With offshore supply chain opportunities under the spotlight in Aberdeen this week, it is important to realise that this isn’t just about oil & gas.
The fast growing maritime renewables market is getting a significant push too, especially offshore wind.
Naturally, the North Sea wind industry is getting a big push and necessarily so as the oil & gas supply chain has, on balance been slow to realise let alone grasp the massive opportunities that have largely escaped them by over the past 20 years or so. But with much more investment planned and with high carbon energy coming under increasing pressure from the climate change lobby, now is the chance to do some catching up.
However, there’s another offshore wind market that is also getting attention this week and it’s in the US where the scale of both the ambition and future potential investment is staggering, with nearly $70billion of investment in the pipeline.
This is something that the UK/European oil and gas supply chain with its huge experience of the US business climate via Houston especially can surely break into; especially on the project engineering and subsea fronts.
Offshore wind development started in EU waters more than 20 years ago. With some 16GW of capacity installed by the end of 2018, and more than 47GW expected to come online in the region from 2018 to 2027, the North Sea especially continues to be a focal point of growth for the windpower industry, moreover with a steady shift to zero subsidy tendering.
By comparison the effort offshore US in terms of turbines planted on the seafloor has been minimal with only one project currently operational, namely the 30MW capacity Block Island windfarm.
However, there are around 2.0GW of electricity supply approvals already stacked up, with more to follow this year. That will fairly soon translate into very real business opportunities … contracts … hundreds more turbines installed near-shore.
In a nutshell, the offshore US windscape is predicted to change massively over the coming decade; moreover on a scale that will match Europe’s offshore wind capacity achieved to date.
The Special Initiative on Offshore Wind (SIOW) at the University of Delaware in March this year forecast 18.6GW of offshore wind procurements through 2030 at an estimated capital expenditure total of $68.2billion.
UoD’s SIOW report provides a state-by-state, year-by-year forecast for offshore wind power contracting. Connecticut and New York, for instance, are each forecast to schedule generating capacity procurements totalling in the hundreds of megawatts every two years through 2030.
The outline shopping list is roughly as follows:
– 1,700 offshore wind turbines and towers (worth $29.6billion)
– 1,750 offshore wind turbine and substation foundations ($16.2billion)
– 5,000 miles of power export, upland, and array cables ($10.3billion)
– 60 onshore and offshore substations ($6.8billion)
In addition, the market is likely to see $5.3billion invested in marine support, insurance and project management activities.
“Today, offshore wind farms totalling 1.6GW of capacity are contracted to provide electricity in Massachusetts (800MW), Connecticut (300MW), New York (130MW), Maryland (368MW) and Virginia (12MW), says the SIOW paper.
“Additional offshore wind power contracts are expected to be signed in 2019, including in Rhode Island (400MW), New Jersey (up to 1,100MW) and New York (up to 800MW), bringing to seven the total number of states to which offshore wind power will soon be providing electricity.
“This 1.6 GW is just the tip of the iceberg. Many of the same states have their own offshore wind power commitments stretching to 2030 and beyond. In addition to the 1.6GW of offshore wind farms already contracted to supply power, contracts are expected to be signed for approximately 17GW of additional projects as a result of state commitments in the period 2020-2030.
“This brings the total forecasted amount of contracted offshore wind power between 2020 and 2030 to 18.6GW.
“Collectively, these state commitments are equivalent to the electrical capacity of 18 large nuclear power plants, an extraordinary capital expenditure (CAPEX) that requires many suppliers. “
But, as yet, there is little in the way of a local supply-chain. Crucially, there are no indigenous Tier 1 contractors, nor are there any Jones Act compliant construction/installation vessels, although EU company GustoMSC did offer the market a windfarm construction barge design dubbed the SEA-3250-LT two years ago.
It is a budget entry model to enable US domestic ownership of vessels capable of competing in the potentially very large North American offshore wind construction and servicing market. The Jones Act currently prevents American companies from using European installation vessels though that does not mean the door is necessarily wholly closed, given the derogations that have existed for some years in the US Gulf of Mexico oil & gas industry.
While there is currently a rather sketchy domestic offshore renewables supply chain, the US has a strong presence on the OEM (Original equipment manufacturer) front; in particular mighty GE.
Though Wall Street-listed, GE has its GE Renewable Energy HQ in Paris, it has a considerable manufacturing footprint in the US and Canada. There are 40,000 GE wind turbines installed worldwide … about 25% of the total turbine installations count to date. That may come as a surprise to Brits especially given that the UK does not have a big turbines capability at all and the assumption that renewable energy is a no-go area under the Trump Administration.
According to 4C Offshore, There are currently around 140 US offshore wind projects in gestation of which some 40 are regarded as near- to medium-term candidates for development.
The majority are located along the Eastern Seaboard though a number of projects have been mooted for the Great Lakes of which only one appears to be making headway while the rest are currently in abeyance. After being similarly stalled for a number of years, the 21MW Great Lakes Icebreaker proposal is once again inching ahead.
Turning to California, following a call issued in October 2018, the US Bureau of Ocean Energy Management (BOEM) said in April that it had received expressions of interest from 14 would-be developers covering acreage offshore Central and Northern California. The call came shortly after California committed to achieving a 100% renewable energy target by the end of 2045.
In the same way that UK companies have over the past 50 years carved out supply-chain positions in US oil & gas, both on and offshore, it is perfectly reasonable to suppose that the same will be possible in offshore wind. Subsea especially is mentioned above; however the UK has a broader relevant ocean-tech capability and maritime expertise to offer.
And though the two industries are quite different, there are areas of overlap and it is important that these are exploited, with much to be learned from the North Sea oil and gas experience where, in some instances, companies in the supply chain only survived the late 2014 through 2017 oil price slump by virtue of complementary diversification … especially on the subsea front.
It is encouraging that this year’s Offshore Technology Conference was heavy on offshore wind. It shows that what many regard as a dyed-in-the-wool oil convention really is paying attention to the dramatic shifts now taking place in global energy.
The OTC 2019 conference papers are worth accessing and clearly demonstrate both the huge expertise resident in Europe and the determination that now exists in the US energy industry not to be outdone.
Now that they are waking up to offshore wind, the US supply chain will likely waste no time in closing its many capability gaps including at Tier One level. That being so, UK firms hoping for a piece of the action need to get a move on.