Launch of US wind installation vessel masks critical shortage

Dominion Energy’s ‘Charybdis’ will be the only American wind turbine installation vessel until markets soften and developers can justify the cost premium of building U.S. ships.

The launch of the first U.S.-built wind turbine installation vessel (WTIV) in April marked an important milestone for the offshore wind sector. Commissioned by U.S. utility Dominion Energy, the 472-foot ‘Charybdis’ will be fully operational by early 2025 and will first be used to install Dominion's 2.6 GW Coastal Virginia Offshore Wind project.

The Charybdis is a positive step for the burgeoning U.S. offshore wind industry but several other vessels are needed to fill a widening supply gap that is holding back developers. Slow buildout of U.S. supply chain and port infrastructure and a lack of clarity over leasing and permitting schedules has hampered developers and deterred some investors.

The U.S. needs four-to-six turbine installation vessels to meet the 30 GW offshore wind target set by President Biden for 2030, according to the U.S. National Renewable Energy Laboratory (NREL).

Last year, Orsted cancelled its Ocean Wind 1 and 2 projects in New Jersey, largely due to a shortage of installation vessels which would have caused a “multiyear delay,” Orsted Chief Executive Mads Nipper said.

“WTIVs are an essential component of the offshore wind supply chain and critical to the development of the industry and meeting offshore wind targets,” Carter Atlamazoglou, managing director at FTI Consulting's Power, Renewables and Energy Transition practice, told Reuters Events.

The Biden administration has already approved eight large-scale offshore wind projects and developers would need to install more than three large wind farms per year to meet the Biden administration's 2030 target.

"We need a fleet of vessels, one wind turbine installation vessel is not going to do enough,” said Ramesh Maini, CEO of Zentech, an offshore marine engineering company.

         Investments needed to build a US offshore wind supply chain

                                                            (Click image to enlarge)

Source: NREL's Offshore wind Supply Chain Road Map, January 2023. 

Until U.S. installation vessels are built, developers must use European or Asian installation vessels anchored offshore and American vessels to transport materials and crews from ports. This method complicates logistics and pushes up costs, exposing developers to global installation vessel markets during a period of high demand in Europe and Asia.

“Ultimately the availability of [installation vessels] is a critical supply chain challenge for the U.S. offshore wind industry," Atlamazoglou said.

"Developers will use foreign built vessels, as well as the [Charybdis], for near term projects,” he said.

Shuttle boats

In January, the U.S.' first large-scale offshore wind farm supplied its first power to the Massachusetts grid.

The 800 MW Vineyard 1 project will consist of 62 turbines and was developed by Iberdrola subsidiary Avangrid and Copenhagen Infrastructure Partners (CIP),

The Vineyard 1 partners are using barges to transport equipment from New Bedford port in Massachusetts to foreign-flagged installation vessels anchored offshore, rather than loading up installation vessels on quayside, to conform with the U.S. Jones Act. The act requires the use of U.S.-flagged vessels to transfer equipment and staff into American ports.

“For our other projects we are keen on finding some better solutions than the barges frankly,” Ken Kimmell, Chief Development Officer for Avangrid, told Reuters Events in January.

                    Global average offshore wind turbine capacities

                                                           (Click image to enlarge)

Source: U.S. Department of Energy's Offshore Wind Market Report, 2023 Edition (August 2023)

“Not having Jone’s Act compliant vessels in the U.S. drives up costs and logistics,” Christopher Niezrecki, Director of the Center for Energy Innovation at the University of Massachusetts, said.

Kimmel hopes U.S. installation vessels will be built in time for later offshore wind projects but vessel investments continue to lag behind project plans.

The Biden administration has implemented measures to support local supply chain investment but these have had little effect on installation vessel activity. The 2022 Inflation Reduction Act provides a 10% manufacturing tax credit for U.S.-built vessels, alongside domestic content bonuses for developers, but these incentives do not make U.S. installation vessels cost competitive with vessels built in Asia, Atlamazoglou said.

Volatile global markets and supply chain issues since the pandemic have hurt developers and U.S. interest rates remain at some of the highest levels in modern times.

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The estimated cost of Charybdis has risen to $625 million, up from an earlier estimate of $500 million, Dominion said in a filing to the U.S. Security Exchange Commission in February. The vessel was originally expected to be ready by end of 2023 but completion is now expected by early 2025, largely due to "higher financing costs related to higher rates and a longer construction timeline," Dominion said in November.

Last month, Orsted said it had cancelled a charter agreement for the Charybdis and secured an alternative installation vessel for its 704 MW Revolution Wind project off the coast of Rhode Island and 924 MW Sunrise Wind farm off the coast of New York.

Vessel progress

Growing U.S. offshore wind activity combined with federal and state incentives has led to a range of new vessels that will support installation and maintenance.

Shipbuilders are investing in more than 40 new vessels including 27 crew transfer vessels (CTVs), eight Service Operation Vessels (SOVs), four vessels to install monopiles and other components, and three tugs and barges, according to the American Clean Power association (ACP).

“There’s a huge amount of shipbuilding that’s happening,” Claire Richer, senior director of offshore wind for American Clean Power, told Reuters Events. “A lot of this is happening along the Gulf Coast, Florida, Louisiana, and Mississippi, and I think this is really exciting. People think about offshore wind as blue state issue, but it’s not. It’s bringing a lot of jobs in Republican states.”

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The large investments required for installation vessels mean that construction activity may depend on inflation and interest rate movement in the coming years. Shipbuilders also require a clear deployment pipeline and in April federal authorities announced new regulation to help solidify the deployment outlook.

The new rules require the Bureau of Ocean Energy Management (BOEM) to publish a rolling five-year schedule for offshore wind leasing and streamline regulations for offshore wind permitting. The rules eliminate unnecessary deployment of metrological buoys, increase survey flexibility and improve design, fabrication and installation certification, in a bid to shorten permitting times and reduce offshore wind costs.

President Biden has been firmly behind the offshore wind industry and November's presidential election brings additional risk for U.S. offshore wind investors. A Trump administration could look to slow the pace of development, based on the lack of progress made under the previous Trump administration, his comments criticising the approval of Vineyard Wind 1 by the Biden administration in 2021 and statements made by Trump during his presidential campaign this year.

“With the election coming there’s extra uncertainty, we could have a government focused more on the oil and gas side,” Maini said.

Reporting by Mark Shenk

Editing by Robin Sayles