The US is actively working towards its ambition of achieving 30 GW of offshore wind (OSW) capacity by 2030. The country’s OSW industry, which has been witnessing significant activity, particularly over the last couple of years, is expected to contribute significantly to US’ goal of achieving a carbon-free electricity sector by 2035. In fact, the 2030 OSW goal establishes a pathway to deploy 110 GW or more of OSW by 2050. According to the recently released ‘Offshore Wind Market Report: 2022 Edition’ by the US Department of Energy (DOE), by May 2022, the US OSW project development pipeline grew to over 40 GW compared to the existing installed capacity of 42 MW. Notably, the market continues to be driven by state-level solicitations and policies that aim to procure close to 40 GW of OSW capacity by 2040. 

Further, the Bureau of Ocean Energy Management (BOEM) has announced plans to develop wind energy areas (WEA) in up to seven US regions by 2025. The new lease areas will provide regional diversification beyond the North Atlantic and mid-Atlantic as well as technology diversification. While majority of the 2030 target will be met by the use of fixed-bottom technology, the Biden Administration recently launched key initiatives to position the US to take the lead on floating OSW technology. It has set a new goal to reach 15 GW of floating OSW by 2035, and launched new research programmes to reduce the cost of floating technologies by over 70 per cent and develop modelling tools for project design and demonstration efforts.

In the context of ambitious OSW goals and expected rapid development, the federal government and the states acknowledge the importance of comprehensive and timely planning and development of transmission systems required to connect the upcoming OSW capacity early on. At the federal level, the recently passed Inflation Reduction Act (IRA), which committed a spending of USD369 billion on energy and climate, proposes to fund DOE loans for interregional and OSW electricity transmission planning, modelling and analysis. Additionally, the government initiated the two-year Atlantic Wind Transmission Study in 2021 to investigate a more integrated approach to offshore wind transmission. Meanwhile, the East Coast states are collaborating with grid operators to procure independent offshore transmission to meet their OSW goals or considering meshed transmission solutions as part of their OSW solicitations.

Global Transmission Report presents the recent developments in the OSW segment as well as the key transmission solutions that are under consideration across regions.

Key highlights – US OSW Market Report

The US OSW project pipeline has grown to 40,083 MW as of May 2022 – marking an increase of 13.5 per cent over the 35,324 MW reported in May 2021. The pipeline comprises installed projects, approved projects, projects in the permitting process, existing lease areas and unleased WEAs. The expansion of the project pipeline is driven by the addition of eight new lease areas that were auctioned in the Atlantic and two call areas that were converted into WEAs in California. 

The OSW project pipeline comprises 42 MW of operating projects and 932 MW of under-construction projects (800 MW Vineyard Wind 1 and 132 MW South Fork Wind Farm). Majority of the projects aggregating 18,581 MW are currently in the permitting stage, followed by 15,996 MW in the site control stage and 4,32 MW of unleased WEAs.  

The number of viable OSW energy sites in the US are set to increase as the BOEM announced plans to conduct up to seven new offshore WEA lease auctions as part of its Offshore Wind Leasing Path Forward 2021‒2025 in October 2021. The auctions are expected to be held for New York Bight, Carolina Long Bay, Central Atlantic, Gulf of Maine, California, Oregon, and the Gulf of Mexico by 2025.

Earlier, in February 2022, BOEM auctioned six lease areas in the New York Bight, which fetched a selling price of USD4.37 billion, setting a new record in terms of total revenue generated from an OSW lease auction in the US. More recently, in May 2022, the two lease areas in the Carolina Long Bay auction were sold for a total value of USD315 million (with an average sale price of USD7,07,894 per square kilometre).

Notable project-related developments over the past one year include the commencement of the construction of the 800 MW Vineyard Wind 1 project in November 2021 by Avangrid and Copenhagen Infrastructure Partners. The project is expected to be commissioned by 2024. In addition, Ørsted and Eversource broke ground on their 132-MW South Fork Wind Farm project in East Hampton, New York, in February 2022. This project is expected to come online at the end of 2023.

The US OSW market is primarily being driven by state-level OSW initiatives with states such as Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Maryland, Virginia and North Carolina planning to deploy at least 39,322 MW of OSW capacity by 2040 as part of their energy policies (Table 2). In addition, several other states such as California, Oregon and Louisiana have also adopted policies that support OSW energy development but have not quantified procurement targets or created procurement requirements.

