State of the Industry: Offshore Wind - Part 2

Walt Musial, a principal engineer at the National Renewable Energy Laboratory, stops by the show to discuss the current state of the US offshore wind market. Walt details progress in key regions like the Northeast, where gigawatt-scale projects are actively under construction. Walt addresses the ramifications of renegotiations of power purchase agreements and the mixed outcome of recent offshore wind lease auctions. On the technology front, Walt goes into great detail about the potential of floating wind technology, which offers flexible siting and cost benefits when compared to fixed-bottom turbines. Walt also outlines the key highlights of NREL's annual Offshore Wind Energy Market Assessment, which track information for 2,036 active offshore wind energy projects in 49 countries.

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Transcript

(Note: This transcript was created using artificial intelligence. It has not been edited verbatim.)

Sean McMahon  00:00

What's up everyone and welcome to the Renewable Energy SmartPod. I'm your host, Sean McMahon, and today, we're bringing you part two of our special series focusing on the state of the offshore wind industry. In a minute, I'm going to be joined by Walt Musial. Walt is a principal engineer at the National Renewable Energy Laboratory, where he leads the offshore wind research platform. Walt and I are going to discuss all things offshore wind, including the arms race that's been going on in recent years to build the biggest, most powerful turbines and the challenges that offshore wind presents for the grid when you try to bring all that energy onshore. 

Walt will also share his insights about recent cancelations of offshore wind power purchase agreements and explain what the up and down performance of offshore lease options means for the future of the industry. 

And finally, Walt is going to share his bold prediction about the impact that floating wind turbines are poised to have on a market that has thus far been dominated by fixed bottom turbines. 

If you haven't already had the chance, please give a listen to part one of this series. I chatted with Ollie Metcalf from BloombergNEF, and he shared his expert analysis on how the global market for offshore wind is positioned amid a sea of uncertainty. 

And of course, if you want a daily dose of renewable energy news delivered directly to your inbox, head on over to SmartBrief.com and sign up for the Renewable Energy SmartBrief or you can just click on the link in today's show notes.

Right now, let's get things rolling with Walt Musial from the National Renewable Energy Laboratory. Walt, how you doing today?

Walt Musial  01:52

I'm doing great. Sean, how are you?

Sean McMahon  01:55

Excellent. It's a wonderful fall day here in the Pacific Northwest, so I want to bring you on the show to kind of talk about the work you've done. You lead a team there at NREL in studying offshore wind, and we're really just trying to kind of take a survey of how that market is shaping up, both in the US and maybe even kind of a global outlook. So I'll just ask you right now, when you think of the US offshore wind market, how would you describe it?

Walt Musial  02:18

Well, the offshore wind market in the United States is growing pretty rapidly. It's just starting, though. The challenge we're facing right now is that projects that have been in the pipeline and being developed for several years are just starting to get constructed. So we're moving from the engineering side of things to actual deployment and the reality of operations. And so we have over 5000 megawatts of offshore wind being constructed right now in the ocean on many, many different projects, and we're experiencing some of the realities of that construction. But we're also starting to put projects online, and it's starting to look very good. 

Sean McMahon  03:04

So what are some of the regions or states that offer the most promise? I mean, you mentioned there's some hard realities that the industry has faced. But how do you see the the industry navigating its way through all that uncertainty?

Walt Musial  03:16

Well, the industry is really being stimulated by the states that need the energy and that are promoting offshore wind as part of their energy portfolios for future development, and really the biggest area is in the Northeast of the United States, which include eight states up there that are that have actual offshore Wind Energy carve outs or mandates that use those mandates to develop procurements for their energy supply. And there and those states are Maine and Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Maryland, Virginia. And so these states are actively developing projects right now on the gigawatt scale, which means we're talking about utility scale projects that are replacing large scale fossil plants that are being retired right now.

Sean McMahon  04:07

Okay. And there's also, as anyone who follows this industry knows, there's been some cancelations of previous contracts. So how do you see that all shaken out? I mean, some of these will be rebid will some of these projects just be dead in the water? Or what do you think? 

Walt Musial  04:21

Yeah, well, let's make sure we distinguish between a cancelation of a contract that was issued to purchase electricity in the cancelation of the entire project. Most of these projects haven't been canceled, they just couldn't follow through with their power purchase agreements that they negotiated, and a lot of that has to do with COVID and the supply chain disruptions that happened during COVID, and the enormous inflation that happened in the investment costs and the cost of money that that came with that so as COVID progressed, it became clear that the prices that a lot of the projects had negotiated. Prior to COVID could no longer be met because the costs for those on up, and they had to renegotiate it with the utilities. They paid a penalty to do that, but now they're in the process of rebidding, and so the consequences of those projects is really a delay and the time it's going to take them, because now they have to acquire a new power purchase agreement to sell the power back to the utilities. In one case, a project was canceled where they totally mothballed the project. But even in that case, that that was in New Jersey, the project still exists, because the lease area that was sold to that company still exists. But that was that was only really one case where that happened.

