Offshore wind will take years to materialize


When the administration of US President Joe Biden this month approved the country’s first large offshore wind farm, it touted the move as the start of a new clean energy industry that by the end of the decade, will create more than 75,000 jobs in the United States.

Industry executives and analysts don’t dispute this claim, but they provide a clarification: for the first few years at least, most of the manufacturing jobs in the US offshore wind industry will be in Europe.

Developers of offshore wind projects plan to ship huge blades, towers and other components for at least the first wave of US projects from factories in France, Spain and elsewhere before potentially opening manufacturing plants on them. US coasts, according to Reuters interviews with executives from three of the world’s largest wind turbine manufacturers.

Indeed, suppliers need to see a large pipeline of US projects approved, along with a clear set of regulatory incentives such as federal and state tax breaks, before committing to selecting and building new US factories. , they say – a process that could take years.

“For the first projects, it is probably necessary” to ship across the Atlantic, said Martin Gerhardt, head of offshore wind product management at Siemens Gamesa, the world leader in the offshore wind market, in a typical comment from the group.

This highlights an uncomfortable truth for the Biden administration as it seeks to show political opponents that a shift away from fossil fuels to tackle climate change can be good for the economy: many of the jobs are in clean energy. that it aims to create to compensate for losses linked to drilling and climate change. mining may not materialize until well after his time in the White House is over.

The administration has unveiled a target to install 30 gigawatts (GW) of offshore wind capacity in U.S. waters by 2030 – roughly the amount that already exists in Europe’s two-decade-old industry – a plan that he says will create 77,000 jobs in the U.S. while combating the global climate change.

More than 2,000 turbines will be needed to reach the 30 GW target, according to Shashi Barla, an analyst at consulting firm Wood Mackenzie. But US-based factories are unlikely to materialize until 2024 or 2025, he said.

After that, Barla said he expects the U.S. supply chain to grow rapidly and produce around 70% of the industry’s major components by 2030.

A White House official did not immediately respond to a request for comment.

A FACTORY IN ALL STATES

This month, Washington took a big step towards its goal of launching the offshore wind industry by approving the Vineyard Wind project off the coast of Massachusetts, jointly owned by Avangrid Inc and Copenhagen Infrastructure Partners.

This project, the first large offshore wind farm to gain federal approval in the United States after more than a decade of shutdowns and starts, is expected to produce enough electricity to power 400,000 homes in New England by 2023 .



According to company officials, Vineyard Wind alone will create 3,600 jobs in the United States, although most components for the project are manufactured in Europe due to the lack of an existing national supply chain.

The renewable energy division of US-based General Electric, GE Renewable Energy, will supply Vineyard Wind with 62 turbines. The main parts of these turbines, which are twice the height of the Statue of Liberty, including the rotor blades and gearboxes, will be manufactured at its factories in France.

Iberdrola, the Spanish parent company of Avangrid, said the contract to manufacture the foundation for the turbine will create around 400 jobs at the Windar Renovables plant in Spain.

Several other proposals for offshore wind projects in the United States are also preparing orders from companies such as GE and Siemens Gamesa, but they are awaiting federal regulatory approval before moving forward.

Manufacturers told Reuters they need those orders to become solid and reliable before considering investments in a US-based supply chain for offshore wind.

Opening a plant is expensive and time consuming: it requires permits and large amounts of space near the coast, said Christy Guthman, GE Renewables’ sales manager for the US offshore.

“We really want to maximize our local content where possible, but we need to have this volume sustained year after year to look at potential investments in the United States,” Guthman said.

Developers must also manage the complex state-level demands on the industry, as governors compete against each other to ensure that all future factories supplying the offshore wind industry are built within their borders.



New Jersey, for example, has asked bidders on its offshore wind supply contracts to specify how they will help the state become an industrial hub, while a recent solicitation from New York said that investments that create sustainable jobs in the state would be favored.

“We can’t have a factory in every state, it’s not economical,” said Andreas Nauen, managing director of Siemens Gamesa, in an interview.

The Nauen-based company is still deliberating whether to open a specialty facility on the East Coast to service a proposed project for Dominion Energy in Virginia, after being named preferred supplier in January 2020.

Siemens Gamesa, GE and Vestas are already producing parts for smaller land turbines in the United States, but places like landlocked Kansas, Iowa, North Dakota, and Colorado place them too far from windy shores to be of great use for larger offshore parts. .

Orsted and Equinor, meanwhile, said they plan to open up manufacturing of some parts to service the US offshore projects they have proposed, although many major parts are likely still derived from factories established in Europe. .

POLITICAL TURBULENCE

Suppliers have reasons to be cautious. The expansion of clean energy in the United States relies heavily on political will – which can shift from administration to administration.

Federal incentives for renewable energy projects have expired or have seen eleventh-hour extensions in Congress several times over the past decade. Meanwhile, Biden’s predecessor Donald Trump had canceled Vineyard Wind’s permit application during his tenure, putting the whole industry in doubt until Biden restarted the process.

This turbulence reverberated through the supply chain. Vineyard Wind initially selected Vestas as its turbine supplier in 2018, but that contract expired due to the extension of federal authorizations.



The White House Biden said it is aware that suppliers need tight commitments to invest in local manufacturing, and points out that the administration has pledged $ 3 billion in government funding for wind power developers and offshore transport and component suppliers. It will also fund $ 230 million in port infrastructure projects to help encourage the industry.

The United States International Trade Commission, for its part, imposed tariffs on wind turbines imported from certain countries, including Spain. Although the move came at the request of two domestic producers of towers for the US onshore wind industry, the tariffs would also apply to offshore towers, which would increase the economic incentive to open US factories.

“We know we need to create greater certainty for offshore wind projects,” Amanda Lefton, director of the US Bureau of Ocean Energy Management, said on a call with reporters on May 11.

Lefton also acknowledged that competing demands from the state could be a barrier for the industry.

“There has been this healthy competition between states to determine who is more aggressive,” Lefton said in an interview with Reuters. “But we have a lot more to gain now by … rowing in the same direction to establish the supply chain here.”

(Reporting by Isla Binnie in Madrid, Nichola Groom in Los Angeles, Susanna Twidale in London; editing by Richard Valdmanis and Marguerita Choy)



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