Regarding power offtake agreements, 24 such agreements for OSW energy procurement have been signed in the US as of May 31, 2022. Eight states have unique targets with varying power offtake mechanisms to purchase electricity from specific OSW projects. These state policies have resulted in 24 power purchase agreements (PPAs), adding up to 17,597 MW in OSW energy contracts. Between May 1, 2021 to May 31, 2022, 10 new PPAs totalling 11,874 MW were signed. These include the five new offtake agreements that were awarded in December 2021 – two in Maryland for the Skipjack 2 project (808 MW) and the Momentum Wind project (848 MW), and three in Massachusetts [two for the Commonwealth Wind project (1,232 MW) and one for the Mayflower Wind 2 project (400 MW)], for a total increase in contracted capacity of 3,288 MW.

Meanwhile, the levelised cost of energy (LCOE) generated by fixed-bottom OSW projects in the US has recorded a year-on-year decline of 20 per cent to reach USD84 per MWh on an average (with a range of USD61 per MWh to USD116 per MWh). The LCOE has declined by over 50 per cent since 2014 and as per industry estimates, it is expected to reach USD60 per MWh by 2030. The capex of OSW projects has also declined over the years. Since 2015, the capacity-weighted average capex for OSW projects has decreased, reaching about USD3,700 per kW in 2021 globally and just below USD4,000 per kW in European and US markets. The reported capex tends to be higher in Europe and the US than in Asia, but the two markets have been converging since 2015, with Europe and the US capex projected to reach levels similar to those in Asia by 2026.

For floating OSW projects in the US, various research organisations have projected a decline from about USD200 per MWh in 2021 to USD58‒120 per MWh in 2030. The cost of floating OSW technology is currently based on a small set of data from the first phase of demonstration projects.

Recent federal initiatives

Boost to floating OSW – recent government initiatives

In September 2022, the Biden Administration announced a new goal to deploy 15 GW of floating OSW capacity by 2035, building upon its existing goal of 30 GW of OSW by 2030, which will be mostly based on fixed-bottom technology. To meet the goal, the federal government will advance lease areas in deep waters that account for two-thirds of OSW energy potential in the US, including along the West Coast and in the Gulf of Maine. Notably, the Administration plans to hold lease auction for wind energy areas off the Californian coast as early as end-2022. So far, only about 0.1 GW of floating OSW has been deployed globally vis-à-vis over 50 GW of fixed-bottom OSW. With the latest announcement, the US aims to seize the opportunity to emerge as a pioneer in floating OSW technology. 

To reduce the cost of floating OSW technology by 70 per cent to USD45/MWh, the federal government plans to launch the Energy EarthshotTM programme to accelerate advances in engineering, manufacturing and other areas. In addition, the Biden Administration launched a new prize competition for floating OSW platform technologies; initiatives funded by the Bipartisan Infrastructure Law (BIL) to develop modelling tools for project design and to analyse port needs; and other funding for research, development and demonstration efforts. Further, the DOE will provide USD50 million funding including support from the BIL for research, development and demonstration of floating OSW technology. 

Focus on offshore wind transmission 

Meeting the ambitious OSW targets announced by the federal government and individual states requires extensive planning to develop offshore transmission facilities and strengthen onshore grid infrastructure. 

Notably, New York and New Jersey are considering a high voltage direct current (HVDC) meshed network in recent OSW solicitations as the existing near-the-shore transmission infrastructure in New York and New Jersey, which can absorb power from large offshore wind farms, is highly insufficient. In both these states, the backbone transmission facilities including substations are located at a distance from the proposed landing sites of export cables from new/planned OSW farms. In addition, the current approach of radial tie lines or gen ties wherein the transmission links are developed in a bundled manner with individual OSW plants by single companies, faces the risks of cost and time overruns of onshore upgrades once available onshore interconnection points are exploited/utilised. It is therefore imperative to have a more planned approach for OSW transmission that can facilitate long-term optimisation of offshore and onshore transmission, especially point of interconnections (POIs). There is a strong case for the development of offshore grids for multiple OSW plants (or planned solutions) with HVDC links as it not only reduces the overall costs for generation, OSW transmission and onshore upgrades but also mitigates environmental impacts to the ocean to a large extent. Planned solutions encompass OSW transmission concepts such as meshed generation ties, shared collector station and backbone offshore grid. Notably, the Brattle-Anbaric OSW transmission studies for New York State found that the state can accrue estimated electric grid cost savings of over USD500 million and significantly reduced environmental impacts and project risks if it develops a multi-user, planned transmission system for OSW.

