Not a Shore Thing: Challenges in US Offshore Wind Development, with Ben Storrow

Notable Quotes

• Ambitious federal goals for offshore wind: “For the Biden administration, this is almost like the perfect marriage of Bidenomics: greening the economy while creating blue-collar, family-supporting jobs. The administration, very early on, came out with the goal of 30 gigawatts of offshore wind by the end of the decade. Thirty gigawatts is a lot of power; it’s about 10 million homes.” (5:06)
• Shortage of transport vessels that can install wind turbines: “The industry has kept getting even bigger. They’re talking about 15 megawatts and maybe even pushing even higher than that. The problem with that is you need boats that are big enough to carry these [wind turbines] and put them up, and there’s just simply not enough [boats] to go around. So, all of those factors are coming to a head and making the prices of these projects more expensive than what people previously thought.” (10:48)
• Some US states are committed to offshore wind development: “The states, particularly the New England states and New York, have really shown that they’re in it. They’re willing to see out this storm, and they’re trying to find solutions. At this point, if that kind of political commitment from the states remains, I think it’s fair to assume that some of these projects will get built.” (29:04)

Top of the Stack

• “What is an ‘Energy Community’? Understanding the Effects of the Inflation Reduction Act” event hosted by Resources for the Future
• Dune series of books by Frank Herbert

The Full Transcript

Daniel Raimi: Hello, and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. Today, we talk with Ben Storrow, reporter with E&E News, about the state of the US offshore wind industry.

As you may have heard, there have been a number of project cancellations and delays announced in recent weeks as the industry encounters a variety of unexpected challenges. I'll ask Ben to help us understand the source of those challenges, the tools policymakers have to address them, and its longer-term outlook for the future of US offshore wind.

We'll also get into the weeds on things like state contracting, the specialized ships that install offshore wind turbines, and the details on recent federal energy tax credits. Stay with us.

Ben Storrow from E&E News, welcome to Resources Radio.

Ben Storrow: Thanks for having me.

Daniel Raimi: Ben, it's a thrill to have you on the show, because I get to ask you questions this time, instead of you asking me questions.

Ben Storrow: Which I love to do; I prefer asking you questions. But I'm happy to be here.

Daniel Raimi: We're happy to have you, and I look forward to having this shoe on the other foot for the day.

So, let's get started, Ben, with the same question that we ask all of our guests to start off. How did you get interested in environmental topics? Were you interested in this stuff as a kid, or did you come to it later in life?

Ben Storrow: I was interested in it as a kid. My dad worked in the conservation movement, and so that always held an interest for me. But in terms of reporting about it, it sort of happened by accident. I moved to Wyoming in 2012, I guess it was. I'd moved there as a feature writer, and it didn't take me long to realize that the biggest stories in Wyoming are energy related. So when the energy reporter left, after a couple months of my being out there, I was like, "Hey, I'd like to do that job," and I did a lot of writing about coal and oil and natural gas as well as wind. A decade later, I'm still doing it.

Daniel Raimi: Excellent. Well, we're lucky you're still doing it, because your reporting is great, and I'm always really appreciative of it.

That last energy source you mentioned, wind—that's what we're going to talk about today. Our listeners probably know that there's been a lot of news lately about offshore wind in the US in the last several weeks and months. But before we talk about the news and the latest (and maybe not the greatest) sets of developments, can you start us off by articulating some of the goals that the Biden administration has stated and also that some states have stated with regard to deploying offshore wind in the US?

Ben Storrow: I think a good place to start is with the states, because they're really the drivers here and have been the drivers for quite some time. The modern story of offshore wind, by which I mean everything that came after Cape Wind, the failed project off of Cape Cod, all started in Massachusetts around 2016 when Massachusetts decided that it wanted to buy a lot of offshore wind. The state went out, passed a law saying its utilities were going to have to buy some wind. Then when the first contract got done for what is now Vineyard Wind, the price came in and it was much, much lower than everybody was expecting. It set off this boom up and down the East Coast, where all these states were piling in trying to get offshore wind.

Their reasons were several. The climate reason is, for the Northeast, this is the Northeast's best renewable resource. California has solar, the Midwest has onshore wind, but in the Northeast, the best renewable resource is offshore wind. So that's thing one.

