Oil Giants See a Future in Offshore Wind Power. Their Suppliers Are Investing, Too.

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Transporting an offshore wind array from the factory floor to the ocean floor is no easy feat. Giant, specialized marine vessels must carry the blades and turbines—which sit atop rigs hundreds of feet tall—out miles from shore. Steel or concrete foundations are built to hold them in place, and underwater cables are laid on the seabed to transfer the power to land.

One other industry has spent decades constructing and maintaining such massive energy infrastructure that can survive the storms of the open ocean: oil and gas. Now, with global demand for wind power growing, major oil and gas companies like Shell and Statoil are diversifying their portfolios by developing offshore wind, and the companies that provide services to offshore fossil fuel platforms are seeing a new market rising in their wake.

“Offshore wind developing seemed like a natural skill set for offshore oil and gas companies,” said Stephen Bull, senior vice president of wind and carbon capture storage for Statoil, a Norwegian oil and gas company. “From the Gulf of Mexico to Brazil and beyond, we see a similar supply chain and skill set and can grow within this area.”

Statoil, which is building the world’s first floating wind farm near Scotland, is planning development for its first offshore wind lease in the U.S., an 80,000-acre area off the coast of New York that could generate more than a gigawatt of power. Ørsted (formerly DONG Energy, short for Danish Oil and Natural Gas), has a 1.3 gigawatt wind farm under construction off the UK and is exploring developments off Massachusetts and New Jersey. Shell is leading the development of two wind farms in the Dutch North Sea.  

Globally, 17.6 gigawatts of wind power capacity have been installed offshore, with most of it in Europe, and the industry is growing. Bloomberg New Energy Finance raised its offshore wind forecast this week, with an expectation that it will reach 115 gigawatts worldwide by 2030.

The U.S. market, however, has gotten off to a slow start.

Cape Wind, a large-scale offshore wind project planned near Massachusetts, was officially killed late last year, leaving only one small working offshore wind farm in the U.S., and 13 offshore leases from Massachusetts to North Carolina, according to the Bureau of Ocean and Energy Management (BOEM). Other projects are in various stages in the South Atlantic and Pacific Ocean.

According to a 2017 Wood Mackenzie study, annual revenues from wind and solar could represent one-twelfth of the revenues in oil and gas by 2035. As major global oil and gas companies and supply chain companies are moving into the offshore wind game, the market is ripe for large-scale projects that could not only generate more wind power in the U.S. but bring costs down and create jobs in local communities.

“Building on the success of the oil and gas industry and their work in the open ocean for several decades now, we think it’s a great business opportunity for them,” said Nancy Spoko, director of offshore wind and federal legislative affairs at the American Wind Energy Association. “And it’s a great starting point for offshore wind to utilize the skilled workers, infrastructures, the vessels and the body of expertise that comes from oil and gas to catapult another new ocean industry resource.”

Using Oil and Gas Industry Strengths

Just south of Rhode Island, the only working offshore wind farm in the U.S. has been successfully supplying power from five turbines to about 2,000 customers for just over a year. Years ago, Europe started with small projects like that, Bull said. But as oil and gas giants entered the market, they have been able to take on larger projects that generate more electricity. Since then, Europe has become the world leader in offshore wind, with about 13 gigawatts installed and more in the works.

“What we see now has scaled dramatically on the industrial level—turbines are much larger and farther from shore to capture better resources,” Bull said. “Oil and gas companies are used to carrying that kind of investment.”  

Oil and gas supply chain companies are also getting into the market.

Gulf Island Fabrication, based in southern Louisiana, manufacturers foundations for offshore oil rigs—and for offshore wind turbines. The company built foundations modeled after oil platforms for the Block Island Wind Farm.

The Houston-based engineering firm Zentech, which specializes in rig platforms and offshore oil drilling and construction vessels, announced plans this summer to tackle another hurdle facing the wind industry: with Renewable Energy Resources International of Virginia, the company is building the first U.S. offshore wind-turbine installation vessel. Under the Jones Act, only U.S.-built, U.S.-based ships with U.S. crews can carry goods between U.S. ports. When the Block Island Wind Farm was built, a European ship had to be used, and it wasn’t allowed to dock in the U.S. before delivering supplies. After some “fine-tuning” of the designs, the new U.S. vessel is on track to be completed by mid-2019, Zentech Vice President Sundaram Srinivasan said.

The wind industry provides an opportunity for companies to reinvent themselves and diversify, Bull said, and for employees to find work in a new market. “These workers have been building things for open ocean use for decades,” he said, adding that he’s hoping American offshore oil supply chain companies will get into the offshore wind industry to help create local jobs.

“That will be essential for us to win the hearts and minds, not just with politicians, but with local people,” he said.

Statoil is interested in utilizing the oil and gas supply chain along the Gulf Coast to build foundations, vessels and turbines, and using port authorities in New Jersey and New York and other local vendors to help with the New York project.

“It’s a true redeployment of the American workforce,” Spoko said. “It will create great-paying jobs and increased energy independence and attract investment in infrastructure and manufacturing.”

Streamlining the Process

There has been a surge in demand for offshore wind from many coastal states, with about 14 gigawatts of leased wind energy area capacity in the Northeast alone. Several states have set goals for offshore wind power:

• New Jersey’s incoming governor has pledged 3.5 gigawatts by 2030.
• New York’s governor has a goal of 2.4 gigawatts by 2030.
• Massachusetts is calling for 1.6 gigawatts by 2027.

California has been pushing for offshore wind, too. Floating wind farms, which are now being tested off Europe, have more potential near California and Hawaii, where the seafloor drops off quickly, Bull said.

But an offshore wind project can take up to a decade to complete. After the long bidding process, it takes time to choose and assess a site, figure out financing, and do an environmental impact analysis—all before a developer begins construction.

“The key thing about renewables is that we need and want to develop as fast as we can but the regulatory process stops it for so many years,” Bull said.

There are ways to streamline the process at the federal level, Spoko said, and AWEA has been lobbying the Department of Interior and BOEM to do so. For instance, she said, a floating wind farm doesn’t have the same environmental impacts as one on the seafloor, so it shouldn’t be held to the same environmental assessment requirements.

“That could shave two years off process for a developer,” Spoko said, “which is going to keep attracting investment.”

There are also hold-ups at the state level, where some lawmakers and communities have pushed back against offshore projects. Along the East Coast, fishermen groups are fighting plans for offshore wind projects; Cape Wind was set back for years because of political opposition from the Kennedy and Koch families.

“Each developer must demonstrate safe and responsible development plans to the regulators as well as to a plethora of other agencies and local stakeholders,” said Walt Musial, manager of offshore wind at the National Renewable Energy Laboratory.

However, as those processes are smoothed out and fossil fuel companies scale up offshore wind projects, he said, the costs will likely come down. “The oil and gas industry is in an excellent position to capitalize on this nascent industry,” Musial said. “It possesses the skills and know-how to step into this business, which could see revenues of well over $20 billion in the next decade.”