U.S. Offshore Wind Project Awards Push Market Boundaries
U.S. offshore wind energy generation in the developing East Coast hub has leaped forward in recent weeks, with New Jersey’s much-anticipated award of an 1,100-MW project to Danish giant Ørsted, formerly the energy firm DONG.
Set for construction off the coast of Atlantic City, the estimated $1.6-billion wind farm is the country’s largest offshore capacity award.
Additionally, New York is set to announce imminently the winner of its first project to build 800 MW—or more if offers are attractive.
Maine and Virginia also have taken key steps to advance their lagging state programs to stretch the market's geography and join a fast-growing clean energy sector that could become a $70-billion market, say proponents.
“This is wickedly exciting,” says Matthew Palmer, vice president and offshore wind manager for design firm WSP. States are now competing for the largest-capacity awards and investing political capital, he says.
New Jersey Gov. Phil Murphy (D) ramped up the state’s effort since last year, now committing to building a total of 3,500 MW offshore by 2030. New York Gov. Andrew Cuomo (D) has set an ambitious and nation-leading 9,000-MW commitment by 2035.
They follow a May solicitation by Massachusetts for 800 MW to meet its 1,600-MW offshore wind target. Its first award one year ago, an 800-MW project won by Vineyard Wind, will soon start construction.
Construction of the first New Jersey project is set for 2024. The award brings to 2,000 MW Ørsted’s East Coast offshore wind portfolio to be completed between 2022 and 2024.
The firm has been a key player in Europe’s well developed and still expanding offshore wind energy market.
The big awards' timing is considered critical to enable developers to use federal tax credits set to expire this year and to give suppliers confidence needed to make required investments to set up local supply chain and manufacturing, says Liz Burdock, CEO and president, Business Network for Offshore wind.
In late June, legislation was introduced in Congress to extend the federal tax credit for up to eight years. New Jersey's next solicitation will be released next year and a third in 2022.
Competitors Gear Up
Offshore wind power competitiveness in the fast-changing market has evolved quickly, as technology—particularly larger turbine capacity—lowers design and construction costs.
Ørsted’s New Jersey project offered a first-year power price of $98.10/MWh with the actual cost paid by ratepayers estimated to be $46.46/MWh after energy and capacity revenue is refunded.
The monthly cost boost is estimated at $1.46 per residential ratepayer.
Three developers submitted 14 bids, the state Board of Public Utilities said. Other competitors are French utility EDF teamed with a Shel Oil unitl and the Norwegian developer Equinor, formerly national energy firm Statoil.
The board said it chose Ørsted based on what it considered the most advanced environmental protections during construction and operation and detailed economic benefits that totaled $1.7 billion. The firm has an agreement with German manufacturer EEW to spur construction of a turbine foundation fabrication plant in Paulsboro, N.J., which the board said “may be enlarged … as the Atlantic coast offshore wind industry grows.”
Some observers also see as a key factor in Ørsted’s New Jersey win, its $510-million acquisition last year of Deepwater Wind, theRhode Island developer of the first and only operating offshore wind farm in theU.S., a 15-MW facility. The Danish firm had been previously unsuccessful in winning projects in Massachusetts and Connecticut.
New Jersey project participants are expected to reach a pact with the South Jersey Building and Construction Trades Council for union-only construction, the state board order says. The developer also will spend millions to train small-business subcontractors and fund apprentice programs and new research.
Under its agreement, any cost of non-performance in construction or operations will be paid by the developer, the NJ board said.
Ørsted also has a deal with the state’s largest utility owner, PSEG, to provide energy management services. The utility firm also has an option to become an equity investor in the project.
In New York, four bidders are awaiting word from the State Energy and Development Authority on 18 submitted project bids. The state required a minimum bid of 400 MW, with energy delivered through a direct marine cable link from the offshore wind farm to the New York transmission grid. Bidders paid $300,000 to participate and $20,000 to $40,000 for each added alternative proposal.
Vineyard Wind, a joint venture of Copenhagen Infrastructure Partners and Avangrid, submitted three bids, including one for a 1,200-MW project, according to its submission. Ørsted and Eversource Energy submitted three bids and have agreements with Con EdisonTransmission and the New York Power Authority.
EDF Renewable and ShellNew Energies submitted eight bids. Equinor submitted four bids. Bid capacity details were redacted in some proposals.
After coming up empty in the New Jersey award, the head of Equinor’s renewable energy business said the firm would be back stronger in future U.S. offshore wind solicitations.
“This outcome illustrates that this is a fiercely competitive market,” Pal Eitrheim told sector publication Recharge Wind.
Linking to the Grid: Controversial
Linking power transmission to onshore East Coast grids remains a critical and controversial challenge.
Ørsted aims to build its own transmission system in New Jersey, spendingbetween $36 million and $130 million on upgrades.
Such transmission control is being challenged by others who seek an open so-called “backbone transmission system” that they say could link various east coast projects.
“Offshore transmission infrastructure will be critical to the long-term success of the offshore wind industry,” says Walter Cruickshank, acting director of the U.S. Bureau of Ocean Energy Management, the federal agency that controls offshore ocean tract leases.
Anbaric Development Partners has requested a right-of-way to develop the New Jersey and New York offshore grid. Its proposal says it would build and operate a transmission system of several offshore collector platforms, each linked to one or more high-voltage subsea export cables that would connect to onshore connector points.
But BOEM announced in late June it is seeking competitive interest to develop an offshore transmission line to deliver New Jersey produced wind and new generation now under way in New York to the electric grid onshore. Each platform could connect multiple offshore wind projects to accommodate phased development within BOEM’s wind energy areas. Each platform would be designed to handle 800 MW to 1,200 MW of offshore wind energy.
Ørsted USA CEO Thomas Brostrom said in 2018 that the backbone approach “would limit wind developers to a set of prescribed design parameters and is the equivalent of the tail wagging the dog.”
Meanwhile, Dominion Energy said July 1 it has begun construction of Virginia’s first offshore wind energy project and the first to be constructed in federally owned waters.
The two-turbine 12-MW generating station will be located in 80-ft-deep waters 27miles east of Virginia Beach.
Ørsted will build the turbines, the blades of which will reach up to 600 ft high, while L. E. Meyers Co., Glen Allen, Va., is performing onshore design and construction, including upgrades to an existing substation and installation of feeder conduit.
The $300-million project is set to become operate by the end of 2020; Dominion says its 112,800-acre offshore commercial lease area could support more than 2,000 MW of renewable energy.
in Maine, Gov. Janet Mills (D) signed a bill on June 19 to revive an effort stalled by her predecessor, Republican Paul LePage, to build the first commercial-scale floating project in the U.S.
University of Maine project developer and engineering faculty member Habib Dagher says the bipartisan bill will allow for a 20-year power purchase agreement to be issued this fall for the AquaVentus project.
Dagher says the project gives Maine “potential to lead the world in floating offshore wind development.”
Financial close is expected in 2021, with connection to the grid in 2022, he says. The full-scale project, capable of scaling up to 500,000 MW, is expected by 2025.
The project received a $40 million federal grant in 2016, in recognition of vast potential to harness renewable ocean energy from the 156 GW resource in the Gulf of Maine.
With 26 patents issued so far, the university plans to license the technology to developers.
In recent days, “interest has been big” in the highly vetted program from developers worldwide, Dagher says.