When the prices came in much lower than expected, it all of a sudden started looking like a better financial deal for everybody, and so that was, of course, attractive.

Then the third thing that's really important here is the jobs and the potential for job creation. This is a part of the country where the extraction part of the energy industry has never really happened. It's usually importing energy from other parts of the country. So, this ability to have a domestic energy industry, if you will, was really appealing to a lot of these states. So they all pile in, they have a lot of goals, and then the Biden administration comes around.

For the Biden administration, this is almost like the perfect marriage of Bidenomics: greening the economy while creating blue-collar, family-supporting jobs. So, the administration, very early on, came out with the goal that they were going to do 30 gigawatts of offshore wind by the end of the decade. Thirty gigawatts is a lot of power; it's about 10 million homes. The other interesting fact or projection, I should say, about the 30-gigawatt target is that it would lead to cumulative emissions reductions of 78 million tons by the end of the decade. The way I always try to put that in perspective is, if you took the annual emissions of every power plant in New England, New York, New Jersey and added that up, it's around 78 million tons per year, so it has the potential to cut quite a bit of carbon.

Daniel Raimi: Another piece of context for the size and scale: I often think about gigawatts in terms of big nuclear reactors—a big nuke is about one gigawatt. So, having 30 gigawatts offshore is a pretty big deal. Capacity factors are different, of course.

Ben Storrow: Very different.

Daniel Raimi: Ben, I feel like it was a year ago, or maybe 16 months ago or something like that, when I was hearing lots of good news stories about offshore wind coming from the Northeast—and maybe this is part of the low production costs that you were talking about, but there were also successful lease sales and project announcements. There were lots of companies, including international oil companies like Total and Equinor, announcing big projects in the Northeast. Can you talk about some of those good news stories that cropped up a little while back? Then we're going to turn to the more recent bad news after that.

Ben Storrow: I've been thinking about this story in chapters. In the first chapter, it was the euphoria stage, where everything was possible. It looked like the prices were going down. It looked like this massive renewable resource, and there was just good news. The state targets kept getting higher and higher.

You're referencing, in early 2022, when the Bureau of Ocean Energy Management, which is a division of the Interior Department, had a lease sale where they brought in $4 billion. That was eye-opening to everybody. At the time, BP, Shell, and Equinor were all really making offshore wind a centerpiece of their energy transition plans. The oil companies were particularly drawn to this industry, because they felt like they had a particular expertise offshore. That was something that they were good at and they knew how to do. So, for a minute there, it seemed like there wasn't anything that offshore wind couldn't do.

Daniel Raimi: And now we turn the page to the next chapter. So what's the next chapter?

Ben Storrow: The next chapter was the one-two punch of COVID and the war in Ukraine.

So, you have COVID, which sparked the inflation that we have seen economy-wide. For offshore wind, that was damaging for things like steel prices and copper prices and basically all the things that go into one of these turbines.

With the war in Ukraine, it is really hard to overstate how big of an impact that has had. Probably a lot of the listeners will be familiar with when, early on in the war, the Ukrainians made a stand in the port city of Mariupol, in some steel mills there. They held out for a long time, and eventually the Russians won that battle. Those steel mills, and Ukraine more generally, produce about 50 percent of Europe's plate steel—plate steel is what you roll into a tower for an offshore wind farm—so, the supply chain and the prices got really snarled by that. So, that had a huge impact on this industry.

The other thing that was happening in the struggle for offshore wind here is it's almost the victim of its own success in some ways. It's growing very, very rapidly, both in terms of the number of countries that are looking to build offshore wind projects, but also in the size of these turbines themselves.

With folks who will remember, in Cape Wind's day, which was the early 2000s, those were like 3-megawatt turbines that they wanted to use. The ones that are being put up off of Martha's Vineyard today for Vineyard Wind, those are 12-, 13-megawatt turbines. The industry has kept getting even bigger. They're talking about 15 megawatts and maybe even pushing even higher than that. The problem with that is you need boats that are big enough to carry these things and put them up, and there's just simply not enough of those to go around. So, all of those factors are coming to a head and making the prices of these projects more expensive than what people previously thought.

