Farm—has already started construction and reportedly remains largely on schedule.
Several other large projects are in the pipeline to start construction within the next two to three years. The 800-megawatt Vineyard Wind 1 project in Massachusetts was initially scheduled to commence last year until federal regulators determined that they needed more time to analyze environmental impacts before they would issue the necessary permit. Recently, the Department of Energy’s Bureau of Ocean Management has indicated that it will issue its findings by December 2020, setting that project back at least a couple of years from their initial projections. Since the new analysis will require a consideration of the potential “cumulative” environmental impact if other offshore windfarms are built, this delay is likely to cascade to other projects.
Revolution Wind, a 704-megawatt project off the coast of Connecticut and Rhode Island targeted for completion by 2023, has announced delays of their own, also due to permitting issues and effects of the COVID-19 pandemic. Other large projects are facing similar delays.
Among other problems, the delays have jeopardized the projects’ access to federal tax credit and investment tax credits. Originally expiring in 2019, the credits were extended for one year to include facilities that begin construction within 2020. The credits can be claimed where a project is placed into service within four years of starting construction—a timetable that may be increasingly challenging due to COVID-19-related delays. Recently, the Treasury Department has signaled to Congress that they will be looking at possible modifications to this rule.
So what does all this mean for the maritime sector? Offshore wind has been tantalizing the industry for years now, and it’s no wonder why. The American Wind Energy Association (“AWEA”) predicts that the offshore wind projects could create up to 83,000 jobs and $25 billion in annual economic output by 2030. Already, the AWEA reports, companies have announced well over a billion dollars in port-related infrastructure, transmission infrastructure, manufacturing facilities, and supply chain development.
Meanwhile, in other parts of the world, offshore wind development and infrastructure is already well developed, particularly in places like northern Europe where the first offshore wind farm was erected in 1991. Unsurprisingly, many companies from those markets are looking closely at the United States as a major new opportunity—and not just for the installations, but also for design, fabrication, consulting, service and maintenance, and every other aspect of this specialized work. And they are right to do so, for there remains a shortage of expertise in the United States when it comes to offshore wind projects, and experienced companies will have much to offer in this new market. Continue Reading
This article was first published in the June 2020 edition of Maritime Reporter & Engineering News. Reprinted with permission.