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Vestas US offshore wind SVP warns common market needed to avoid sector 'boom and bust'

ReCharge News|Tim Ferry|November 23, 2022
USAOffshore Wind

As the US offshore wind sector scrambles to develop a supply chain equal to the task of building out a gigascale fleet off its coasts, a top executive at Danish turbine maker Vestas has warned that the even greater concern will be “keeping factories filled” for the decades ahead as the sector takes shape.


Turbine giant tells Recharge Summit that climate legislation will propel investment but collaboration across states and projects will be key to 'filling factories year after year' as regional play grows
 
As the US offshore wind sector scrambles to develop a supply chain equal to the task of building out a gigascale fleet off its coasts, a top executive at Danish turbine maker Vestas has warned that the even greater concern will be “keeping factories filled” for the decades ahead as the sector takes shape.
 
Vestas’ biggest apprehension looking ahead, said Josh Irwin, senior vice president for the OEM’s offshore business unit in America,“is not how do we get the factory started, but how are we going to keep it full year after year without boom and bust”.
 
OEMs worry that the market cyclicality seen in the US onshore wind sector – which has resulted in multiple factories being shuttered or sold over the past five years – could impact the emerging offshore business, which has had many pledges of supply chain investment but few firm commitments for local large component manufacturing.
 
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Turbine giant tells Recharge Summit that climate legislation will propel investment but collaboration across states and projects will be key to 'filling factories year after year' as regional play grows
 
As the US offshore wind sector scrambles to develop a supply chain equal to the task of building out a gigascale fleet off its coasts, a top executive at Danish turbine maker Vestas has warned that the even greater concern will be “keeping factories filled” for the decades ahead as the sector takes shape.
 
Vestas’ biggest apprehension looking ahead, said Josh Irwin, senior vice president for the OEM’s offshore business unit in America,“is not how do we get the factory started, but how are we going to keep it full year after year without boom and bust”.
 
OEMs worry that the market cyclicality seen in the US onshore wind sector – which has resulted in multiple factories being shuttered or sold over the past five years – could impact the emerging offshore business, which has had many pledges of supply chain investment but few firm commitments for local large component manufacturing.
 
“The single biggest thing that we can do to localise the supply chain is to create a common market where there is reciprocity between the states in terms of local content,” Irwin said, speaking at Recharge’s Global Offshore Wind Summit in Washington, DC last week (link to coverage)
 
The panel discussion focused on the US’ path to deploying 30GW of offshore wind by 2030 – in line with the Biden administration’s “national goal” – and 110GW by 2050, a goal that moderator Darius Snieckus, Editor in Chief of Recharge, called “a gargantuan task” given the current immaturity of the supply chain.
 
The Department of Energy (DoE) sees the administration’s offshore wind goals driving $12bn in annual investment and generating some 77,000 direct jobs by the end of the decade, but interstate competition for manufacturing investment – and the jobs it brings – risks creating “a series of micro markets where [the big turbine OEMs] are not getting enough [demand] volume”, cautioned Irwin.
 
The US supply chain is being rolled out on a state-by-state basis primarily based on power purchase agreement (PPAs), with investment in factories and ports tied to 20-year PPAs despite the fact, Irwin added, that “no one state can support a manufacturing facility on its own.”
 
A common market would drive higher “overall economic gains to the individual states”, he argued.
 
IRA bringing ‘enthusiasm and certainty’
 
Hayes Framme, head of new markets and supply chain for Orsted, who joined Irwin on the high-level panel, said the passage of the Inflation Reduction Act (IRA) last summer was a watershed for the industry, with the tax incentives for the domestic production of offshore wind components promising to spur investment “that creates a lot of enthusiasm, and that certainty and clarity can help unlock further investment”.
 
The “certainty” this would provide the nascent sector, Nick Prokopuk, offshore wind business developer for TotalEnergies, added, would “allow developers to initiate multibillion dollar projects [which would] cascade down [to finance development of ] the supply chain and workforce”.
 
TotalEnergies walked away with two wins in recent leasing rounds, with a $795m award in the New York Bight and a $160m lease in the Carolina Long Bay, sums justified by the combination of positive signals from federal regulators and states offering successful paths to market for developers, said Prokopuk.
 
Manufacturing tax credits in the IRA have a “shelf-life”, however, warned Irwin, noting their value starts to step down at the end of the decade.
 
“This window right now where we can get to this common market, we can get the infrastructure in place that's going to play in favour of localisation, is critical,” he said. “We can’t let that opportunity pass.”
 
Transmission ‘assumed to be there’
 
Crucially, as several panellists noted, the IRA doesn’t include investment tax credits (ITC) for grid capacity, a deficit Andy Geissbuehler, CEO of transmission infrastructure developer Atlantic Power, sees as a historic issue embedded in the industry’s approach to power network development.
 
“Transmission comes last, that is how the [renewable energy] industry has worked for the last 20 years,” he said. “We never worried about transmission: we know it’s complicated, and we assume it is there.”
 
That “won’t help” the industry advance, he stated, and will likely create even more problems down the line for the national power transmission network that will require costly fixes.
 
Incorporating gigascale offshore wind production into the grid will need unprecedented power infrastructure at the point of interconnection as well as upgrades to transmit the power to load centres, Geissbuehler stressed
 
Permitting timelines are even longer for high voltage direct current (HVDC) lines than for the projects themselves, he said, and by the time a developer “kicks off the generation project, they’re already a year late to secure transmission”.
 
“Any rectification is always inefficient and costs money,” Geissbuehler said. “If you want to de-risk a project, you need to take action early.”
 
“Taking action” means planned, coordinated grid upgrades across states and projects that can “enable the 50GW-plus we need on the east coast,” he said. “It will not work otherwise.”
 
Cablemakers likewise are not blind to the looming demand for transmission line manufacturing for the US market, with France’s Nexans already fabricating export cables at its refurbished factory South Carolina, while Italy’s Prysmian plans to build a $900m cable plant at the site of a former coal-fired power station in Massachusetts.
 
Geissbuehler flagged that these investments will not match demand, noting that the US will be “competing with a global rush for offshore wind transmission” construction, and urged ramping up of the grid-oriented supply chain.
 
“That’s really the leadership challenge for industry and governments,” he said. “Get this supply chain booked.”
 
Port capacity
 
Even with policy certainty and generous government incentives, the US supply chain is still set to struggle with a lack of port capacity for the first wave of offshore wind projects in the Atlantic.
 
Offshore wind components are of size that means they need to be manufactured at or adjacent to the same ports from which projects are marshalled. But while eight large scale windports are under development on the eastern seaboard, today none in the northeast, amid dense populations and costly coastal real estate, is ready to start full-scale operations.
 
Jonathan Kennedy, director for the New Jersey Economic Development Administration (NJEDA), who manages the New Jersey Wind Port (NJWP), said “I don’t think we're ever going to get to a place where we've got an exact match between demand and supply in port capacity.”
 
The NJWP will be the US’ largest purpose-built offshore wind port with over 200 acres of capacity when completed in 2026 and has already attracted the interest of Vestas and GE for turbine assembly and manufacturing but will still be insufficient for the entire 30GW buildout.
 
“There’s going to have to be a concerted effort that involves not just bringing on additional acreage but other tools to manage port capacity to avoid bottlenecks,” he said.
 
“Coordinated sequencing, across projects and across states, holds the key to potentially mitigating this bottleneck,” he said.

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Source:https://www.rechargenews.com/…

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