Daniel Raimi: I want to ask you in a second about some of the specific announcements that we've heard recently about projects getting delayed or shelved. But one quick follow up on the boats: It makes me think about the Jones Act, which I don't know all the details of. My thumbnail recollection is that, for cargo that is carried from an American port to another American port, the boat has to be American flagged. Is that correct, and is that part of the story here with the lack of availability of vessels?

Ben Storrow: That is part of the story. Let me put it this way: it is and it isn't.

The shortage of vessels is an issue globally, but it is one that the Jones Act makes even more difficult. Basically, you're right. You can't have a foreign-flagged ship going from US port to US port. So, the wind developer's way around that is you'll get these great big ships for installing foundations and towers and the turbines themselves. Basically, they go offshore, they stay there for the duration of the installation, and they are fed by a series of barges.

I guess I should back up. All of this stuff at this point pretty much is made overseas. So the towers and all of that, they come in, they go to the port, they get partially assembled in the port, and then they get put on a barge that goes out to the project site. There, you'll have your foundation ship or your turbine installation vessel, which have huge cranes. They will then install the turbine there.

Daniel Raimi: Ben, is the issue that there aren't enough of these large installation ships waiting offshore to do the work, or is it a lack of capacity of ships coming from the coast to supply those installation vessels?

Ben Storrow: The problem, really, is that for an offshore wind installation vessel, you need basically three things. You need deck space. You need a crane that is strong enough to lift one of these components—I mean, we're talking about something that weighs as much as three fully loaded Boeing 747s, so it has to be a really strong crane. Then the third thing is, for the wind turbine installation vessels, specifically—they have legs. They actually put down their legs onto the ocean floor to stabilize themselves, and they have to be long enough to reach the ocean floor.

Back in 2020, the Government Accountability Office did a study of how many of these vessels exist, and they identified 50 in the world. That number is probably too high because the turbines have since grown. So, there are literally just not enough of these boats, and, at the same time, more and more countries are dialing up more and more projects. We'll talk in a little bit here about some of the projects that got canceled in New Jersey, but one of the biggest factors in that decision was that the installation vessels weren't going to be available for a couple years.

Daniel Raimi: That's so interesting. So, it's cost, clearly, but it's also just, these ships are tied up. They're booked out through the relevant periods.

Ben Storrow: They're booked out, yeah.

The one final interesting thing about this is, Dominion Energy, the utility based in Virginia, has the biggest planned offshore wind project in the country. It's 2,600 megawatts. They went out and decided, "Okay, we're going to build one of these things." It is under construction in South Texas today. It's called the Charybdis. Any readers of the Greek classics might get that reference.

The Charybdis, in addition to working on Dominion's project, was signed up to work on some projects off of southern New England starting next year. Its construction has fallen behind, and that's been a big question mark for those projects that had planned on using it.

Daniel Raimi: That's really interesting.

There are all these headwinds, so to speak, facing these projects. What are some of the outcomes we've seen recently? You mentioned a couple projects in New Jersey being announced as canceled. How big of a deal was that?

Ben Storrow: The first thing we saw was it started in Massachusetts again, this time for ill for the wind developers. The companies there were basically saying, "Hey, we have signed contracts that aren't going to pay us enough to cover our costs, and so we need to renegotiate these deals." The state said, "Nope, we're not going to do that. We don't want to set a bad precedent where we have a competitive process to issue these contracts, and then you come back to us and say, 'No, they don't work.'" So, they said no.

A similar thing has happened in Connecticut and in Rhode Island. Only one bid got submitted for a follow-up project. The way it works in Rhode Island is the utility gets to pick, and the utility said, "No, this is too expensive. We're not going to do it." In New York, we saw the developers make a similar request as the ones in Massachusetts, and the state said no.

The thing that unites all of these projects up until this point is all the developers said, "Okay, that's not good." In the case of Massachusetts, they're like, "Okay, we're going to cancel our contracts." In the case of New York, it's just happened. So it's a question mark of how these things will land. But the key point is they all said that they were going to keep moving forward, and they were just going to try to rebid and get a new contract.

Fast forward to last week, New Jersey comes along, and Orsted says, "You know what? We aren't just going to cancel our contract for Ocean Wind 1 and Ocean Wind 2. We're just going to cancel the project entirely." That was a really massive moment for the industry here in this country and a really big moment for Orsted, which is under a lot of financial duress at this moment in time; it just signaled that, going back to that euphoria stage, some of those projects are not going to happen—or, they're not going to happen by 2030, is the better way to put it.

