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DOE Releases 2014-2015 Offshore Wind Technologies Market Report

On September 29, 2015 the Department of Energy released the 2014-2015 Offshore Wind Technologies Market Report, assessing the nation’s offshore wind potential and planned projects through June 30, 2015. The report summarizes domestic and global market developments, technology trends, and economic data with the purpose of aiding U.S. offshore wind industry stakeholders. The Report builds upon previous market reports conducted by the Navigant Consortium between 2012 and 2014, which would track U.S. wind projects that had reached an “advanced stage” of development. The 2015 Market Report not only assesses the progress of offshore wind projects in various stages but it also analyzes projects in a range of countries. To learn more about where the U.S. offshore wind industry stands in comparison to other countries as well as about domestic and global ongoing projects and expected trends, read on!

New Method for Tracking Offshore Wind Projects

The National Renewable Energy Laboratory (NREL) re-developed its system for classifying and tracking the progress of projects within the development pipeline. The purpose of this new method is to increase connectivity across markets and regulatory regimes as well as to objectively assess the status of projects.

Global Offshore Wind Market on Target to Set Annual Deployment Record in 2015

The increase in offshore wind projects in the pipeline is leading to an upsurge in operational capacity spread out across the world. While 1,069 megawatts (MW) of new wind capacity was installed in 2014, it is expected that 2015 will provide approximately 3,996 MW of wind capacity, making 2015 a record year for offshore wind deployment. The total global installed capacity is now 8,990 MW. At this rate, the global cumulative capacity could exceed 47,000 MW by 2020. Projects are also beginning to spread out beyond Europe. While currently 63% of the projects are located in Europe, 23% are located in Asia, 9% in North America, and 5% spread across the rest of the world.

15,650 MW of U.S. Projects are in Various Stages of Development

There are 21 U.S. offshore wind projects in the development pipeline, which equates to 15,650 MW of potential installed capacity. 13 of these projects have achieved site control or a more advanced phase of development. While most of the offshore wind projects are located in the North Atlantic region, there seem to be feasible offshore resources in the South Atlantic, Great Lakes, Gulf of Mexico, and Pacific regions of the U.S.

Deepwater Wind Begins Installation of First U.S. Offshore Wind Project

The Block Island Wind Farm (BIWF) began offshore construction in 2015. Led by Deepwater Wind, clients of ML Strategies, BIWF is expected to be the nation’s first offshore commercial wind project, it also has the potential to lower electricity prices for the residents of Block Island, provide substantial clean energy to the mainland townships of southern Rhode Island as well as produce approximately 300 jobs during its construction phase.

Cost Trends and Learning from Europe

Offshore wind projects are capital-intensive, where utility scale projects (>200 MW) generally require investments of over $1 billion. With projects expected to be built in locations that are located in deeper water, further away from shore, and larger in size, operating costs becomes an even greater concern. The industry is focused on introducing a variety of technological innovations to drive down the cost. The DOE’s Report suggests the U.S. will likely enact a cost structure similar to that of Europe. Part of the reason Europe’s offshore wind industry is so widespread is due to its ability to subsidize projects via investors and its action on the part of policymakers. For instance, policymakers in the UK have set goals to reduce the Levelized Cost of Electricity (LCOE) and are implementing programs designed to lower costs, reduce risk to developers, and minimize the prices required to make projects financially viable as evidenced by their initiation of competitive auctions for subsidies, their classification of zones that emphasize size affordability (choosing projects closer to shore), and their sponsoring early-stage development activities to reduce uncertainty about site conditions. Recent state and federal policy developments including President Obama’s issuance of the Clean Power Plan regulation and the initiation of the BIWF project provide hope for the U.S.’ offshore wind industry.

Overall, even though the EU continues to lead projects in the wind industry, the industry is becoming more geographically dispersed with projects now underway in the U.S. and Asian markets. While the biggest challenge the U.S. offshore industry faces is the current high cost of offshore wind generation, the industry is focused on cutting such costs through leveraging European technology and experience.  It is also the hope that cost reductions of projects in the EU caused by its target to reduce the LCOE for offshore wind projects, the Cost Reduction Monitoring Framework set up by the UK government, and additional actions by policymakers, will translate to the U.S., further strengthening the wind industry in the U.S.

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Sarah Litke