New Offshore Wind Blowing in U.S.

By MarEx 2015-05-25 03:11:36

By Patrik Farkas, Douglas-Westwood Houston

For the U.S. energy industry, 2014 will be remembered as the year when crude oil prices fell below $50/bbl, resulting in significant realignments in the sector. Aside from the oil price collapse and the historic high of domestic natural gas production, several other energy records were set last year. Both solar and wind energy production reached an all-time high in the U.S., contributing to a record 9.8 percent of total primary energy supply.

The U.S. is ranked the second largest producer of wind energy. With more than 65GW installed capacity in 39 states, wind energy represented over four percent of national power generation in 2014. Annual installations peaked in 2012 when some 13GW of new capacity came online. At the time of writing, onshore wind energy is approaching cost-competitive levels around the country. However, while the U.S. is internationally recognized for its strong offshore energy operations, there has been no utility-scale offshore wind energy production in the country to date.

Several groups have been working on offshore wind project plans, but they have faced funding difficulties and public resistance, which have negatively impacted their ability to reach a final investment decision. Throughout two rounds, the US Department of Energy selected three offshore wind advanced technology demonstration projects which are expected to start their operation in 2017.

Ahead of the government supported projects, and after seven years of planning, the construction of the Block Island Wind Farm – the first U.S. offshore wind plant – finally began in April 2015. The 30MW farm which will be located 18 miles from the coast of Rhode Island, consists of five turbines and is expected to start its operation in Q4 2016. The feasibility of the project is secured by a 20-year power purchase agreement.

Compared to the European sites, the Block Island project is tiny, but it could prove the commercial viability of such projects for policy makers, utilities and capital funds, boosting further investment in the U.S. offshore wind energy sector.