Biden backing spurs US offshore wind development
The federal government has approved the construction and operation of another East Coast wind farm
The Biden administration approved the construction and operation of a second East Coast wind farm last month. Two large-scale wind farms have now received federal approval and Washington is bolstering its permitting capacity in response to a pipeline of projects now totalling more than 35 gigawatts. The emergence of offshore wind means renewables are likely to extend their already impressive domination of new generation capacity additions.
What next
Offshore wind will become an important part of the generation mixes of East Coast states over the next decade, reducing the need for gas-fired generation capacity or the extended use of ageing coal-fired plants. Growth is likely to be strong but will be limited by the need to develop a US offshore wind supply chain at a time when the sector has an expanding range of development options around the world.
Subsidiary Impacts
- System flexibility requirements will grow as a higher proportion of generation comes from variable sources.
- The growth of offshore wind supply chains should support substantial employment opportunities, both direct and indirect.
- As in Europe, US electricity systems are likely to face new grid investment and congestion challenges related to offshore wind.
Analysis
US electricity generation is undergoing a transformational shift from a high dependence on coal to a mix of natural gas and renewable energy, primarily wind and solar.
Over the last decade:
- coal-fired generation has fallen 55%;
- gas-fired generation has increased by nearly 60%; and
- wind and solar generation have surged by 181% and 2,727% respectively, albeit from low bases.
Significantly, renewables now dominate newbuild capacity and this is likely to increase as offshore wind construction accelerates to serve East Coast electricity markets.
Newbuild outlook
The changing face of the US electricity sector can be seen clearly from newbuild plans. From a roughly 50/50 division between gas-fired and renewable energy sources in recent years, renewables now dominate. Coal and nuclear are almost completely absent and the existing coal and nuclear fleets are much older than their competitors, and so have higher retirement rates.
From over 70% of new capacity in 2020, in the first nine months of 2021 renewables accounted for 88% of new capacity. Solar, with 8.4 gigawatts, and wind, with 8.2 gigawatts, are predominant; natural gas is a distant third with 2.3 gigawatts.
88%
Renewables' share of new capacity in January-September 2021
This trend is set to continue amid high US gas prices and a more supportive regulatory environment for renewables. According to the Federal Energy Regulatory Commission, the three-year pipeline for solar is 169 gigawatts, with 52 gigawatts classified as high probability, while for wind it is 73 gigawatts with a high probability figure of 33 gigawatts. Retirement levels for wind and solar are negligible. In contrast, net growth to September 2024 for natural-gas fired generation is forecast at 14.5 gigawatts.
Nuclear and hydro
The contribution of nuclear and hydro generation to the energy mix has broadly stayed flat.
Nuclear
Uprating existing nuclear plant and a 1.7% fall in overall generation since 2011 have allowed the nuclear sector to maintain its share of electricity generation.
However, the age of the fleet is now on average 40 years, implying a steady decline in its share of generation over coming decades as plants retire, notwithstanding the expected start-up of the Vogtle units 3 and 4 in Georgia next year. These are the only new reactors currently under active construction. The last reactor to enter service was in 2016, and it was the first to do so since 1996.
Hydro
Hydropower makes up just under 7% of installed generating capacity at around 80 gigawatts. It is the most extensively used resource for hourly ramping flexibility and provides 40% of the country's black start capability and 93% of grid storage. According to the US Department of Energy (DoE), although overall growth is slow, pumped storage is growing as fast as all other storage technologies combined.
Capacity growth is coming primarily from increases at existing facilities. At the end of 2019, 1.5 gigawatts of new hydropower capacity was in the development pipeline, suggesting the sector will contribute steady, if unspectacular, growth in clean energy. However, it will continue to play a central role in grid storage, demand for which will increase with growth in other renewable energy capacity.
Offshore wind
Another imminent major change in generation is the emergence of offshore wind. Although more expensive than either onshore wind or solar, it has higher capacity factors, meaning that each megawatt of installed capacity will generate more electricity than the other two forms of generation.
US offshore wind potential is almost completely undeveloped
So far, this resource is almost completely undeveloped in the United States, which currently has only 42 megawatts of offshore wind generation. This is due to a number of factors, including:
- a lack of clear targets and adequate support mechanisms;
- regulatory blocking under the Trump administration;
- higher costs versus onshore alternatives; and
- opposition from coastline communities and the fishing industry.
All of these restraining factors are weakening. In particular, Europe has demonstrated the feasibility of subsidy-free bids for new offshore wind construction, owing to falling costs associated with larger turbines. President Joe Biden has set a target of 30 megawatts of offshore wind by 2030 and is unblocking the regulatory approval process (see UNITED STATES: White House sets new wind power targets - March 30, 2021).
Offshore wind outlook
While no commercial-scale offshore wind farms began construction under the Trump administration, the pipeline of projects seeking approval increased enormously as states, particularly in the northeast, set ambitious capacity targets. Eight states have set offshore wind targets totalling 40 gigawatts by 2040:
- Ground was broken last month on the long-delayed 800-megawatt Vineyard Wind 1 farm off the Massachusetts coast after it became the first large-scale offshore wind project in the United States to win federal approval in May. Construction is expected to start early next year on the South Fork Wind project off Rhode Island, which received federal approval on November 24. It will have 132 megawatts of capacity.
- In June, the Bureau of Ocean Energy Management (BOEM) reached an agreement with the US Army Corps of Engineers to support planning and reviewing of renewable energy projects on the Outer Continental Shelf, which should increase BOEM's operational capacity to review and assess new lease areas and potential projects.
- In October, the Biden administration announced a plan to scale up offshore wind leasing in federal waters on all US coasts with the aim of holding as many as seven new offshore lease sales by 2025.
In total, the United States has just over 35 gigawatts of offshore wind projects at various stages of development. With a stable policy framework, 22 gigawatts could be installed by 2030 and 86 gigawatts by 2050.
Resource potential
The first developments will take place off the East Coast, owing to the proximity of major demand centres and the capacity to locate conventional fixed-bottom offshore wind turbines on the seabed (see UNITED STATES: West Coast wind sites designated - May 26, 2021).
Deeper waters on the West Coast suggest primarily floating wind concepts, the first of which have already been deployed successfully in Europe. California's technical resource potential is around 200 gigawatts, according to the National Renewable Energy Laboratory, while the Gulf Coast has technical potential for 500 gigawatts, both conventional and floating.
