Winds of economic development and IOTW

The scale of the challenge and opportunity requires creative and coordinated efforts

Jul 19, 2024

Offshore wind is increasingly a resource that governments around the world are subscribing to in an effort to green the grid and as a key tool to drive economic development.

According to ERM, “in 2023, global operational offshore wind capacity increased to near 68 GW. This growth puts the world on track for up to around 233 GW of installed offshore wind capacity by 2030 and up to 340 GW by 2033, well short of the 2030 capacity of 494 GW that the International Renewable Energy Agency (IRENA) estimates is necessary to keep temperatures below 1.5°C.”

To put this in perspective, how much is 1 GW?

~312 wind turbines assuming the average wind turbine is 3.2MW

~3,350 Ford Platinum vehicles with ~400 hp

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So how does building wind turbines contribute to economic development? By building ports - dedicated spaces focused on the operation and maintenance of offshore wind farms, where all turbines and other equipment get transported, and where floating turbines are assembled - new jobs can be created and local economies will benefit from the modernization and re-investment into the local communities. These wind ports will also become the hubs to attract green hydrogen projects - powered by wind turbines - leading to the creation of new and adjacent industries to produce clean fuel and by-products.

Where are these ports? Do we have enough?

Building wind ports requires large parcels of land with plenty of open space and no (or very limited) height restrictions, depending on the use of the land, to allow the equipment and machinery to be set up, or transport wind turbine blades, towers (the longest part of the turbine) and monopiles (large hollow cylindrical structures that are installed into the sea bed and hold the weight of the structure above water).

“Oceantic Network has identified 25 U.S. ports currently involved in offshore wind or undergoing development to support the industry, with dozens more rumored or planned. These range from $20 million projects, like smaller Crew Transfer Vessel (CTV) operations and maintenance (O&M) ports and modest manufacturing quays, to enormous all-in Marshalling & Assembly plus O&M developments like Equinor’s $861 million South Brooklyn Marine Terminal (SBMT). The Network, using closely tracked data from the U.S. offshore wind market, conservatively estimates that the current public and private investment into offshore wind ports stands at $4.2 billion.”

“As of March 2023, Europe had 30.3 GW of offshore wind energy from over 5,954 turbines in 126 wind farms across 13 countries. European governments plan to add up to 150 GW of offshore wind power in the next ten years to meet climate goals. This means a big jump in new installations each year, from 3 GW in 2023 to 7 GW by 2025 and over 20 GW by 2030.”

Asia-Pacific, being led by China, is aggressively pursuing offshore wind as well to supercharge their commitments to lowering emissions.

All this means that we are going to need A LOT MORE wind ports, globally!!

The scale of challenge & opportunity is massive, and requires coordinated efforts to succeed

Even if we did find all this land, building a purpose-driven wind port could take up to 10 years and requires significant capital. To overcome these hurdles, the following are the key considerations;

Responsible and coordinated development is the name of the game. Heavy-lift terminals have had varied impacts on communities. On land, equipment such as tractors, forklifts, trucks, cranes, and handlers mostly use diesel. At sea, cargo ships and tugboats often run on diesel or heavy fuel oil, polluting the air. Even when docked, these ships and tugs burn fuel to keep the electricity on. This leads to air pollution that affects nearby communities. For example, in Los Angeles, studies done by the California Air Resources Board (CARB) found that diesel fumes from these terminals greatly increased the cancer risk for people living within fifteen miles of a seaport. Federal and state governments ought to be better coordinated in their efforts to deploy funding to decarbonize equipment, ships, and tugboats, so that they’re in-sync in regard to driving responsible port development. Today, these efforts are haphazard at best.
Repurpose existing or retired O&G ports/ infrastructure, where feasible. While I am no expert in O&G or related infrastructure, it would be a worthwhile effort to evaluate synergies between what is needed to build a port to house offshore wind operations and what may already exist in an O&G port. “It is estimated that approximately one-third of the total life costs (operation, maintenance, and service costs) of an offshore wind project can be favorably impacted upon by significant synergies with the O&G supply chain, by making it possible to electrify O&G offshore operations by installing wind farms nearby or by means of floating turbines, thus reducing the need to operate diesel or gas generators on the platform, reducing GHG emissions and air pollutants, and facilitating the energy transition, with platforms providing bases for wind farms,” elaborated Braga, Santos, Shadman, Silva, Tavares, and Estefen in their article.”
Coordinate private-public partnerships to de-risk commercial port offtake agreements. Offtake agreements are crucial in the renewable energy industry regardless of the flavor of the technology. Without them, attracting investment for large renewable energy projects that aren't owned by utility companies would be challenging. This is where state, local, and federal governments can play a role to de-risk these projects to ensure better success. The most common form of an offtake agreement has been a traditional power purchase agreement, or “PPA,” with the local utility. Today, the wind power industry has matured, and stakeholders such as large corporates including Google, Microsoft, and Apple have committed to procuring renewable energy and replacing the role the utility. These efforts can however be better coordinated through public-private partnerships and coordination to ensure project success. Without a predictable and consisted projected demand for offshore wind based electricity, existing ports or those under construction will be forced to transition again to support other industries displacing all the newly trained workers.
State-level and regional coordination to build purpose-driven ports to grow the industry. Even as states are competing against one another to attract suppliers in the offshore wind industry, it would be worthwhile for states to coordinate (in a co-opetition instead of competition) efforts to ensure the wind industry can grow regionally. This might mean that some states or ports are centrally focused on operations and maintenance of a wind farm, whereas another could be focused on becoming the hub for spare parts or the “service port”. While this is beginning to happen, we are ways off from a more coordinated and well-intentioned implementation.
Source: Oceantic.org
Incentivize co-location of adjacent and complementary industries & technologies. While the benefits of electricity produced by offshore wind are evident, wind plants are curtailed today for a variety of reasons. A few reasons include, (a) wind energy output is not accurately predicted leading to a supply-demand imbalance and require gas plants to be turned on to meet the demand, (b) transmission network congestion caused due to the grid network not being able to keep up with the supply of wind energy, and (c) due to unpredictable or adverse weather. Installing batteries to store the excess power generated could be a very practical way to reduce curtailment costs. For example, according to an analysis from a battery developer Field, turning on gas plants in England and Wales and switching off wind farms in Scotland cost taxpayers ~$1.17 billion; this cost is estimated to come down if wind plants were combined with battery energy storage. Perhaps there is value in co-locating battery plants with wind ports or incentivizing the installation of batteries as a backup.
Access to low-cost capital. Steel is one of the most important components of an offshore wind turbine. For every MW of an offshore wind turbine, about 120 tons to 180 tons of steel is required. Steel is also necessary to build bridges and other infrastructure. According to S&P, steel demand for offshore wind is expected to grow 26% over 2021 levels by 2030.
To ensure continued success of offshore wind, project developers need access to low-cost capital. Federal and state governments can play a crucial role in this regard. The Hong Kong government recently raised $3.2 billion via green bonds attracting central banks, sovereign wealth funds, insurance firms, and private banks. Creating similar climate bonds backed by the government could lower the overall cost of capital made available to build ports to offset unpredictable surges in cost of materials (due to tariffs or supply chain constraints).