Odd Lots Here's What's Going Wrong in the US Offshore Wind Industry
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Nov 22, 2023 Chelsea Jean-Michel, an offshore wind industry analyst at BloombergNEF, sheds light on the current struggles facing the U.S. offshore wind sector. She discusses rising commodity costs, project cancellations, and the impact of high interest rates on financing. Comparisons with the U.K. highlight the U.S. sector's regulatory challenges and bidding complexities. Jean-Michel emphasizes the need for strong state policies and a diverse energy approach to overcome these hurdles and effectively contribute to decarbonization efforts.
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US Offshore Wind Challenges
- The US offshore wind industry faces headwinds like rising interest rates and component costs.
- Offtake contracts, agreements with states to buy power, are crucial for project financing but create risks due to long lead times.
Offshore Wind Farm Economics
- Developing offshore wind farms involves high upfront costs, including seabed leases, development, and equipment.
- Financing costs significantly impact profitability due to long lead times (8-14 years) before revenue generation.
Cost Pressures on Offshore Wind
- Inflation, interest rate hikes, and supply chain issues have significantly impacted offshore wind project costs.
- The levelized cost of electricity (LCOE) for US offshore wind has increased by almost 50% since 2021.