Does the US Jones Maritime Act present yet another hurdle for offshore wind developers, who already face an acute global shortage of vessels? Or is it a golden opportunity to be seized with both hands? NRG Bluewater Wind sees prospect in the silver lining.

By Rikki Stancich in Paris

The Jones Act – otherwise known as ‘Section 27 of the US Merchant Marine Act' - has repeatedly come under fire from a range of critics since its inception in 1920.

Importers deplore its provisions as being protectionist. Domestic producers shipping goods between US ports condemn it, saying it undermines their competitiveness against foreign importers paying cheaper shipping rates. Meanwhile, US shipyards have been priced out of the international market, owing to US ships’ ‘All American’ components and labour.

This is because its provisions require that all goods transported by water between U.S. ports be carried in US-flagged ships, that have been constructed in the United States, and are owned and fully crewed by US citizens.

Now, US offshore wind developers are next in line to navigate Jones Act compliance. In short, developers face the choice of either juggling a foreign installation vessel with US-owned and operated barges; or with building their own vessels, in order to be Jones Act compliant.

What kind of impact is this likely to have on US offshore wind developers, going forward?

WindEnergyUpdate’s Rikki Stancich speaks to NRG Bluewater Wind’s founder and group president, Peter Mandelstam, to find out what the Jones Maritime Act means for offshore wind developers and how NRG Bluewater Wind intends to turn it to its advantage.

Currently working on more than seven offshore projects in the Northeast, NRG Bluewater’s most advanced projects are in Delaware and in and New Jersey. In Deleware, it has secured a 25-year, 200 megawatt power purchase agreement (PPA) with Delmarva Power & Light Company.

In New Jersey, the company is one of three preferred developers awarded a US$4 million rebate from the state to build a meteorological tower, which collects wind data for offshore projects.

WindEnergyUpdate: To what extent could the Jones Act present a hurdle to offshore wind farm developers?

Peter Mandelstam: We strongly support the Jones Act – to build, finance, own and operate US vessels. We want to build vessels or charter vessels that are Jones Act compliant.

As things stand, we can use European vessels for offshore work and US vessels to take components out to the European vessels for installation. We bid for and won the Delaware and New Jersey projects with Fluor, the EPC contractor with a plan for using European offshore vessels and US feeder vessels for turbine installation.

WindEnergyUpdate: Given the shortage of specialist foundation and turbine installation vessels globally (coupled with massive pending demand in the UK), wouldn't US offshore service providers/operators need to build specialist vessels anyway?

Peter Mandelstam: There is an enormous shortage in the market and US shipyards are hungry for work, so this is a great time to be building vessels.

One question the financiers ask is whether US vessels can operate in Europe. The answer is: Yes.

So we can sail our vessels over to Europe and service that demand as well.

WindEnergyUpdate: Apparently BlueWater Wind is seeking financing to construct three specialist installation vessels. What kind of support is available, how accessible are grants and would such vessels be eligible for the manufacturing tax credit scheme?

Peter Mandelstam: That’s correct. Three years ago, I hired a naval architect and marine engineer. We have selected the design for 3 potential vessels and we are still arranging the finance.  

We have chosen the Wärtsilä design, which will be able to carry five 5MW turbines. The vessels will be capable of installing around 50 kits (foundations and topsides) per year.

We were convinced we had made the right choice when it became known that RWE Innogy recently selected the same design (the Wärtsilä), with the same British shipbroker, Clarkson PLC.

We have already engaged with the State of Delaware for permits and we are currently arranging finance for the proposed vessels.

The financial institutions understand that it is a good investment, due to the Jones Act and the fact that there is a shortage of vessels in Europe.

With our own proposed vessels, we should be able to build all the projects in our pipeline as well as all the projects currently being discussed in the Atlantic, and the UK’s round-three projects.

Wind developers do what they need to do. We don’t necessarily want to be in the ship business, but we will do what we need to – which may also include chartering vessels out. It is nice to have flexibility and to be able to service a potentially lucrative market.

Whether the vessels would be eligible for the manufacturing tax credit is still unclear. We are currently investigating that.

WindEnergyUpdate: What are your views on the actions of those democratic senators who are pushing for ‘100% made in America’ turbines? Could this kind of lobbying result in a US supply chain bottleneck?

Peter Mandelstam: We respect that it is a difficult environment and we want to create as many jobs as possible, but we can’t control the suppliers.

We want offshore wind to advance generally and we want our projects to stay on track.

The industry is still in its infancy and it remains to be seen as to how the whole supply chain comes together, in terms of how much manufacturing will take place here – the next 3-5 years will tell.

We urge Europeans to bring their supply chain here to the US. If you look at the industry in 1997, there were a handful of manufacturers, but it was largely a European supply chain. Increasingly, the supply chain has followed projects to the US.

When suppliers see regular projects, the supply chain will come.

WindEnergyUpdate: What is the current state of port facilities and what level of investment is required to upgrade/build the kind of facilities required for offshore wind farm deployment, as well as on-going operations and maintenance?

Peter Mandelstam: Unlike in Europe, in the US the port and the cable is 100% owned by the developer. For example, there could be a significant investment opportunity for the state of Delaware – which is doing a very smart job of attracting the next generation of clean tech jobs.

One of the unintended, but positive, effects of industrialization is the development of port facilities. NRG Bluewater Wind has identified two ports – the port of Wilmington, where onshore turbines are currently being shipped to, and at Fort DuPont, which will be the lay down area, with around 12-13 hectares of deep water quayside to bring the equipment in, stage it, and bring it back out, either on a US barge or jack-up vessel.

If we had the permits tomorrow, we would upgrade the ports.

We have never broken out a separate figure for the ports. For our Mid-Atlantic Wind Park project in Delaware, we are looking at upward of US$1billion for 293mw; for 450MW, it is upward of US$2billion, which could be arranged by NRG with a Department of Energy loan guarantee.

WindEnergyUpdate: What other supply chain issues will offshore wind developers likely face and what could be done to mitigate these issues?

Peter Mandelstam: We are focused on the one thing we believe to be the most sensitive, which is vessels, via the Jones / Maritime Act. 

We are watching, but we are not overly concerned, given that the markets have a tendency to right them selves.

As long as you have the vessels, there are no other real choke points that we have identified.