Biden and the US government are huge proponents of offshore wind energy. They have set ambitious goals aiming for 30,000MW of energy from offshore wind by 2030. This makes sense because wind energy more broadly has the wind behind its sails - it already drives the largest share of renewable energy for the US today.
There is considerable headroom for growth in offshore wind though given the progress China and Europe have made. As of Jan 2024, the US generates less than 50 MW of energy from offshore wind.
Unfortunately, 2023 was a terrible year for US offshore wind projects1
Avangrid ditched contracts to sell power generated by projects off Massachusetts and Connecticut claiming they had become “unfinanceable”
Orsted scrapped two projects off the coast of New Jersey blaming “macroeconomic factors”
BP and Equinor cancelled their offtake contracts with New York after the state utilities regulator rejected their bid to raise the selling price
Authorities are starting to recognize the problem. The New York State Energy Research and Development Authority recently fast-tracked a process through which developers can try to negotiate higher prices.
Macroeconomic factors are understandably driving up development costs but there is another, more insidious driver of cost that is destroying the financial attractiveness of offshore wind projects. The Jones Act of 1920.
The Jones Act…means that only US‐built and US‐registered vessels can transport goods by water in the United States. No existing Wind Turbine Installation Vessels (WTIV) comply with these restrictions, barring them from transporting wind turbine components to installation sites from nearby US ports.2
To comply with the Jones Act, developers end up having to use comical workarounds like transporting materials using US ships and then transferring them to more appropriate vessels anchored next to the site.3 The first US WTIV, the Charybdis, was expected to be delivered in 2023. Current estimates suggest it’ll be ready only by late 2024 or 2025 at over 1.25x the original cost.
Biden is right in promoting offshore wind, but he remains a strong proponent of the Jones Act, perhaps not recognizing the cognitive dissonance at play here. In fact, to all who ask for the Act to be scrapped, he says “not on my watch”.4
Developers being allowed to sell energy at higher prices is a good short-term market-oriented solution. The victims of these higher prices however are going to be the consumer and the transition to renewable energy itself. At the margin, higher prices will make offshore wind less attractive than the alternatives which defeats the entire purpose of promoting new developments.
India removed its equivalent of the Jones Act last year.5 Maybe it’s time for the US to follow suit.
Financial Times; Various articles
Cato Institute; https://www.cato.org/blog/jones-act-contributes-offshore-wind-growing-pains#:~:text=The%20Jones%20Act%2C%20however%2C%20means,sites%20from%20nearby%20US%20ports.
Bloomberg Odd Lots Podcast; https://www.bloomberg.com/news/articles/2023-11-22/what-s-wrong-with-offshore-wind-in-the-us-odd-lots-podcast
Maritime Trades Department; https://www.maritimetrades.org/biden-to-jones-act-foes-not-on-my-watch/
Splash; https://splash247.com/india-lifting-cabotage-laws-to-help-coastal-shipping/?utm_source=dlvr.it&utm_medium=twitter