For America’s nascent offshore wind industry, the last year was the best of times and the worst of times.
In the past 12 months, American offshore wind development reached some key milestones. Foundations were laid and turbines were installed at the nation’s first two commercial-scale offshore wind farms and those farms generated their first megawatts. The first U.S.-flagged turbine installation vessel was launched and the first U.S. service operations vessel (SOV), Eco Edison, entered service for Orsted. Numerous crew transfer vessels (CTVs) have now been delivered, most recently Atlantic Resolute for Atlantic Wind Transfers. And construction is underway on the South Brooklyn Marine Terminal, which is slated to become one of the largest American hubs for offshore wind activity.
In the same period, several energy companies backed out of U.S. offshore wind projects, claiming their involvement was no longer financially viable in an altered global economy. According to the industry group Oceantic Network, those pullouts account for 51 percent of contracts in place before 2023.
“Offshore wind really hit a huge stumbling block, with inflation [and] supply chain crunches,” Sam Salustro, vice president of strategic communications for Oceantic Network, said in an interview with Professional Mariner. “The war in Ukraine had a huge impact on our industry, and that really forced sort of a reset.”
The maritime industry is continuing to build the infrastructure to service a network of wind farms on the East Coast. It just expects to wait longer before reaching lofty goals, like President Joe Biden’s target of generating 30 gigawatts from offshore wind by 2030. Expect to reach that goal closer to 2040 or 2050, some experts now say.
Pullouts and renegotiations
An offshore wind project begins when the federal Bureau of Ocean Energy Management (BOEM) opens a section of ocean floor for lease. (There are now 35 active leases for commercial wind in some stage of development.) Oceanfront states are mostly in charge of awarding contracts for the construction and maintenance of farms, as the wattage generated will support that state’s power grids. The state and an energy company negotiate a power purchase cost, which dictates how much money the companies make for the power the turbines generate.
Several companies decided that power purchase agreements, negotiated years ago before Covid- and conflict-related impacts on the global economy, no longer made sense and dropped out.
Connecticut-based utility company Avangrid canceled a contract to develop a wind farm in Massachusetts and later walked away from a project in its home state. Shell New Energies and Ocean Winds North America exited a separate Massachusetts project. Danish energy giant Orsted pulled out of two projects planned off the New Jersey coast and later cancelled another one planned for Maryland. Equinor and BP ended their involvement in the Empire Wind 2 project off New York after failing to negotiate higher prices for electricity with the state.
The companies paid states eye-popping penalties. Avangrid paid a total of $64 million, Shell New Energies and Ocean Winds North America paid $60 million, Equinor and BP paid $48 million and Orsted paid $125 million for the New Jersey project. They also wrote off millions already invested in these efforts.
The reasons for exiting come down to simple math, Christopher Niezrecki, director of the Center for Energy Innovation at the University of Massachusetts, Lowell, told Professional Mariner. “Those companies were going to lose money on these projects, so they pulled out,” he said.
States will start anew, seeking replacement partners or perhaps offering better terms to the ones that dropped out. Niezrecki said that ultimately, this snag in the long-term plan for offshore wind development will be worked out.
“There’s still an industry out there that exists and there’s still money to be made,” he said. “It’s just going to cost a little bit more than what people had originally planned. So, I think the contracts are being renegotiated and things are moving forward now.”
The industry moves ahead
When the first U.S. offshore wind farms were envisioned a decade ago, the country had almost none of the manufacturing and installation capacity needed to begin to establish them. Turbines must be installed by specialty installation vessels that can sail to a site, stand on retractable legs — essentially becoming a platform — and then drive the turbine into the ocean floor. Also needed were service operations vessels that act as bases for activity during construction and crew transfer vessels that could reliably zip to and from the challenging, shallow waters where turbines are laid.
Europe, which had begun installing offshore wind farms in the early 1990s, had such vessels but the Jones Act mandates that U.S.-flagged ships conduct all commercial traffic from one American port to another and a wind farm site in U.S. waters is considered a port.
As a workaround, some companies chartered foreign-flagged vessels, loaded them with turbines in foreign ports and brought them to wind farm areas, but that was not a sustainable solution.
Since then, the U.S. has built up an offshore wind infrastructure, delivering vessels and building shoreside hubs ordered by energy companies and a cottage industry of companies developed to service the offshore wind industry.
In April, the first U.S.-flagged turbine installation vessel sailed for the first time. Owned by Dominion Energy, the $625 million Charybdis will install turbines at the utility giant’s own Coastal Virginia Offshore Wind project and then will be available for hire to other projects. Eco Edison is now supporting multiple offshore wind farms from ProvPort in Providence, R.I. Edison Chouest Offshore also is building second SOV that is a near-sister to Eco Edison.
New CTVs also are entering service as new offshore wind projects take shape. Since the start of 2023, the number of CTVs dedicated to offshore wind increased from three to at least nine. Senesco Marine launched three and has plans for two more. Blount Boats, St. Johns Shipbuilding and Gulf Craft have each built CTVs, and Metal Shark and Gladding-Hearn currently have vessels under construction.
Meanwhile, two sites are being developed as dockside centers that will act as hubs for offshore wind activity and handle as much of the turbine construction and staging processes as possible in a single location: the Salem Offshore Wind Terminal in Massachusetts, and the South Brooklyn Marine Terminal in New York City. They will join the already-operational New Bedford Marine Commerce Terminal.
Neither Oceantic Network nor any other organization has ventured an estimate on how many, but these projects have created jobs across multiple industries in addition to those in the maritime space, according to Salustro.
“We have limited scientific numbers and more anecdotal good vibes,” he said recently. “Going by project, one by one, and sort of looking at the supply chain of companies, we feel confident that there’s a lot of job creation going on.”
Each facet of offshore wind development is linked to every other one, but the companies involved in offshore wind projects do not see the pullouts of energy companies as reasons for despair.
McAllister Towing operates a fleet of more than 70 tugboats, crew boats and barges stationed along the East Coast. That put it in a position to cater to several offshore wind farms. In an email to Professional Mariner, McAllister Executive Vice President Alessandra Tebaldi said the burgeoning offshore wind industry and its servicers and suppliers can withstand near-term economic headwinds.
“The issues faced by offshore wind project developers are well-understood and range from the aftermath of the Covid-19 pandemic to supply chain disruptions, inflation, financing costs, and fluctuating interest rates,” wrote Tebaldi. “But the offshore market is robust and it is evolving and adapting to these challenges.”
Other tugboat companies, including Foss Maritime, have positioned tugboats along the East Coast to support offshore wind projects. For instance, Foss built Foss Prevailing Wind, one of just two 400-foot barges capable of towing massive GE Haliade-X turbine components for the Vineyard Wind project.
“I actually look at these recalibrations and this reset that we’re seeing right now as a good thing,” Bob Karl, senior vice president and general manager for Crowley Wind Services, told Professional Mariner. Karl’s division of the historic maritime firm has renovated barges and tugboats to serve offshore clients, is planning new construction and will be a tenant in the Salem offshore wind hub. He said the cancelled projects provide some breathing room for shipbuilders.
“The fact that there are not a lot of projects executed, that’s actually not a bad thing,” he said, “because it gives the infrastructure and the supply chain time to catch up and be able to support when these projects really get into full swing.” •