Observations from members of the Business Network for Offshore Wind

 

The Business Network for Offshore Wind, a non-profit organization dedicated to growing the US-based offshore wind supply chain, will coordinate with SubCableWorld to host a Subsea Cable Supply Chain Event on 10 October 2019 in Houston, Texas. Join us to be part of the conversation.

The following observations on supply chain strategies were captured from speakers at the International Partnering Forum (IPF) held in New York, NY in April 2019. The IPF is a flagship event of the Business Network for Offshore Wind. It is also a vital event for the growing offshore wind industry.

“We had record attendance this year with over 1400 people,” Liz Burdock, CEO & President, Business Network for Offshore Wind, said, “These are the senior leaders of government and industry who are making this market happen. I'm proud to say that we had 222 speakers, over 100 exhibitors, 62 sponsors and cooperating partners, and 25 media partners. We also had over 200 government officials and regulators at this year’s IPF, including delegations from the U.K., Netherlands, Norway, and Denmark.”

SubCableWorld was also there, and we listened closely to discussions about the offshore wind supply chain in the United States. The key takeaway? The time for solving these challenges—

including the subsea power cable supply chain addressed in this report—has arrived.

Liz Burdock, CEO & President, Business Network for Offshore Wind, said, “As 2018 wound down, the United States leased 16 wind energy areas for a total capacity of 21 gigawatts. In the fourth quarter of 2018 alone, the private sector spent more than one billion dollars on leases and projects. Then, 2019 began with a 62 percent increase in market size when the Governor of New York Andrew Cuomo increased his commitment to offshore wind and took the future U.S. market to 17 gigawatts.  That number grew again when, during the IPF conference, Maryland announced their Clean Energy Jobs Act, which committed the state to adding 1200 megawatts capacity.  

“That gives you a sense of how fast this industry is growing. As a result, if you look at the planned project development timeline, there is a bottleneck of projects coming to a head in 2021 and 2022, where at least 5000 megawatts of offshore wind capacity are going to have to be constructed, installed, and operating by 2023. So, we are under a severely compressed timeframe when it comes to supply chain capacity and one of the questions that we have to ask is: Do we have enough businesses to meet that demand?”

While Europe has a head-start on the rest of the world, when it comes to offshore wind, according to Eric Thumma, Director of Policy and Regulatory Affairs at Avangrid Renewables, when you compare the size of early projects, “We're already ahead of Europe on technology from when they started . . .  A lot of times you want to be the first mover, but we probably have the advantage in this case in not being the first mover in that we can start a little bit ahead of where everyone else has been in Europe and can take advantage of some of those best practices, and the technology and the innovation work that they've put into it.”

Liz Burdock believes that the U.S. can catch Europe in 5 years, “I think the first scale large scale offshore wind projects are going to go into the water in 2020-21. There will be a lot of European partners coming over and installing that, but they're going to work with our local businesses and as we start partnering that expertise will be transferred over. I also believe that we have a lot of really valuable knowledge from the oil and gas industry that will also help. Between those two areas, we'll be able to transfer skills and build local supply chains in the Northeast, and all over the country.”

While some aspects of offshore wind, such as floating windfarms, invite the expertise of oil and gas companies, Burdock adds that for much of offshore wind, “This is a specialized industry and even though we talk about transferring over from land-based wind or from oil and gas, it’s not exactly the same. So, you really do have to work with those partners that do have that specific experience and you have to make a commitment to diversifying into the industry and providing resources to it. If you do that, it will pay dividends, because this is going to be huge.”

Jason Folsom, National Director of Sales, US, MHI Vestas, said, “I consider offshore wind to be the strongest unique provider of economic development ecosystems that we could possibly have in our coastal regions in this country.”

He used growth for offshore wind specific procurements in the U.S. as an example, saying that it amounts to around 85% compound growth per year. And if you look at the projections for 100 gigawatts by 2050, he says, “There's a lot of room to run in this industry . . . it is logical that you would build a purpose-built supply chain to support it.”

Folsom is bullish on America’s ability to do so, saying, “We can not only build a purpose-built US supply chain in this country, but we can improve and maybe even build a more efficient supply chain than Europe, we get to take those lessons learned as a starting point, we get to innovate as a country as we take ownership of the supply chain, and what we end up with is going to very much be American.”

Folsom added that his company, MHI Vesta, will have American offices to support a local supply chain, and that “Our management has been very clear: We do not want to run our new market businesses from Europe.”

He added that “We're going to build a purpose-built supply chain at the same time we're building our first wave of projects. . . So, at the same time we want this robust, comprehensive, better-than-Europe supply chain, we also have to build stuff. And that I think presents a unique challenge.”

