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    Port Infrastructure Boost To Bolster US Offshore Wind Expansion


    December 12, 2019 - Fitch Solutions Sector Intelligence

     

      Key View

      • State-level renewable energy initiatives continue to strengthen the United States' offshore wind power project pipeline, supporting our view that state-level actions will drive growth in the US offshore wind power sector.
      • The most recently announced projects within Massachusetts, Connecticut, and Virginia add an additional 4.25GW to the US offshore wind project pipeline. As a result, we now include just under 10GW of offshore wind power projects in our 10-year forecast.
      • We expect the most recently announced projects to result in significant developments for the US' offshore wind power sector's port infrastructure - a key component in supporting the anticipated growth from the project pipeline.
      • While we remain positive about the US offshore wind sector, we continue to highlight ongoing challenges related to permitting and construction that could delay initial growth within the industry.
      US Offshore Wind Project Pipeline Continues To Grow
      US - Annual Capacity Additions (MW) From Proposed US Offshore Wind Power Projects
      Source: DOE, Project Sources, Fitch Solutions

      Over the second half of 2019, state-level renewable energy initiatives continued to strengthen the United States' offshore wind power project pipeline and outlook, further supporting our view that state-level actions will drive growth in the US offshore wind power sector. Among recent efforts in H219, we highlight:

      • Connecticut: In December 2019, the state of Connecticut's Department of Energy and Environmental Protection (DEEP) announced its selection of Vineyard Wind's 804 megawatt (MW) Park City Wind Project as a part of the state's Request for Proposals (RFPs) for 2,000MW of offshore wind projects. The project is expected to be operational by 2025.
      • Massachusetts: In October 2019, Massachusetts selected the 804MW Mayflower Wind Project, which is being developed through a joint venture between Shell New Energies US and EDP Renewables, for the state's second offshore wind power contract. The project will fulfill the second half of the state legislature's target for 1,600MW of offshore wind capacity by 2027, with the state's previously selected 800MW Vineyard Wind project filling the other half.
      • Virginia: On September 17, 2019, Virginia Governor Ralph Northam signed Executive Order Forty-Three, which includes the goal of developing up to 2,500MW of offshore wind by 2026. The order also contains new renewable energy targets for the state, including 30% of renewable electricity by 2030 and 100% renewable electricity by 2050. In the days following the executive order, Virginia-based utility, Dominion Energy, announced its proposal to build a 2.6GW offshore wind project in the company's offshore wind zone located off of Virginia's coast. The project will be built in three 880MW project phases, to be completed in 2024, 2025, and 2026, respectively. The 2026 offshore wind power target and Dominion Energy's proposed project timeline represent an accelerated timeline for the state's offshore wind development, as Virginia's 2018 Energy Plan called for deploying 2,000MW of offshore wind capacity by 2028.
      • New York: In October 2019, New York State's Energy Research and Development Authority (NYSERDA) finalized contracts with the developers of the Empire Wind and Sunrise Wind projects, pushing the projects one step closer towards the construction phase, which is expected to begin in 2022. Governor Andrew Cuomo announced the two projects as the winners of the state's first offshore wind solicitation in July 2019.
      Six Largest US Offshore Wind Power Projects Announced In 2019
      Source: DOE, Project Sources, Fitch Solutions
      PROJECT NAMESTATECAPACITY SIZE (MW)PROJECT STAGEESTIMATED YEAR OF COMMISSIONINGDEVELOPER(S)
      Ocean WindNew Jersey1,100At planning stage2024Orsted
      Sunrise WindNew York880At planning stage2024Orsted, Eversource Energy
      Domion Energy Project Phase IVirginia880At planning stage2024Dominion Energy
      Domion Energy Project Phase IIVirginia880At planning stage2025Dominion Energy
      Domion Energy Project Phase IIIVirginia880At planning stage2026Dominion Energy
      Empire WindNew York816At planning stage2024Equinor
      Vineyard Wind IIConnecticut804At planning stage2025Vineyard Wind
      Mayflower WindMassachusetts804At planning stage2025Shell, EDP Renewables
      Vineyard Wind IMassachusetts800At planning stage2021Vineyard Wind
      Revolution WindRhode Island400At planning stage2023Orsted, Eversource Energy
      Revolution WindConnecticut300At planning stage2023Orsted, Eversource Energy
      US WindMaryland248At planning stage2023US Wind
      Skipjack WindMaryland120At planning stage2022Orsted
      South ForkNew York90At planning stage2022Orsted, Eversource Energy
      Coastal Virginia Offshore Wind (CVOW)Virginia12Under Construction2020Dominion Energy, Orsted
      Icebreaker WindOhio21At planning stage2022LEEDCo/Fred Olsen
      Aqua Ventus IMaine12At Planning Stage2022Aqua Ventus

