Over the past two years, states along the U.S. East Coast have announced increasingly ambitious targets to build offshore wind projects.

In January of this year, to cite the most consequential recent example, New York nearly quadrupled its offshore wind target to 9,000 megawatts by 2035.

But what do the gigawatts' worth of state-level commitments mean for companies unsure whether to commit resources to become part of the supply chain for offshore wind projects?

A new report from the Special Initiative on Offshore Wind (SIOW) at the University of Delaware aims to provide “first-of-its-kind granularity” into the U.S. offshore wind supply chain. The report forecasts 18.6 gigawatts of U.S. offshore wind procurements through 2030, which represents a $68.2 billion opportunity for suppliers.

Potential supply chain investors need "a much greater level of clarity and transparency on the U.S. market and how it is likely to unfold, especially in the near term,” Stephanie McClellan, SIOW director and report author, told Greentech Media in an interview.

McClellan said research from SIOW going back to 2015 affirms that “the quickest way, and the most impactful way, to reduce the cost of energy for offshore wind was providing market visibility to the industry.”

If projects are seen as one-offs, with no visible pipeline, she said, “We are likely to have very limited competition, not only among developers but in the supply chain for folks like turbine manufacturers and other [original equipment manufacturers] who might say, ‘If we don’t know that there’s a market there, why should we spend our time there when we could spend our time in Europe?’”

Moving beyond big targets and lease areas

Here’s how the report breaks down the $68.2 billion U.S. offshore wind build-out through 2030. The market is likely to install at least:

  • 1,700 offshore wind turbines and towers (worth $29.6 billion)
  • 1,750 offshore wind turbine and substation foundations ($16.2 billion)
  • 5,000 miles of power export, upland, and array cables ($10.3 billion)
  • 60 onshore and offshore substations ($6.8 billion)

In addition, the market is likely to see $5.3 billion invested in marine support, insurance and project management activities.

The report provides a state-by-state, year-by-year forecast for offshore wind power contracting. Connecticut and New York, for instance, are each forecast to schedule procurements totaling in the hundreds of megawatts every two years through 2030.

In talking to suppliers, McClellan said, she would often hear, “We know the lease areas. We know how much acreage has been leased. We know the project developers who have leases. We have seen timelines of proposed projects and their estimated time for operating and being in the water. And we know the large [state] goals.”

But, they added, “None of that means anything to us in trying to understand what it means in terms of a business opportunity.”

McClellan said the supply chain report is intended to close that gap and answer questions such as: "Will there be a big boom-and-bust cycle? Are there going to be a lot of turbines or foundations or substations procured in the early years but maybe there might be a five-year dry period?"

“We were responding to the supply chain’s need for that kind of information, so they can go back and make the business case to their companies, to their management," according to McClellan.

“The offshore wind industry has been a black box for many U.S. companies,” said Liz Burdock, CEO and president of the nonprofit organization Business Network for Offshore Wind, in an email.

“Visibility and a better understanding of the timing and pace of projects allows companies to seriously consider diversifying into the industry, and to make human capital and equipment investments required to establish a U.S.-based offshore wind supply chain,” Burdock said.

She added, “European suppliers are already hitting capacity constraints, which is accelerating the search for U.S.-based solutions and provides an opportunity for American companies to enter the market.”

New York's nation-leading target

In New York, officials are proactively building out a local supply chain capable of supporting the state’s ambitious offshore wind deployment target.

In November 2018, the New York State Energy Research and Development Authority convened an offshore wind supplier forum attended by more than 150 companies. NYSERDA is hosting followup supplier forums in early June in New York City and Albany.

NYSERDA also maintains an offshore wind supply chain database and runs a Jobs and Supply Chain Technical Working Group. Under the solicitation for 800 megawatts or more of offshore wind projects issued in November 2018, New York businesses must have an opportunity to bid on all supply contracts greater than $5 million.

“Creating a regional project pipeline is essential for offshore wind suppliers, giving them confidence in the long-term economic opportunity afforded by offshore wind,” Doreen Harris, NYSERDA’s director of large-scale renewables, told GTM in an email.

Harris highlighted New York’s 9-gigawatt offshore wind target, saying it “places our market potential among the most promising in the world.”

When combined with offshore wind targets in neighboring states, it would, she said, create an “aggregated market [that] will maximize industry efficiency and opportunities.”

She continued, “Confidence in a regional project pipeline will serve as the backbone for the business decisions made by local suppliers to step into the offshore wind industry, and enhanced competition will serve to drive down prices and improve overall project quality.”

Tier 1 suppliers coming to the U.S., eventually

Despite the clear business opportunity coming in the emerging U.S. offshore wind industry, market watchers cautioned potential suppliers to carefully consider their place in the supply chain.

“Having a sense of the size of the industry is important to assess the opportunities available to U.S. suppliers,” said Burdock. “However, most of the major components will be delivered by the well-established Tier 1 suppliers."

"I don’t see many new entrants for major component parts right now, but I do see those top suppliers establishing operations in the U.S. and signing contracts with American suppliers here," she said.

Burdock went on, “American companies need to recognize that offshore wind is a specialized industry — not an ocean-based version of land-based wind, or the same as the oil and gas industry in the Gulf. The importance of understanding where a company fits into the supply chain cannot be overstated.”

“There are many opportunities in the secondary and tertiary supply levels for local U.S. companies that have solid knowledge of the industry and make themselves available to developers and Tier 1 suppliers,” she added.

Avoiding a zero-sum game

According to Anthony Logan, senior analyst for North America wind power, Wood Mackenzie Power & Renewables, states must be careful to balance the desire to add local jobs against the need to hold down construction costs for projects with narrow margins.

“Developers are largely selecting their suppliers based on competitive bids within the constraints of the state policies they’re working under, and I wouldn’t expect them to do anything else — the contracted prices we’re seeing are very low and can’t be executed on otherwise,” he wrote in an email. “It’s up to the states to foster the domestic supply chain without fostering inefficiencies that raise LCOE and undermine the whole sector.”

He added, “The first round of projects, a timeframe I’d say includes the projects that will be contracted before the end of this year, will suffer in this regard. Very large suppliers have been frustrated with the lack of clarity in many of these initial solicitations.”

Logan urged states to cooperate in building a domestic supply chain ready to support future solicitations.

“Writing in the perfect conditions to create the ideal multi-state supply chain into multiple individual state policies is the next huge challenge,” he said.

Logan conceded that such collaboration goes against state officials’ habits. “The degree of collaboration required is probably going to be very hard for some state policymakers, programmed to treat jobs and other economic benefits as a zero-sum game, to swallow.”