Biden Plan Backs Offshore Wind — Which Public Companies Could Power A Boom?

In contrast to his killing of the Keystone XL oil pipeline at the start of his presidency, Joe Biden this week has emphatically embraced the promise of offshore wind power. In an announcement Biden said his goal for offshore wind was to see hundreds of turbines installed by 2030, enough to produce 30,000 megawatts, or enough to power 10 million homes. Biden’s proposal aims to support the effort with $3 billion in federal offshore wind loan guarantees and big upgrades to coastal ports. The White House figures the resulting offshore boom could support 44,000 union jobs. 

But that’s just the start. Today, Biden is calling in his infrastructure plan for a $100 billion investment in electric transmission, including 20,000 megawatts of high-voltage lines — just what the nation will need to get ever more wind and solar power from the oceans and plains into population centers. Biden’s plan envisions putting “hundreds of thousands of people to work laying thousands of miles of transmission lines and capping hundreds of thousands of orphan oil and gas wells and abandoned mines.”

So far the United States has just two operating offshore wind installations — the biggest, Block Island Wind, off Rhode Island, features only four turbines that (as I wrote in 2016) were a struggle to install, despite huge subsidies. But the wave is coming, not by Biden decree, but years in the making. The federal government for nearly a decade has been auctioning off windy stretches of the Atlantic for development. The permitting has taken years. Are the NIMBYs finally losing strength in a battle of attrition against Big Wind? It’s become tough to argue that my unmarred ocean vista is more important than your access to renewable energy. At least that’s what Spanish renewables giant Iberdrola is hoping for. By the end of 2023, its Avangrid subsidiary aims to erect 62 of General Electric’s

GE
Halide X turbines, 800 feet tall, off Martha’s Vineyard.

Are we really looking at the dawn of an American offshore wind boom? Despite massive investment in Europe, the offshore wind industry has been a disappointment here — because people with oceanfront real estate didn’t want it around. Two decades ago Cape Wind tried to gain approval to build turbines in Nantucket Sound. They were ultimately blocked by powerful NIMBYs including the Kennedy clan and Walter Cronkite who objected to the prospect of flickering turbines marring the horizon by day and polluting the skies with incessant red blinkers at night. “Why would you want to sail in a forest of windmills?” billionaire William Koch told Forbes magazine back in 2006.

If you can’t beat ‘em, at least try to make a buck off them. Some of the world’s biggest public companies are already at the top of the offshore wind game, and vying to build the first U.S. megafield. Other leaders include Ørsted, which operates 4,000 megawatts of offshore wind in Europe, along with the Block Island project. David Hardy, CEO of Ørsted Offshore North America, says the aim to “launch a new U.S. industry that will provide well-paying union jobs, create economic opportunity, and generate local investment the will benefit all Americans.” Ørsted is in the environmental permitting phase of development on the Ocean Wind project, 13 miles southeast of Atlantic City, N.J. It would feature nearly 100 turbines producing 1,100 mw on a windy day. 

And then there’s Equinor, the Norwegian energy giant has two megaprojects in the works. Empire Wind is located 20 miles south of Long Island, east of the Rockaways, and would cover 80,000 acres with upwards of 200 turbines, generating 2,000 mw. Its Beacon Wind project, 20 miles off the Massachusetts coast, would be about half the size. Both are in permitting, and Equinor has already contracted a cable-laying ship called the CLV Nexans Aurora. 

Dominion Energy, meanwhile, have ordered a brand-new Jones Act compliant wind turbine installation vessel, being made with 10,000 tons of Alabama and West Virginia steel sent to a shipyard in Texas. Dominion has a 2-turbine, 12 mw pilot project off the Virginia coast, but hopes to erect hundreds more. 

A JV between Royal Dutch Shell and French electricity giant EDF called Atlantic Shores Offshore aims to produce 3,000 mw from 180,000 acres of water between Atlantic City and Barnegat Light, leased in 2019. Since then New Jersey regulators have undertaken a 2-year field study of birds, turtles, fish and marine mammals that might be bothered by the construction work. Other stakeholders will have a say, too. A spokesperson says turbine visibility “during parts of the day and year may be a concern,” so they will soon “host a series of open houses where residents can learn more” and ask questions. Shell currently has 6,000 mw of wind in its portfolio, while EDF Renewables has done four offshore wind farms in France. 

But of all the offshore wind players, analyst Meike Becker of Bernstein Researh favors the Vineyard Wind developer. “Iberdrola is the name to play offshore wind,” she wrote recently. It already operates 2,000 mw and has experience in Sweden, Poland, Japan, Ireland and the Baltics. For the multi-billion-dollar Vineyard Wind 1 and 2 projects it would use the Bedford Marine Commerce Terminal for some heavy lift items, while other materials could be floated over directly from Europe and offloaded onto installation barges. It’s no sure thing: NIMBYs are pushing back, and the Department of the Interior permitting process has been widened in scope to consider the impact of new wind developments up and down the seaboard. Iberdrola has other things going for it. Avangrid is growing an electricity utility business in the U.S., first in New England and New York, plus the recent acquisition of the PNM regulated utility in New Mexico — where coal is being quickly phased out of the power mix. Avangrid is in the early stages of setting up a research center in the southwest, which could someday help perfect floating turbine designs (vs the standard seafloor-anchored) for potential deployment off the California coast. Iberdrola generated 4 billion euros of net income last year, sells at 22 times earnings, and boasts a 4% yield. It’s now the third biggest operator of renewable energy generation in the U.S.

Bernstein’s Becker sums up the state of play: “The days of supra-normal returns in offshore wind are over and the market has matured to a level where it is competitive – not aggressively so – but it is competitive and warrants a differentiated strategy or some unique selling point for developers to achieve attractive returns.”

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