OSW Overview

January 2, 2024
John Dalton

2023 was a bumpy road for offshore wind (OSW). However, interest rates appear to have peaked and in the US OSW procurement frameworks now typically employ inflation adjustment mechanisms. I’m optimistic that 2024 will be less tumultuous. Here’s some of what I’ll be looking at in 2024 to assess the state of the US OSW market. Evidence of OSW Developer Confidence: A number of bids submitted in response to the Southern New England states’ OSW procurement are large, multi-phase projects that call for the sequential development of their project in stages so economies of scale can be fully realized. Comparison of contract pricing offered in NYSERDA’s 2023 ORECRFP with the $145/MWh nominal levelized strike price in the 2022 RFP, with price declines evidence that the supply chain is healing and price risks are receding. Coordinated Transmission Development to Support OSW: What are the outcomes of the numerous initiatives targeted at realizing the potential for coordinated transmission development? The number of these initiatives is clear indication that the promise of coordinated transmission development is appreciated by policymakers:

·      NYISO’s New York City Public Policy Transmission Planning Process (PPTPP): What’s the scope of innovation and who’s successful in this PPTPP, recognizing that New York Transco has had success in several recent solicitations.

·      Northeast States Collaborative on Interregional Transmission: Does this effort result in the identification of meaningful new potential transmission investments or policies to support such investment (e.g., agreements on cost sharing frameworks)?BOEM Lease Auctions: There aren’t better barometers of OSW developers’ interest and confidence in the economic prospects of lease areas than the results of BOEM lease auctions. I’ll be interested in seeing the level of market interest in forthcoming BOEM lease auctions.

·      Central Atlantic: How does the loss of the WEA B-1 impact auction dynamics? WEA A-2 is well suited to address the emerging needs of Delaware (look for legislation in 2024 to enable state procurement of up to 1GW) and Maryland (recognizing that the OREC cost cap is a constraint). WEA C-1 is well suited to supply Virginia. Interest in this WEA will be influenced by potential legislative changes that could increase the prospects for third-party offshore wind development to supply Virginia Power’s renewable energy requirements.

·      Gulf of Maine: As another floating offshore wind play, how do auction results compare to California? Massachusetts and Maine represent viable offtake opportunities. Massachusetts offers a tested procurement framework with the potential for a significant increase in the state’s OSW procurement target in the current legislative session. Maine has legislated procurement authority for 3 GW and strong state policy support for floating OSW.