      We expect the most recently announced projects to significantly improve the port infrastructure that will be used by the US offshore wind industry - providing a path for substantial growth over the coming decade. In addition to the construction of the Park City Wind project, Vineyard Wind has proposed plans to invest hundreds of millions of dollars into transforming the port city of Bridgeport, Connecticut into a primary US offshore wind hub, including redeveloping a waterfront industrial property that will be used to assemble the wind turbines, as well as constructing an operation and maintenance facility. The projects selected in Massachusetts and New York also include proposals for significant investments to transform port cities within the states into manufacturing and O&M hubs for the offshore wind industry. We expect Virginia's offshore wind ambitions and Dominion Energy's proposed 2.6GW project will also lead to significant development within the Hampton Roads area's port infrastructure and other ports along Virginia's coast.

      The improvements are a significant - and necessary - step for supporting substantial growth in the US offshore wind power industry. We expect states in the Eastern US to continue adding to the project pipeline over the coming years as they work towards meeting their offshore wind power targets.In total, the offshore wind targets by Northeast US states aim to install over 20GW of offshore wind capacity by 2035. In addition, we expect technology improvements, especially the evolution in the size of wind turbines to power capacities of 10MW+, to be a key driver of additional growth in the sector, as larger turbines will make projects more efficient and cost competitive ( see 'Increasing Wind Turbine Size To Boost Competition And Growth In Offshore Wind Power', 18 November 2019).

      The projects recently announced in Connecticut, Massachusetts, and Virginia add an additional 4.25GW to the US offshore wind power project pipeline, and we now include just under 10GW in our forecast - boosting our 10-year outlook for the total US wind sector. The announcements and project procurements over the past few months build upon a very active first half of 2019 for the offshore wind industry, during which New Jersey selected the 1.1GW Ocean Wind Project, New York selected the 880MW Sunrise Wind and 816 Empire Wind Projects, and numerous states along the East Coast advanced their goals for developing offshore wind power projects ( see 'State-Level Actions Provide Significant Momentum To US Offshore Wind Power Market', 23 August 2019).

      Offshore Wind Projects To Provide Boost To US Wind Power Sector Growth Over Coming Decade
      US - Total Wind Power (Onshore + Offshore) Electricity Generating Capacity, MW (LHS) & Generation, TWh (RHS)
      e/f=Fitch Solutions estimate/forecast. Source: EIA, AWEA, IRENA, Fitch Solutions

      While we remain positive about the industry overall, we continue to highlight multiple challenges that could slow the initial development within the US offshore wind industry, including delays related to permitting, building support port infrastructure, and complying with the Jones Act. Gaining project approvals is one significant challenge, as both the project developers and government agencies are working through the permitting process for often the first time. Therefore, delays in permitting decisions, especially at the federal level, could delay project completion. In addition, delays in developing the supporting port infrastructure or challenges related to complying with the Jones Act - which requires transportation between two ports or points in the US, including US waters, to be undertaken by American vessels - could also slow initial project development.

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