Building a project is tough. Building an industry is tougher still. That is the challenge for US offshore wind.
Last week, the American Wind Energy Association gathered the great and the good in Atlantic City at Offshore 2014. Discussion
focused on some key themes. How can we fund schemes? How can we ensure that they’re built? But, above all, it served as a reminder to focus on the positives. It was an important pep talk.
In our own discussions, in the past 12 months we too have seen a subtle shift. The focus is on ‘when’ and not ‘if’ anything will happen.
Confidence is growing. And yet, while the ‘when’ is important, the danger for many is that it misses the point.
Yes, the US will get an offshore wind farm. It may even get a handful in quick succession. That’s great stuff. This would create revenue and jobs. It would tackle growing transmission challenges. And it would provide a demonstrable response to industry sceptics.
What it will not do however is create a US offshore industry. It will have stepped towards it – and it will show that it can be done – but it’s by no means the end game. It’s just the end of the beginning.
And remember, right now there is still significant policy uncertainty that could strangle the industry and kill off investor excitement.
The US Department of Energy says there are 14 offshore schemes at varying stages in the planning process, with potential capacity of 4.9GW. Those are interesting numbers. But there are actually only two projects in the race to be America’s first offshore wind farm.
The scheme already has funding commitments of more than $1.2bn from backers including EKF, PensionDanmark and Bank of Tokyo Mitsubishi; and is looking to complete project financing this year for a start on construction in 2015. It is a very ambitious project, and it shows there is interest from major financial investors.
Meanwhile, Deepwater Wind’s Block Island project – a 30MW initiative – is the second contender in the running to be be the first to put steel in the water and the competition is to be encouraged.
It’s a fraction of the size of Cape Wind but even so it won its final federal approvals last month, and construction is due to start next summer. It won’t be the biggest but it might be first.
Both schemes demonstrate a promising start. And yet. And yet…
Remember, the US quickly needs a second wave of projects to cement growth in the industry.
That second wave is dependent on tackling the continued uncertainty surrounding the wind production tax credit (PTC) and investment tax credit (ITC). Both expired at the end of last year, and the attempt to extend them has stalled in Congress.
Getting these reinstated would take a concerted lobbying effort from the businesses who stand to benefit from the change.
Now the Offshore Wind Development Coalition has been acquired by, and incorporated into, AWEA that could further cloud the picture. The majority of AWEA members are focused on the US onshore wind debate, and sustaining and protecting its future.
Whether that relegates the needs of offshore wind is a pertinent point. Quite understandably, AWEA has dismissed this concern.
We’ll see. For now, the continued presence of central government support remains critical. Without it, America’s first offshore wind farms may end up getting rather lonely.
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