Daniel Raimi: I want to come back and ask you about your long-term view about how temporary or not these challenges are. But first, I'm curious what options state and federal policymakers might have at their disposal to speed things up. Obviously, they have announcements that they're trying to hit. They have targets they're trying to hit. What are some of the options at their disposal, and how viable do you think they might be?

Ben Storrow: For the states, it's really about contracting and how quickly they can get their new contracts in place. Massachusetts is expected to go out and announce new contracts early next year.

In New York's case, the state Public Service Commission said, "No, we don't want to amend your existing contracts." Then, what happened with NYSERDA—the New York State Energy Research and Development Authority came out and said, "Okay, we're going to do an expedited procurement for new contracts," basically. They have to be careful. I think they have to open it up to everybody, but I think the idea is to get the four projects in New York that had wanted higher prices to give them an opportunity to get new contracts. The reason why that was really important in New York's case is because these projects are almost fully permitted, so they're ready to start building. Equinor and BP have three projects. They were supposed to start building a staging port in Brooklyn imminently, like in the next couple of months. That port is really foundational to everything else that's supposed to come in New York State from this point forward. So, if it's not there for subsequent projects, that's problematic. So, New York is trying to move very quickly to get their preexisting projects new deals, essentially.

At the federal level, if you talk to anybody in the industry, they're all going to talk about permitting and the lengthy permitting timelines that these projects face. Going back to Vineyard Wind, the first project, that project was announced in 2017, and it didn't get its final permit until 2021. There's outstanding legal challenges to that project. That hasn't prevented it from moving forward, they have something like four turbines installed already, but the lengthy permitting timeline is something that you will hear from everybody in the industry, because the way they would put it is it just increases the risk these projects face. The global economy and economic conditions can change pretty drastically in four years, as we've found out.

The other thing (and really the biggest thing, I think) that's probably right in front of the Biden administration right now is how to administer the final rules for the tax credits under the Inflation Reduction Act as it relates to offshore wind. How those rules, and the fine details of those rules, are administered are really going to determine which one of these projects are probably going to move forward and which ones won't.

Daniel Raimi: You mentioned the fine details on the Inflation Reduction Act rules. I can't help but ask this question that I was curious about, which is: I think a couple of these offshore wind projects that are going forward are going to be eligible for a bonus tax credit under the Inflation Reduction Act for projects that are cited in energy communities. I think the intent was to support fossil energy–dependent communities in the energy transition. So, it makes me wonder, how can an offshore wind farm be in an energy community? I'm pretty sure they don't mine coal in the Atlantic Ocean.

Ben Storrow: The energy communities rule is really, really interesting. When the IRS came out with its initial guidance, they said, "All right, we're going to define an energy community. This is a 10 percent tax credit or tax bonus for renewable developers." Just as you said, it's not like an onshore wind project or a solar project that can be built in a community with a lot of coal mining or oil and gas development. It's like, where do we place an offshore wind project? Where do we define its location? They decided that the most legally defensible place to put it was where the project connects to the grid.

The problem with doing it that way … I think the best example for describing it is Avangrid, which is a subsidiary of Iberdrola and based in Connecticut. They had two projects. Their two projects (they both canceled their contracts with Massachusetts and Connecticut) were both going to connect to the grid on Cape Cod—so, they're not energy communities. There's not a lot of energy development out on Cape Cod. That was frustrating to Avangrid because they had decided that they were going to make two ports: a marshaling port in Salem, Massachusetts, and an operations and maintenance port in Bridgeport, Connecticut. Both of those communities had coal plants until relatively recently, and that is where the vast majority of the investment and the jobs and all of the work associated with these projects is going to be taking place. As it stands under the rule—and it's just a proposed rule at this point in time—they would not qualify for that. So that is part one.

With part two, some of your listeners might remember that we did a panel on the energy communities bonus. When did we do that?

Daniel Raimi: I think it was maybe a year ago or something like that. I can't quite remember.

