2022

2022 marked the beginning of a strong ramp-up of state offshore wind procurement goals, investment in manufacturing facilities, and major development milestones across several projects. This period of demand for offshore wind industry-enabling policy and infrastructure was showcased in the outcome of the New York Bight auction, which drew record-high bids on offshore wind lease areas. Additionally, the California offshore wind auction at the end of the year created a path forward for developers to begin developing the nation’s first commercial-scale floating offshore wind projects. At the year’s end, the industry had demonstrated a sense of financial security associated with offshore wind development.

2023

A turbulent market environment (i.e., high inflation increasing capital expenditure and supply chain bottlenecks) forced many projects into unplanned changes during project development. Commonwealth Wind and SouthCoast Wind canceled their PPAs with Massachusetts; Empire Wind 1, Empire Wind 2, Sunrise Wind, and Beacon Wind attempted to renegotiate prices with New York; Orsted ceased development of Ocean Wind 1 and 2 in New Jersey. This trend was seen around the world including in the UK, Europe’s leader in installed offshore wind power, where the country’s fifth allocation round produced zero bids on offshore wind Contractors for Difference. In the US, these challenges led to an industry-wide reset of expectations and a more cautious posture going into new procurement rounds.

Nevertheless, many regulatory and industrial successes prevailed in 2023. Four existing projects – South Fork Wind Farm, Revolution Wind, Coastal Virginia Offshore Wind, and Empire Wind – received Records of Decision on their Construction and Operations Plan, the last federal OK before construction can begin. The combined total of state offshore wind procurement goals surpassed 85 GW, with New Jersey and Maryland increasing their goals to 11 GW and 8.5 GW, respectively, and Virginia bringing forward its procurement goal of 5.2 GW by 3 years to 2032. Additional state milestones were reached that will support offshore wind development – Maine and Connecticut released their states’ respective offshore wind roadmaps; California Senate Bill 286 has shaved five years off the offshore wind permitting timeline; Delaware Senate Bill 170 directed the government to study the impacts of offshore wind transmission and procurement. Massachusetts, Rhode Island, and Connecticut have found a new way to synergize offshore wind development through a potential multistate procurement round for offshore wind.

A long-anticipated offshore wind lease sale in the Gulf of Mexico opened doors for offshore wind development in the region. Though the auction only drew one winning bid, BOEM is again establishing new Wind Energy Areas for continued lease sales in the Gulf of Mexico. BOEM has also begun the leasing process in three new regions of the US, establishing and conducting the review on Wind Energy Areas both off the coast of Oregon and in the Gulf of Maine, and recently announcing two lease areas in the Central Atlantic.

The US celebrated manufacturing successes including the installation of the first US-made offshore wind export cable and the first US-built offshore substation. The first offshore wind turbine manufacturing facility in the US is announced in New York as part of offtake agreements from the 2022 New York offshore wind solicitation. Guidance released this year about the Inflation Reduction Act has solidified opportunities for developers to receive investment tax credits for bringing local content to the US, blowing open the doors for American manufacturing to support the industry and increase economic benefits in local communities.

Ultimately, we are ending 2023 with steel in the water and at least one utility-scale project delivering power to the grid, which shows real progress.

2024

Despite market challenges, the successes in 2023 now have the industry once again poised for growth in 2024. Several states are looking to recoup their renewable energy commitments in offshore wind with new, more resilient contracts: Massachusetts, Rhode Island, Connecticut, and New York will close applications for new offtake agreements at the beginning of the year. These procurement contracts finalized in Q1 2024 will define market growth and regional supply chain development for the rest of the year. New Jersey is accelerating the timeline of the state’s fourth offshore wind solicitation, now set to open at the beginning of next year, and New York has planned its fifth procurement round for Q4 2024.

According to its leasing schedule, BOEM will next pursue offshore wind leasing in the Central Atlantic, Oregon, and the Gulf of Maine. Although obtaining a lease triggers regulatory work at a state and municipal level, federal agencies directed by the executive office must still approve several key development plans, including the Site Assessment Plan, the Construction and Operations Plan, the Facility and Design Report, and the Fabrication and Installation Report. As we enter a presidential election year, it is important for us to remember that the outcome of a presidential election can significantly impact the speed at which these project development milestones come. But today’s industry is well-positioned to weather potential regulatory uncertainty – we benefit from forceful financial inertia and the existence of newly operating utility-scale projects that have already delivered economic benefits to constituents.

Forecasting tools will be especially valuable for developers looking to attain first-mover advantages amidst market uncertainty. If you’re looking for insight on risk assessment and LCOE modeling or other services including route-to-market analysis, competitive procurement bid support, and advisory, please reach out to Hillary Bright at hillary.bright@xodusgroup.com.