Sean McMahon  05:43

And, you know, speaking of lease areas and the auctions from BOEM, like, what's your take on? Kind of, it seems like the mixed interests. Just a few days ago, there was a successful auction up in Maine. We've seen stuff in the Gulf of Mexico off the coast of Oregon, just kind of fall through.

Walt Musial  05:57

Yeah, well, the auction really foretells a lot of the just the sentiment and the kind of the feeling that the industry is having about about the confidence they have in the industry. And when we see auction leases get sold, we know that there's that the industry has some faith that the industry is going to keep going. There's been many, many leases sold already. We did see higher bidding prices a couple years ago, and then when these companies pulled back and canceled some of their contracts because of the inflation problems that I just described, the industry started to have questions the long term validity, maybe of some of the projects and some of these auctions didn't go through, or the prices went down. So I think there's a lot more caution in the industry right now, but the industry is still moving quickly forward, and the recent auction that you referred to is in the Gulf of Maine, where four more leases were sold for over six gigawatts of power. This is an area of unique interest because it's floating wind farm type leases. These are different types of projects than what are being constructed right now. Floating projects are on buoyant foundations that are moored to the bottom, and they're typically in much deeper water. But the leases that were sold in the Gulf of Maine are in some of the best wind energy areas in the country, highest winds, close to supply chain, close to power interconnects, and close to states that can off take the power in a big way. So I think that those leases are, there was a lot of interest in that area. Because of that. They had all a lot of the ingredients that they need to go forward, even though the floating technology is new and it's, it's still at the pre commercial scale globally. 

Sean McMahon  07:57

I want to talk about floating for a minute here, and then talk about even broader picture, kind of technologies for this industry. So what's your take on the overall potential of floating? Do you think it's going to spread everywhere, and, you know, the turbines will be huge, or is it kind of limiting, and then also after that, I just kind of want to get into any other technologies you see out there that'll streamline the process of building more wind farms.

Walt Musial  08:17

Yeah, I think floating is, is the future of offshore wind energy. Floating technology offers more flexible siting for the projects, because you can put floating turbines in more places you don't need the shallow waters that are typically closer to shore and more conflicted with ocean user issues. They can be cited in many different locations, and globally, we estimate that 80% of the offshore wind resources are in floating type water. So there's more choices that you can make with floating. So yeah, I think floating is is going to eventually become a very big part of the industry. It's not a totally new industry. It's a, it's it's a augmentation of of the fixed bottom technologies, but it's something that we can do at a fairly large scale.

Sean McMahon  09:11

Okay. And doesn't floating kind of also bring certain areas more into play that aren't necessarily close to a large port. Is that? Is that accurate? 

Walt Musial  09:21

The big difference between floating and fixed bottom is actually you need a large port to build it. You need to do a lot of that construction at a port facility that's custom built to construct that substructure and to assemble the turbine on top of it. But once you do that, you you take that, the wind turbine and the substructure, you put them together at a staging and integration port at shore, and you commission it there. You can tow the machine out with tugboats that are fairly small and you don't need the large vessels that you need for construction of the fixed. Bottom systems, and therefore the vessel requirements, which are very expensive and require Jones Act compliance, are those restrictions, are much more compatible with the US industry in terms of being able to meet those restrictions.

Sean McMahon  10:16

I gotcha. So the use of floating kind of gets around or just it's kind of move right, Jones Act and things like that, because it's you don't need those specialized vessels to go out there in the middle the ocean and put everything together.

Walt Musial  10:27

The vessels are specialized still, but they're they're much cheaper, in order magnitude cheaper, than the vessels we need for constructing fixed bottom systems. 

Sean McMahon  10:37

I got you. Any other technologies, be it turbines or any other aspects of the industry you think could be a game changer in the near future.

Walt Musial  10:45

Well, I think to enable floating systems, we're still we're confident we can do it, but we still need technologies for the electric grid to enable floating substations and dynamic cables that can connect them to each other. Because in floating systems, especially if you're talking about California, the array cables that connect each of the individual turbines together might be suspended in the water column, which means they may not go all the way to the bottom, but they may float or be suspended neutrally among the array in between the turbines and those kinds of cable designs are still under development right now. We also are working on mooring systems and anchoring systems that are easy to install and compatible with the types of turbines that we have in the lease areas that are proposed.