There are several other advantages of planned OSW transmission solutions such as the ability to support larger wind generation capacity of up to 1,200-1,600 MW per HVDC circuit vis-à-vis 400 MW per HVAC circuit in the case of gen ties. Planned solutions are especially useful to connect multiple OSW farms that are close to each other but at long distances from onshore transmission facilities while gen ties can support OSW located at a modest distance only. In addition, planned solutions provide more efficient utilisation of right-of-way as well as greater competition among wind developers through open access to offshore hubs as well as between offshore transmission developers.

Another study by Brattle for New England (for about 8,400 MW of OSW capacity) concluded that the gen tie approach would requires 1,620 miles of offshore cables while the planned grid approach would reduce the length of cables to nearly half at 830 miles thereby reducing the project capex as well as impact on the marine/coastal environment besides avoiding the high costs of onshore transmission upgrades. In fact, as per ISO-NE’s feasibility study, interconnecting three projects totalling 2,400 MW in Cape Cod would result in onshore transmission upgrades worth USD787 million. Therefore, continuing the same approach for even the next 3,600 MW of OSW procurements could lead to an additional USD1.7 billion in onshore upgrades.

Overall, Brattle studies have concluded that committed OSW deployment of 30 GW in the eastern US will require 1,500 to 3,000 miles of offshore transmission cables as well as significant onshore reinforcements. If radial 220kV HVAC gen ties are used for every 400 MW of wind generation (up to 30-60 miles offshore), about 3000 miles of offshore cables will be needed to connect to 75 landing points with associated onshore grid reinforcements. However, if planned OSW transmission solutions are implemented for larger wind plants, only about 1500 miles of cables with 25 landing points will be required in addition to the benefits of economies of scale and more resilient meshed grids.

NYSERDA’s Offshore Wind Integration Study (in 2021) has also indicated the need to move towards a new transmission planning approach that allows for a more flexible and reliable ‘meshed’ offshore grid. The study assessed bulk transmission needs for 9,000 MW of OSW generation by 2035. Another study by Brattle for NYSERDA published in November 2021 concluded that Procuring OSW plants with ‘mesh-ready’ offshore HVDC substations would add only about USD40 million (1 per cent) to the total cost of a 1,200 MW plant and HVDC offshore substations can be (later) meshed at a cost of USD120-240 million per link.

States’ efforts towards planned transmission 

Given the expected benefits of a meshed grid as indicated in various studies, recently (in August 2022), NYSERDA called for mesh-ready offshore power transmission configuration utilising HVDC technology in its latest third competitive offshore wind solicitation (ORECRFP22-1) for a minimum of 2 GW of clean energy. ORECRFP22-1 will expand New York State’s existing 4,300 MW portfolio, which currently consists of five offshore wind projects. The deadline for submission of proposals is December 2022, while the award decisions are expected in the first quarter of 2023.

PJM Interconnection has also taken proactive steps to delink the development of transmission infrastructure with OSW generation. In this regard, PJM launched the first-ever transmission solicitation under its State Agreement Approach (SAA) in April 2021, which allows states to use policy goals, rather than the traditional parameters of reliability or market criteria, as a justification to expand transmission. The solicitation for transmission solutions was sought to integrate up to 7,500 MW of OSW generation. Notably, it received 80 innovative proposals from 13 bidders that cover multiple options to accommodate coastal states’ offshore wind goals and PJM states’ request for proposal requirements. The proposed costs of these transmission options range from USD627 million for 2027 offshore wind expansion scenarios to USD3.2 billion for 2035 scenarios. The proposals are being evaluated by PJM and NJBPU.  The Federal Energy Regulatory Commission (FERC) accepted the executed State Agreement Approach in April 2022 and results are expected by the end of 2022. 