Edgare Kerkwijk, Board Member, Asia Wind Energy Association reminds us that it’s not just the U.S. offshore wind capacity that is growing rapidly. China, Taiwan, Korea and Japan also have major plans – and similar supply chain challenges. He says, “In the next couple of years there will be around 10 gigawatts per annum installed capacity of offshore wind around the world and that will definitely put a strain on supply chains around the world.”

Liz Burdock added, “You can juxtapose our emerging market with what is going on with Asia. Everybody thinks that it's states like New York, New Jersey, Maryland and so on competing, but we are competing against the world now, for the same suppliers that Asia and Europe use.”

Speaking of states, New Jersey Governor Phil Murphy announced the launch of the New Jersey Offshore Wind Supply Chain Registry during the IPF conference. The New Jersey Economic Development Authority (EDA) is building the New Jersey Offshore Wind Supply Chain Registry as part of their membership in the Business Network for Offshore Wind. The Registry allows companies to publicly indicate their interest and ability to supply components and services for U.S. East Coast offshore wind projects. Simultaneously, it serves as a resource for companies looking to buy from and partner with New Jersey-based firms. As such, the registry is meant to support New Jersey's offshore wind solicitations and provide free access to industry-reviewed suppliers based in the state.

Liz Burdock explains that, “The supply chain registry is something that we created when we first started. Essentially is a free service where businesses enter in their information. We've enhanced it significantly over the last year to get really specific on products and services, such as whether or not people have worked on an offshore wind project, what their certifications are, and so forth. We've also had it peer reviewed by our members to give us feedback on what they're looking for, such as what our tier one suppliers are looking for from their secondary suppliers.

“What we really want to do is capture as many local businesses—secondary and tertiary supply chain companies—as we can. People in the industry, like those who attended the IPF, are already aware of the tier one suppliers, and many of the tier two suppliers, but there's a third tier that we need to get to and that's really what the registry is focused on and why we're so excited to work with New Jersey on this. Other states have worked on something similar to what we've done, but it's not as robust nor is it as detailed in any way as what we have.”

Tim Sullivan, CEO of the NJ EDA, sees leadership and partnership as keys to building the supply chain. He said, “Under Governor Murphy’s leadership in New Jersey, our team at the EDA, in partnership with the state Board of Public Utilities, Choose New Jersey, and the Department of Labor are working really closely together to advance all elements of our offshore wind ambitions. . . Supply chain is at the very top of that list alongside solicitation and the Offshore Wind Renewable Energy Certificate (OREC) process to encourage and purchase wind power.”

Sullivan championed the registry and added that the NJ EDA has a whole suite of programs supporting offshore wind, including an offshore wind supply chain tax credit of up to one hundred million dollars to offset the capital costs associated with building or expanding a manufacturing facility or supply-chain-oriented installation in New Jersey. He believes that these ambitious public policy programs, along with the right combination of location, port investments, and policy framework, give his state a competitive advantage.

Liz Burdock said, “In a cable process flow chart, for example, there are many different areas where a small- or medium-sized business can enter into the supply chain. It's just about being able to understand where you fit and understanding where you can come in . . .  A lot of times, you come in underneath somebody that the developer has contracted with. To address that the Business Network for Offshore Wind is also launching training. We received a grant from the state of Rhode Island on this training—foundation to blade—to help companies figure out where they fit into the supply chain to make it easier for them to understand where they go for a contract. We focus a lot on worker training, which I think is important, but I think businesses understanding where they belong is really important at this critical moment in time.”

Eric Thumma said that one of the lessons he learned while working on land-based wind power for 12 years was that it is important to get planning for power transmission correct, including the transmission supply chain. One area where he says that he would call for improvement after working in the land-based arena is “in engaging with the supply chain on public policy.”

He says that, “One of the challenges that we've had in the land-based world, frankly, is public acceptance. As we went through States and we worked on public acceptance, people wanted to know where the jobs were. If we had had the ability to engage more with the supply chain and tell a story—a local economic development story, a job story, a public local benefit story—I think we might have had an easier time on some of the public acceptance challenges that we faced.”

Thumma explained that while global and regional opportunities for supply chains exist, it is also important build local supply chains that create the type of local success stories needed to make sure that the offshore wind market is sustainable from a public policy standpoint. He cited the Business Network for Offshore Wind as the type of network that can create what he calls “a virtuous circle, where there's a feedback loop between the policy-makers, the developers, and the supply chain. It's getting this positive feedback loop that is showing everybody this is a winning opportunity for all of us.”

Tim Sullivan said, “Bringing some transparency and some visibility to that market is good for New Jersey and good for the industry and given the sector, because you know this is a new industry and a new ecosystem that is set to emerge, it's going to be a hybrid of companies that pop up. Companies that come from Europe, companies that come from Asia and other places, as well as companies that bring oil and gas or terrestrial experience together. The more transparency and clarity we can bring to the market, the likelier it is we can connect folks with Northern European accents with folks with good old Jersey accents . . .”