Sean McMahon  11:41

Now I do want to shift to talking about workforce. Obviously, that's a hot topic when, you know, everyone was talking about the inflation Reduction Act, and there was a lot of, you know, jobs, jobs, jobs associated with some of these industries and projects. Where do you think things stand in terms of the US, you know, building up and training a workforce that can get out there and construct all these farms,

Walt Musial  12:01

The workforce that we need to put this together doesn't fully exist yet, and so we do need training programs and specialized skills to be developed in the US. A lot of the initial projects are being the components are being sourced overseas, because that's where the supply chains exist right now. So it's, it's one of the big challenges is to bring that supply chain to the US and set it up here, and we're doing that. But it's, it's going to take some time, especially for the large components that have to be built. And those are like the tower, the nacelle, components, the blades, that are already being built in factories over in Europe, and we want to try to develop that stuff here. There's also a lot of what we call tier two and tier three components that are smaller components made of steel and concrete that can be manufactured in existing plants in the United States, and where we hope to engage that industry right now. May a lot of that industry is unaware that this big industry is coming to the United States and that they can take advantage of that, but we need to mobilize the skill sets that come with this deployment and and that's going to be a challenge. 

Sean McMahon  13:17

So now I want to shift our conversation to the offshore wind market report that NREL puts out. You're obviously one of the lead authors on that. So what are some of the highlights?

Walt Musial  13:27

Well, every year, NREL and DOE put out a market report which characterizes the the the annual market of offshore wind. And what we've seen every year is that there's been an increasing pipeline of projects, and we measure that pipeline by looking at the projects that have applied for regulatory approval at some degree, and then we track that throughout the pipeline. And if that pipeline is growing, then we can assume that the market is growing. The pipeline is measured by the number of lease areas and number of operating projects, and then the total number of projects that are have applied for permitting. And so this year, we if you look at the pipeline, is just take a snapshot of where we are. We're at about 80 gigawatts of projects that are in that pipeline, represented by 65 different projects that we've identified that are part of that pipe. Pipeline. If you break that down between floating and fix, that's about 25 gigawatts of floating and about 55 gigawatts of fixed bottom in the in the pipeline so far. So far, we only have about 174 megawatts installed in the United States and that are operating. And we don't count the operating turbines until the whole project's been commissioned, so there's actually probably a lot more than that operating right now, if you count the machines audit revolution that's being installed by earthstead and. And the turbines at vineyard wind that are not operating yet, but will will be turned on soon. We have about seven and a half gigawatts that have been approved or under construction, and about 20 gigawatts that are are in the advanced permitting stage and are going through that approval process. And some of that is already crossed that line and is has been approved since the report was written. One of the big things, though, that we measure market certainty and market scale is by what are the what's the total number of procurement mandates that have been issued by the individual states to purchase offshore wind? And when we add that all up, there's 45.7 gigawatts of procurement mandates. And the eight eastern states that I mentioned that represent the kind of the market certainty of the commitments that have made by the states in the United States. And if you add in the softer targets that some of the states have, like California has 25 gigawatts of in their planning target. If we add all those types of targets into that, then the United States has about 115 gigawatts of of mandates and soft targets, or what I think 4c calls ambitions, just to target a national ambition, to to build offshore wind, which is very close to Biden's first target. They had an initial target of for the US of 30 gigawatts by 2030 but there was also a mention of over 100 gigawatts by 2050 and I think the state commitments, if you add them all up, equal that.

Sean McMahon  16:40

All right. So I got to ask you, there's a lot of ambition in some of those targets and mandates. Do you think we're going to get there?

Walt Musial  16:48

I definitely think we'll get there by 2050, which is what most of those targets are based on. Yeah, I think we need to get there. Offshore wind is not the only arrow in the quiver, but it is a necessary element to achieve full electrification of the utility grid and and of the energy supply which we need in order to decarbonize the atmosphere.

Sean McMahon  17:14

So we talked a lot about some of the promise of offshore wind, but you've been in this industry for a long time. What do you think are some of the biggest challenges facing the industry right now? 

Walt Musial  17:24

The biggest challenges are probably siting and standardizing the technology for a particular size, because at the scale we got to, and this is unique to offshore wind, because land base didn't get as big. We're at about 15 megawatts per turbine, and that's the new size that that's the new turbine platform that's being developed right now. Land based has gotten up to about three or four megawatts turbine size, and that's only been recently, so they didn't upscale as large, and that was because of the infrastructure limitations that they experienced. They couldn't drive the big towers under the bridges, they couldn't drive the blades under the bridges. They couldn't get cranes on site to install them, so they had to stop at a lower level. Offshore wind kept going, and we're now challenged to make the 15 megawatt platform work, the realization now is that the infrastructure to build that costs a lot more than the infrastructure for the smaller platforms. And we and we have to make those investments. That's one of the biggest challenges, because once those investments are made, the uncertainty of building that platform gets gets smaller, and it gets easier to predict when a project can get built and how long it will take, and then things can flow from there, we will still have to go through it, the challenge of of maturing the 15 megawatt platform Technology, and that's also happening simultaneously as we speak.