In another key development, the five ISO New England (ISO-NE) states, namely, Connecticut, Massachusetts, Maine, New Hampshire and Rhode Island, are also focusing on a long-term transmission planning approach. The five states issued a joint request for information (RFI) in August 2022 for the development of up to 8,400 MW of HVDC transmission options to connect offshore wind and other renewable energy resources through 2040. As per the RFI, the states are looking at an integrated approach for HVDC expansion such that future transmission lines can connect in a meshed manner and share the landing points. The states will prioritise land-based points of interconnection, based on their custom considerations (such as interregional transfer capability, siting considerations, etc.) and overall project timing. The states plan to adopt a regional transmission investment approach for OSW integration that can improve system reliability and avoid costly reliability onshore upgrades. The comments on the RFI are due by October 14, 2022, and a technical conference including state agencies will be held at a date yet to be determined.

Federal initiatives for transmission 

Atlantic Offshore Wind Transmission Study

The federal government is now taking steps to plan transmission in an integrated manner. This is in addition to the states collaborating with the grid operators of their region for transmission planning. In this context, the DOE’s Wind Energy Technologies Office is sponsoring the Atlantic Offshore Wind Transmission Study to evaluate planned, coordinated transmission solutions, including interregional ones, along the Atlantic coast from Maine to South Carolina. The study includes multiple scenarios of offshore wind generation and transmission configurations, including radial spurs, a meshed grid and backbones for 2030 and 2050. The study includes capacity expansion, product cost, resource adequacy, dynamic contingency, electromagnetic transient stability and resilience modelling.

The study is being undertaken by the National Renewable Energy Laboratory (NREL) and Pacific Northwest National Laboratory (PNNL) to close gaps in the existing transmission planning and development processes. The study, which began in November 2021, is expected to be completed by October 2023. 

Overall, it aims at better alignment of OSW transmission studies with national goals and more efficient coordination between offshore wind generation and transmission. It will assess feasibility studies for technology limitations, impacts associated with cable routes and landing points, and consideration of reliability and resilience events (e.g., hurricanes). The study will also compare technology options such as HVAC vis-à-vis HVDC, as well as the current approach of each project connecting to shore individually vis-à-vis planned shared transmission.

Building a Better Grid

Another key development is the launch of the Building a Better Grid initiative (to implement the BIL provisions) by the DOE in January 2022 to accelerate the country’s transmission network expansion and planning efforts, particularly for high-capacity and interregional transmission. The first step under the initiative is the National Transmission Planning (NTP) study, which aims to support the Administration’s goals for a decarbonised power sector by 2035 and a net-zero emissions economy by 2050 while ensuring grid reliability. The NTP study commenced in March 2022 and will continue into the second half of 2023. The results from the study are expected to prioritise future DOE funding for transmission infrastructure support and mitigate the shortcomings in the existing interregional transmission planning. Further, under the initiative, DOE will partner with BOEM to achieve national OSW goals including through consultation with federal agencies such as FERC to develop an action plan for addressing the medium- and long-term OSW transmission challenges.

Future outlook

The US OSW industry is poised for rapid expansion over the next decade driven by state-level procurement targets and the 2030 national target. Further, BOEM’s announcements for ramping up offshore leasing in federal waters and the discovery of record-setting lease prices in the New York Bight auction earlier this year indicate that future growth is expected beyond the North and mid-Atlantic regions. The actual size and speed of US OSW buildout will depend on continued regulatory support, the availability of installation vessels and port infrastructure, proactive onshore and offshore grid planning and upgrades, the successful commercialisation of the 15 MW wind turbine platforms, and sustained market demand. Industry forecasts predict a 2030 US OSW capacity of between 26 GW and 32 GW. Most of the future OSW deployment up to 2031 is expected to occur on the East Coast in states with existing OSW procurement goals. One of the forecasts includes commissioning of floating projects mainly in California and Maine before 2030.

Recent developments show renewed focus on pacing up transmission buildout through greater coordination and comprehensive planning approaches both at the state and federal levels. Future projects will move away from the radial line approach to shared transmission or meshed solutions. The industry is closely watching this space and actively participating in the handful of solicitations that have come up in recent times. Net, net, it is exciting times for US OSW and offshore wind transmission in the coming years.