Ben Storrow: Yeah. There are some funny definitions of what makes an energy community. One of them is that it's a brownfield. So last week, when Orsted announced that it was going to cancel its projects in New Jersey but move forward with this one in Rhode Island or move forward with another project in Rhode Island, part of that is because the project in Rhode Island connects at an old naval dump. It's not officially a brownfield yet, but my understanding from talking to people is they feel pretty confident that it will be officially classified a brownfield. They'll get the extra 10 percent, and that makes the project viable.

There’s a last little complication, and then I promise I'll move on. In New Jersey, it's even more complicated because there are two projects. The first project was called Ocean Wind 1. It had two interconnections. One is at the site of a nuclear plant. The other is at an old coal plant. I'd asked the company, "Well, why wouldn't you qualify for energy communities in this instance, because one of your interconnections is at a coal plant?" They said, "Well, the rules don't contemplate two interconnections. They only contemplate one. We just didn't have any clarity on how this was going to come down."

Daniel Raimi: Wow, that's so interesting.

So, the energy communities tax credit lives on in its complexity. We were not able to figure it all out a year ago or whatever.

Ben Storrow: No. I bet if you want to talk about it in another year, I'm sure we could do a whole 'nother panel.

Daniel Raimi: We'll pencil it in.

Ben, one more question before we go to our Top of the Stack segment, where we ask you to recommend something: What is your long-term view? We've been talking about challenges facing the industry right now, but markets are pretty good at solving market-based challenges. Maybe there's going to be a lot more ships coming online. Maybe the steel situation will find a way to resolve itself.

As you think out toward that 2030 (or maybe even longer—2040, 2050) horizon, do you think we're still going to be talking about these types of bottlenecks?

Ben Storrow: Gosh, I wish I knew. I think the thing that has gotten lost with all the bad news is that projects are moving forward. Vineyard Wind is going to come online probably next year. That's going to be an 800-megawatt project, and we have 42 megawatts in this country right now, so that's a big deal. Dominion's project in Virginia, they've got monopiles showing up. It's fully permitted. So things are moving forward.

The states, particularly the New England states and New York, have really shown that they're in it. They're willing to see out this storm, and they're trying to find solutions. At this point, if that kind of political commitment from the states remains, I think it's fair to assume that some of these projects will get built.

You have to imagine, at a certain point, if more projects get built, that some of the supply chain is going to come to the United States out of pure necessity, because there just simply aren't enough of these facilities worldwide to support the level of growth that we're seeing in Europe, that we're seeing in Asia, and that has been projected for the United States.

Having said all that, I think the widespread conventional wisdom at this moment in time is that we're definitely not meeting the 30-gigawatt target by 2030. Whether we reach that in the next 5 to 10 years —or, better than that, in the following decade—I think that's the real question.

Daniel Raimi: That’s another thing to watch closely.

Ben Storrow from E&E News, this has been a fascinating conversation. It's very timely. Our shows aren't always up to the minute on what's happening in energy news, but I think this is a great chance to do just that.

Before we close it out, I'd love to ask you to recommend something that's at the top of your literal or your metaphorical reading stack—something that you think is great. It could be something you read or you watched or you heard, or whatever kind of content you're into these days.

Ben Storrow: Oh my gosh, Daniel, this is the question that I dread, because it leads me to having to admit to this: outside of what I'm doing for work, I've been reading fiction, because I just can't stand the real world at the moment.

Daniel Raimi: I feel you.

Ben Storrow: I've been working my way through the Dune series, which is a comment on resource management at some level. So, that is what I have been reading lately.

Daniel Raimi: That sounds great. Have you seen the films? Do you like the films?

Ben Storrow: I saw the first film, and I loved it, and I thought it was amazing. I remember seeing the movie in the '80s or the '90s, and I really did not like it. So, for that reason, I never read the books. When HBO put out the first movie a couple years ago now, I was like, "Wow. This is one of those classics that I never read." Then I got all into it. I think I'm on the sixth book now, so it's been a journey.

Daniel Raimi: Very cool.

Ben Storrow, once again, thank you so much for coming on to Resources Radio, and thank you so much for all your reporting that you do. I know I read it whenever it's out, whenever it's available. So we really appreciate you coming on the show and sharing your expertise with our listeners.

Ben Storrow: Thanks for having me, Daniel. I really appreciate it.

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