The Blog - Wind energy market analysis

Posted 05/03/2018

Ilaria Valtimora

    

US offshore wind needs free trade, not protectionism

President Trump started March by launching an international trade war over steel and aluminium imports, which will further stoke fears about protectionist policies in the burgeoning offshore wind industry. Ilaria Valtimora reports

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After years of delays, the US offshore wind industry is gaining momentum. State governments are increasingly committed to the growth of the nascent sector.

However, wind businesses are now getting worried about what would happen to offshore wind if the national government were to adopt protectionist policies. When we look at the trade restrictions imposed by US President Donald Trump on solar panels, their fear is not unfounded.

Last month, he signed into law a 30% tariff to be imposed on imported solar cells and modules, as part of a broader protectionist agenda that would aim to boost US manufacturing firms. He followed this on 1st March by announcing that he would slap 25% tariffs on steel and aluminium imports into the US.

And the growing US offshore wind industry could be hit by Trump’s agenda too.

The market undoubtedly has great potential. According to the US Department of Energy, there is now a pipeline of 28 US offshore wind projects in development totalling almost 24GW, which could unleash investment of up to $56bn.

There is a long way to go, though. Deepwater Wind’s 30MW Block Island is the only scheme that has reached completion so far, and such a huge pipeline would require a great commitment from governments, including to bring in expertise from Europe's major offshore wind turbine manufacturers.

In fact, there is only one significant offshore turbine platform made in the US at present. GE Renewable Energy produces its Haliade 150-6MW turbine, five of which are now spinning at Block Island. GE also announced last month that it would invest $400m over the next three to five years to develop a 12MW turbine platform called Haliade-X, but there is clearly a long way to go on that plan.

And interest from European manufacturers is picking up too. Last year, MHI Vestas picked Clemson University in South Carolina to test its 9.5MW turbine. It will be eyeing orders for some of the first round of utility-scale US offshore wind farms.

No doubt, its big-hitting European rival Siemens Gamesa will be on the lookout too – but free trade will be crucial to bring in these European firms.

The manufacturing operations of Siemens Gamesa and Vestas in US onshore may not be a big help as they currently stand. For example, even though Vestas is the largest turbine supplier in the US, its offshore turbine parts like nacelles, towers and rotors would still need to be made in Europe. The firm needs to see a stable US offshore market emerge before it invests in setting up factories that could produce offshore turbines entirely in the US.

If there are trade restrictions on imported parts would this would affect both the pace of growth of the sector, and the costs of offshore wind farms. And the restrictions on foreign-owned ships in the Jones Act are additional hurdles to overcome.

According to the US Energy Information Administration, the cost of building offshore wind farms in the US is initially projected to be $157/MWh. This is almost double the $80/MWh (£57.50/MWh) at which the 1.4GW Hornsea 2 and 950MW Moray East schemes won Contract for Differences in the UK in September.

The costs of building offshore wind farms in US waters will fall fast, especially when manufacturing operations and supply chains are established. The US sector has a well of knowledge gained in Europe from which it can draw.

But for this to happen, it is highly likely that free trade will be needed in the early stages. Europe has created an efficient manufacturing industry in the last two decades, which has helped drive down costs to their current lows. A free trade approach would allow the US to take advantage of the European expertise and to bolster the growth of the sector.

This would enable quicker development of the local manufacturing industry and create more factory jobs. A perfect scenario to make President Trump happy? We hope so but, after the last week, we’re not so sure. He likes trade wars a lot too.

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