$70 Billion Opportunity in New US Offshore Wind Market
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- Jun 20, 2019 12:30 pm GMT
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This white paper by the Special Initiative on Offshore Wind (SIOW) at Delaware University and the Renewables Consulting Group (RCG) investigates how the sector should develop and details the opportunities available.
The outlook is for over 17,000 offshore wind turbines, generating 18,642 MW of electricity, across seven states, or the equivalent of around 18 conventional power plants.
The report highlights areas for US industry development, but European and Asia-Pacific companies can take heart from the large-scale opportunities forecast, and the implication that components will need to be supplied from elsewhere if the domestic US industry cannot provide them.
Key Highlights from the Report
The white paper identifies nearly $70 billion (€62 billion, £53 billion) of finance needed up to 2030 and breaks it down into charts which show what will be needed, where, and when. This is an instrumental analysis which will help wind developers and supply chain companies plan their operations in the US OW market. A link to the full white paper is here.
In this white paper, the Special Initiative on Offshore Wind (SIOW) quantifies the extensive supply chain business opportunities this $70 billion CAPEX is creating to build out the US offshore wind sector between now and 2030, with quantification broken down by industry component, by state, and by year through 2030.
As such, SIOW's first-of-its-kind analysis offers a road map on the timing and pace of power and supply chain contracting prospects for US offshore wind power suppliers and vendors. The study also provides an overview for states looking to attract supply chain facilities and build the necessary infrastructure for offshore wind industry development.
Key industry components required to achieve an almost $70 billion utility-scale build-out of America's offshore wind power capacity by 2030 include:
This useful analysis shows project procurement forecasts for individual East Coast states, which shows how there is a build-up of momentum-generating economies of scale. However, the US OW industry sector is still quite small compared to its counterparts elsewhere in the world so there will be many opportunities for companies to enter the marketplace. The Special Initiative on Offshore Wind worked with The Renewables Consulting Group (RCG) to create this forecast, based around three specific questions:
- What is the likely scenario for offshore power contracting between developers and utilities during the period 2020-2030?
- Given the forecast for power contracting, what quantities of components will be needed, and which years, to build the wind farms now required to meet state commitments?
- Given the forecast for power contracting and the predicted volume of components that will be needed, what is the total CAPEX — and potential revenue opportunity — that can be expected from these contracts?
The Current State of Play
Supply Chain Contracting Forecast - Components
This part of the white paper will be of significant interest to many companies.
The contracts associated with the 17,042 MW procurement between 2018 and 2028, are expected to result in a $2 billion expenditure for onshore substations and an expenditure of nearly $700 million for onshore export cable by 2030.
Here we can see how many opportunities there are within the procurement process. Block Island relied substantially on manufacturers, service companies, and consultants from outside the USA. If history is any guide, it will take 15 or 20 years for the US OW wind industry to reach maturity. During that time any requirements that cannot be supplied domestically will have to come from companies already well-positioned in the marketplace, and most of them are in Europe.
To construct 1713 wind turbines and 1759 foundations for the turbines and the offshore substations is expected to have a throughput of 200 of each per year to 2026, with around 100 per year after that, though the exact numbers could change, particularly if fewer, larger turbines were ordered.
There will be 46 offshore substations and 3,492 to 3,771 km of export cable required – though the report notes that perhaps cable is the most hard-to-quantify variable, as there may be all kinds of factors that would need more or less cable, for example, underwater obstacles, or where it arrives on land.
Onshore substations are estimated at 17, and as many of these projects will be linking in with existing infrastructure, less cabling is needed, at around 485 km.
Supply Chain Contracting Forecast — CAPEX
The white paper carefully delineates what the capital costs and potential revenue could be. RCG’s research model estimates installed energy at $4 million per MW, including all vessel costs.
Here is a breakdown of the CAPEX costs:
The primary driver of CAPEX is the turbine followed by the foundation. The offshore wind turbine market in the US is expected to be worth about $30 billion between 2020 and 2030, almost double that of foundations, which are expected to bring revenues of $16 billion.
The offshore substation market is expected to be worth more than $4.5 billion from 2020-2030, while the export cable market will bring revenues of approximately $5.5 billion over the same period. On an annual basis, expenditure associated with offshore substations will average $500 million between 2020 and 2026. The remainder of the CAPEX will be spent on infrastructure, services and other outlays.
This timely report shows how large the US OW market could become. This is a powerful opportunity for building the US domestic industry but also acts as a new opening for existing players in the renewables sphere globally. The report says, "This analysis predicts the volume and value of components and services needed to develop the committed offshore wind build. Initially, more of the components will come from Europe than from the US We do not predict when production shifts to US factories."