Federal and state efforts advanced the offshore wind industry in the third quarter of this year and primed the market for growth, while private investment decelerated due in part to the upcoming U.S. presidential election, according to a Q3 market report from the Oceantic Network.
The report found that despite monthly launches of new offshore wind vessels in Q3, there have not been any new orders for vessels so far this year, which “typified a slowing of private investment in the run-up to the federal presidential election.”
“This slowdown comes at a critical time: states have reorganized their project portfolios after rising costs scrambled industry economics and are pushing hard for new offtake agreements; the federal government has hit its stride in permitting advancements and has begun releasing Inflation Reduction Act funding,” the report said. “The market is primed for impressive growth.”
However, the report noted one last significant pre-election investment in July when LS GreenLink announced a new $681 million HVDC cable manufacturing facility in Chesapeake, Virginia, funded in part by a $99 million tax credit through the 48C provision of the Inflation Reduction Act.
“Major construction of new deep-water ports and transmission projects are underway in New England,” the report said. “Maryland, New Jersey, New York, and the New England states are each advancing offtake rounds, working to recover canceled agreements while restoring confidence in the industry and securing local economic benefits.”
The report also noted that the Bureau of Ocean Energy Management has now permitted 10 offshore wind projects with a total capacity of 15 GW, and in Q3 the agency advanced auctions in the Central Atlantic and Gulf of Maine.
However, Q3 saw BOEM cancel an offshore wind auction in the Gulf of Mexico and postpone the first-ever auction offshore Oregon — in both cases due to a lack of bidder interest. BOEM did receive an unsolicited lease request from Hecate Energy for a Gulf of Mexico lease area not included in the auction, and said in July that it will evaluate whether competitive interest exists for that area.
The report said that state efforts to procure offshore wind continue to push the market forward as state governments agree to new offtake agreements and “quickly” open and close new procurement rounds.
“The third quarter also marked a significant milestone … the U.S. market is officially transitioning from its first offtake market phase to its second,” the report said.
As a result of economic headwinds throughout 2023, “around 75% of project offtake agreements signed between 2017 and 2022 have been fundamentally altered or terminated,” according to the report, but “many of these projects have found new offtake agreements with their respective states … Much of that lost capacity is being made up by new projects that signed offtake agreements post-2023 after prices largely stabilized.”
In the first phase, contracts were terminated for 13.2 GW of the offshore wind capacity in development, but Oceantic Network found that 3.8 GW were successfully rebid and 2.6 GW were currently rebidding — along with 4.5 GW of new projects.
