Offshore Wind Market Expansion in EU and US

Last week a German offshore wind project developer announced that it had entered into a preferred supplier agreement with Ming Yang, a Chinese wind turbine manufacturer, for 16 of its 18.5 MW wind turbines. This would be the first time that a Chinese turbine manufacturer has secured a contract to supply an offshore wind project in the EU. It’s hard to overstate the significance of this.   For over 12 months there has been a chorus of western offshore wind turbine manufacturers, Vestas being the loudest, and other supply chain participants arguing that the incessant move toward large wind turbines had to stop to allow the sector to return to profitability; elements of the supply chain to mature; and ensure that there are vessels able to install the WTGs, particularly in the US where the Jones Act poses unique challenges associated with vessel strategies. Earlier this year, facing continued losses GE accepted this argument and cancelled the roll-out of its 18 MW WTG, causing three project developers offering 4 GW that were relying on the WTG to be unable to finalize contract terms with NYSERDA. Meanwhile, Chinese wind turbine manufacturers have continued to develop larger WTGs. At some point the promise of lower LCOEs from larger WTGs was likely to create an opportunity for Chinese wind turbine manufacturers to break into the Western offshore WTG market. While Vestas voiced and GE Vernova accepted the arguments around the need to industrialize the supply chain to drive costs down and increase profitability, this gave Chinese new entrants an obvious opportunity to differentiate themselves by offering a WTG that promised a lower LCOE. Furthermore, it isn’t surprising that the first offshore wind project developer to succumb to their price offering was a fringe player, without strong relationships with incumbent Western offshore wind turbine manufacturers. I expect that Ming Yang made a comprehensive supply offer that minimized the requirements on a developer that doesn’t have the full engineering and construction capabilities of a larger player.     It will be interesting to see if there is a policy intervention by the EU. #offshorewind  

The 2030 EU wind target is reachable – that is the takeaway from the newly published WindEurope report.   It estimates an additional 200 GW of wind power capacity will be added in the EU between 2024 and 2030. This would bring the total capacity to 393 GW. While still a little shy of the intended 425 GW target, I share Giles Dickson’s optimistic outlook, and how this shows we’re making progress.     2023 saw the record high 16.2 GW of wind capacity installed in the EU, with Germany leading the way. Offshore wind reached new heights, boasting 3.8 GW of capacity installed in Europe last year. We are clearly on the right path. In fact, I would mark last year as a turning point for the industry, which grants us an important baseline to further build upon.    We also witnessed a financial upturn: Offshore wind in Europe, for example, saw 30bn EUR of investments in 2023 – a major upturn in comparison to the previous year and an indication of the potential growth to come. And this development will continue as a huge scale-up of offshore wind is expected towards the end of the decade.   Faster permitting, and increased investments are definitely helping oil the tracks along an upward trajectory.    But we still can – and must – go faster. It will only be possible to further ramp up the pace and in fact reach our goals if we address the challenges we still face. Inflation and high costs are still biting, and the electricity grid poses a looming bottleneck. Thus, we need even greater investment incentives, suitably adjusted political frameworks and further simplification of permitting.    There are positive signals of progress towards targets. But we need to keep adjusting our sails to make the most of the tailwind to further speed ourselves towards them.

2 GW CT RFP ISSUED - ALLOWING FOR 6,800 MW OF COORDINATED OSW PROCUREMENTS IN NEW ENGLAND Yesterday, #Connecticut issued two RFPs for clean energy resources, including an RFP for 2,000 MWs of #offshorewind. This step completes the solicitation pieces to enable the October 3, 2023 MOU for coordinated #OSW procurement issued by CT Department of Energy and Environmental Protection, Massachusetts Department of Energy Resources, and the Rhode Island Office of Energy Resources. (MOU HERE: https://lnkd.in/eWhiQxsU) The CT RFP is soliciting up-to 2 GW of #OSW along with onshore resources that can include "solar, onshore wind, energy storage paired and co-located with a zero carbon resource, zero carbon fuel cells, geothermal, energy efficiency, and run-of-river hydropower." (CT RFP INFO HERE: https://lnkd.in/eGbUb3zJ). Combined with the Rhode Island RFP for 1.2 GW of OSW issued earlier this month (Oct. 2023) and the Massachusetts solicitation from this summer seeking up-to 3,600 MWs, the combined tri-state effort allows for procurement of up to 6,800 MW of offshore resources. Notably, the CT RFP allows for bids to have adjustable price elements to avoid the issues recently seen with project-killing global economic shifts. "A new provision in the offshore wind RFP allows bidders to submit pricing at a fixed rate or at a rate that is indexed to the price of listed macroeconomic factors and commodities and that would be fixed at a date certain in the future. This indexed pricing option adjusts for changes, such as inflation, that may occur after the bid due date but before the project reaches financial close (i.e., when project costs for the developer are more locked in) to adjust the final price up or down by no more than 15%." Why this matters? While there have been some head winds for offshore wind globally and in the US, recent shifts by procuring states mean that the demand is remarkably strong: CA issued centralized procurement authority for its 25 GW target, NY recently issued the largest single state, single procurement for over 4 GW of OSW and is moving to quickly backfill projects that hit difficult economics AND add new US turbine supply chain capabilities. This combined with more aggressive lease schedules form Bureau of Ocean Energy Management and #transmission plans from U.S. Department of Energy (DOE) & the DOE Grid Deployment Office in concert with state plans for coordinated transmission in New England, new transmission in New Jersey via a 2nd SAA and now new corridor bids (see yesterday's post), NYISO's PPTN, and Pacific Northwest National Laboratory's recent findings about transmission for N. CA and S. OR, show strong federal and state action and investment. #klgates https://lnkd.in/eRT89piB