Sean McMahon  19:03

So, speaking of the size of these offshore turbines, you mentioned 15 megawatts. The other day, I spoke to Ali Metcalf from Bloomberg Neff, and we talked about that like kind of the race to get bigger and bigger for turbines. And he suggested a good idea for the industry to just stop chasing bigger and bigger turbines and just focus on whether it's 15 megawatts or just a certain size, and let you know. Let everything get kind of streamlined, let all the O and M catch up to it, rather than continuing to push up higher and higher. I mean, I think I've seen stuff for like, 22 megawatts. Would you agree with that? Would you think we should just kind of pick a number that industry globally can all kind of just settle on and let that spread. Or do you think we should keep chasing, you know, 2022, 25 and keep going up? 

Walt Musial  19:48

I don't think we should pick a number, but I think we should stop upscaling machines and build a envelope of infrastructure capability and preserve that for as long as we can, because that's what's going to drive. It costs down. There's been many industries that have have gone through this, and you don't get cheaper by continuously building new prototypes and new new projects. You have to stay with one thing for long enough to earn the cost benefits of mass production and economies of scale and the learning curve that that goes with that, and we've seen it in in so many things wind turbines are are a little bit more complex than, say, a solar panel. We've seen two orders of magnitude decrease in the cost of the solar panel since I've been working in this industry, and I don't expect to see two orders of magnitude or even one order of magnitude in wind, but there's a factor of two or three that's possible with just staying where we are and making a lot of them, and we haven't ever tried that. We experienced it in land based when, and it paid off quite well over the last decade. And I expect that if offshore wind can can stop upscaling and start really focusing on the product that they have that will achieve all the cost goals that we had hoped for and and maybe even more.

Sean McMahon  21:14

What else is going on in the industry? Anything that you know we haven't talked about yet today. Do you think listeners would want to know about the state of the offshore wind industry.

Walt Musial  21:21

There's a lot going on with grid and the grid connectivity, because everything that happens in offshore wind has to be integrated in with the bigger picture. Because this is happening in every energy industry, solar and battery storage, and offshore wind has to integrate with all of that, and so there's high voltage electric current. Is something that's taking over some of the conversations, because as offshore wind gets further from shore, we're going to need HVDC, that's a high voltage DC current to carry the power longer distances, and that technology has is more mature on land, but it hasn't been developed offshore, and we're starting to see the grid go from longer distances with direct current and also across state boundaries. And so these are things that might affect the future grid, and as offshore wind integrates with all these other technologies.

Sean McMahon  22:24

One of the things I could do on this show is I ask each guest to give me a bold prediction about something from their area of expertise. So you know, when you look out and say five or 10 years, you know, not so far out to 2050 but just five or 10 years from now, any bold predictions about what's going to transpire in this industry during that time.

Walt Musial  22:40

I think if we look look toward the near term, we're going to start to we need to see our first floating project in the United States to begin that part of the industry. I think we'll see the global industry for floating evolve first, and that will happen, but probably simultaneously in Northern Europe and Asia. And once we see that commercialization begin, which means we'll start to see utility scale projects. Once we build those utility scale projects at like one gigawatt size, the costs are going to come down considerably. And we can predict that fairly easily, because there's an amortization and economies of scale that comes with that immediately, without the learning curve that you need over time to get the cost down to where it needs to come but once we get to that first step of cost reduction, I think we'll start to see more interest in floating, and it will start to get closer to its companion, fixed bottom wind. And so then there'll be a, hopefully a choice between fixed bottom and floating. l

Sean McMahon  23:52

Al right. Well, hey, listen. Walt learned a lot just from listening to you today. I appreciate your time and your insights. Thank you very much.

Walt Musial  23:59

You're welcome.

Sean McMahon  24:02

Well, that's our show for today. If you like this podcast, please share it with your friends and colleagues, and be sure to follow us on Apple, Google, Spotify, or wherever you get your podcasts. You can also follow us on Twitter, where our handle is @RenewablesPod. And if you'd like a daily dose of renewable news delivered to your inbox, head to SmartBrief.com and sign up for the Renewable Energy SmartBrief. The Renewable Energy SmartPod is a production of SmartBrief, a Future company,