It’s not all about New Jersey, even for Sullivan, who added, “While we have some good natured, spirited competition for the specific components of the supply chain, we really do think of this as an ambition that we all share—everyone who has the coastline. We also think there's a big workforce component. If the jobs are going to be created in North America and in the Northeast, there's a skill development and training component of this.”

Sullivan explained that for the existing supply chain workforce, who are in an analogous manufacturing field, helping them transition to be able to do exactly what the offshore wind industry needs is going to require public policy actions and incentives to help with capital investment and with workforce training at existing suppliers to analogous industries. For the offshore wind industry workforce in general, he says, it's a regional challenge, similar to the challenges once faced in the arena of information technology.

“Given the energy and environmental imperative for alternatives and for renewables, this is going to get figured out. This industry is going to be borne.”

Liz Burdock said, “One of the benefits of developing a local supply chain is lowering the cost of energy. If you have local suppliers, you eliminate transportation cost and ultimately, over the long run, you decrease the cost of energy and electricity generated. But I think it's really important to say that in the beginning you can't focus on cost reduction, especially in starting a new industry. If you're solely focused on cost reduction, you won't have the economic development, you won't have the local jobs. That's a really important element for us to consider in terms of public acceptance. I don't think it is really about what is the lowest cost of energy. It has to be about how many jobs are created.”

In that same vein, she asked, “Are we really training the right workers? A lot of what is going to happen is the data-driven digitization of the offshore wind industry. There are going to be autonomous vessels; we already have the drones; we have autonomous undersea survey vessels. We need coders and computer engineers as well . . . Those are questions and issues that we also have to think about as an industry. . .  These are all areas that I think are really ripe for U.S. growth, U.S. innovation, and a ton of jobs.”

Edgare Kerkwijk said, “Of course, we all want to have a local supply chain, but I think we need to learn from each other. Countries like Taiwan or Japan are doing the same thing as you are doing in the U.S. and I think it's important that we are starting to see synergies. We (will) probably see the first Asian companies coming here and helping out with some of the wind farms and hopefully see some American companies coming to Asia to help with engineering and things like that. I think it's very important to open a market. In Asia we have two examples: Taiwan is very open, and (are) starting with the first construction of projects already and these projects were only awarded 6 months ago. In South Korea which has been trying to use their own turbines, and has not allowed foreign investment to come in, that market is really stagnating. It gives an example: if you're more open, you will grow faster.”

Eric Thumma said, “The reality in the United States is that the retail electricity market is the purview of the individual states. There's not a comprehensive national or regional strategy on retail electricity and the demand for this industry is coming from the states. . . One thing my colleague at Scottish Power said to me is that the supply chain in the U.K. was really dependent on having consistent procurements happening. When they had on-again off-again procurements, that made it very difficult to get supply chain folks to be confident enough to invest. So, one of the challenges in the U.S. is how do you get states to collaborate on a comprehensive offshore policy. If you look at Massachusetts down to Virginia, the count we're hearing is 20 to 25 gigawatts. It would be great if that was coordinated, so that it was happening in a rational, sequential fashion. It would probably be the first time in history that something like that occurred, but I would encourage the states to at least talk about it, because they're all going to benefit from the innovation and the cost reductions in the local supply chain development, if that retail electricity procurement for offshore wind can be rationalized.”

Jason Folsom said, “If you look at the price of offshore wind leases since the beginning here in this country, the compound growth rate there is around 600 percent. I think that is because states have come full forward with very specific offshore wind goals, amounts, timelines, distances, evaluation criteria. And then I point back to what Richard Kaufman of NYSERDA said during the IPF: that we need to make sure that this 9-gigawatt goal is levelized and recurring and other words that we use in the industry. I take a lot of comfort in that, not because New York sets the pace, but because good ideas tend to cross borders.”

Tim Sullivan added, “There will be an impulse to overly design the infrastructure and the supply chain around the first set of projects that are moving forward, as opposed to designing for an industry and designing for an energy patch.”

He recommended a balanced approach of thinking about both the short term and the long term, saying for example that: “We want a network of ports that is somewhat project agnostic, that is somewhat developer agnostic, so that it can have multiple users over the next 25 to 50 years and not design these assets and these investments to just solve the next 3 to 5 to 7 year set of challenges. . . . Having a project and supplier agnostic infrastructure is going to be important.”

As you can see from these excerpts, which are just a sampling of U.S. Supply Chain discussions that occurred during the 2019 IPF, this was a robust conversation about both short and long-term challenges. We invite you to join us in Houston for our Subsea Cable Supply Chain Event and be part of the supply chain conversation. We’ll publish the details of that event on our website, as well as at www.offshorewindus.org.