U.S. Offshore Wind Market Becoming 'Real' With European Interest

Andrew Herndon, Bloomberg
December 06, 2012 | 2 Comments

European energy companies are considering participating in U.S. offshore wind-farm auctions, a sign of increasing confidence in the viability of marine-based wind power off U.S. shores, according to Arcadia Windpower Ltd. President Peter Mandelstam.

Developers including Spain’s Iberdrola SA, Electricite de France SA and Ireland’s Mainstream Renewable Power Ltd., have filed official “indications of interest” for the first competitive lease auction for U.S. offshore wind farms, scheduled for next year.

U.S. companies have been planning offshore turbines for more than a decade and none have been built. Having large European wind veterans evaluate the lease auctions shows that the “market is real,” said Mandelstam, who ran one of the early players in the industry, Bluewater Wind LLC.

“The Europeans have been doing this since 1991,” Mandelstam said in a telephone interview yesterday. “It’s a badge of honor for the U.S. industry that the Europeans are here.”

The U.S. Interior Department announced Nov. 30 plans to offer leases for wind farms off the coasts of Massachusetts, Rhode Island and Virginia. The auction will be the first for commercial wind energy in federal waters more than three miles (five kilometers) from shore.

The government has also awarded two offshore wind-energy leases, in Massachusetts in 2010 and in Delaware in October, to U.S. companies through non-competitive offers that each involved a single company.

Delaware Lease

The Delaware lease was awarded to NRG Energy Inc. for a project initially developed by Bluewater. Mandelstam sold the company to NRG in 2009.

The U.K.’s Renewable Energy Systems Ltd. and Spain’s Orisol Corp. Energetica SA also filed indications of interest in the U.S. offshore wind market, according to documents from the Interior Department’s Bureau of Ocean Energy Management.

Mandelstam expects the offshore wind industry to evolve similarly to the onshore industry, with smaller developers like Arcadia completing “upfront work” such as negotiating leases and power contracts, and then selling the projects, or stakes in them, to larger companies.

“That has been the model on land, that was the Bluewater model in Delaware, and I expect that that will continue,” Mandelstam said. Arcadia, based in Hoboken, New Jersey, plans to bid for offshore projects on the Atlantic coast “from Maine to the Carolinas,” according to its website. Mandelstam said he owns and funds the company.

Smaller companies are able to bid for power-purchase agreements and pursue permits, Mandelstam said. For later steps, “to have billions of dollars in construction equity and be able to borrow the construction debt, you need to have some sort of relationship with the larger, more established players,” he said.

Lead image: Offshore Wind Farm via Shutterstock

2 Comments

Anumakonda Jagadeesh
December 8, 2012

The United States has very large offshore wind energy resources due to strong, consistent winds off the long U.S. coastline. Offshore wind energy is a clean, domestic, renewable resource that can assist the U.S. in meeting energy, environmental, and economic challenges. A robust U.S. offshore wind industry could generate tens of thousands of jobs and billions of dollars of economic activity. Much of this activity would boost economically depressed ports and shipyards, which could be repurposed to manufacture and install offshore wind turbines. Research on European offshore wind farms shows that offshore wind generates more jobs per megawatt installed than onshore wind. A Virginia study has shown that the development of 3,200 MW of offshore wind would create 9,700–11,600 jobs within 20 years, and that installation of a 588 MW offshore wind farm would attract $403 million of investment in the local economy regardless of where the turbines were manufactured. Though offshore wind turbines are more expensive to build than onshore turbines (because they tend to be larger and must be anchored to the sea-floor), they also tend to generate more electricity than onshore turbines because of their size.
In 2011, the NREL published a report, Large-Scale Offshore Wind Power in the United States, that analyzes the current state of the offshore wind energy industry. According to the report, "developing the offshore wind resource along U.S. coastlines and in the Great Lakes would help the nation".
• Achieve 20% of its electricity from wind by 2030, as offshore wind could supply 54 gigawatts of wind capacity to the nation's electrical grid, increasing energy security, reducing air and water pollution, and stimulating the domestic economy.

Dr.A.Jagadeesh Nellore(AP),India
E-mail: Anumakonda.jagadeesh@gmail.com

ANONYMOUS
December 7, 2012

"....U.S. companies have been planning offshore turbines for more than a decade and none have been built...."

That single sentence sums up the current US commercial wind market. While the US market represents the largest percentage of global commercial wind power, virtually 100% of US wind power is from on-shore installations. And globally, off-shore wind still accounts for less than about 20% of installed capacity.

While off-shore wind may sound more sexy than on-shore, the reality is that the economics still greatly favor on-shore wind. When you combine the better economics of on-shore wind with the political hurdles facing off-shore wind in the US, it becomes obvious that US off-shore wind will not achieve any real growth for the foreseeable future.