Status of the Offshore Wind Cable Market in the U.S.

The offshore wind industry in the United States has made incredible strides in the last two years.  Following the completion of the first demonstration-scale wind farm, a number of states in the Northeast began a concerted effort to make offshore wind part of their renewable energy portfolio.  Sizeable state procurements occurred in 2018 and the federal Bureau of Ocean Energy Management (BOEM) threw its support behind the industry, resulting in a record-breaking lease sale at the end of that year. 2019 continued this momentum with additional state procurement commitments. 

These developments are moving the US market closer and closer to the implementation stage for large-scale offshore wind development.  This also means that the market is moving closer to procuring large quantities of offshore wind cable (OWC); a critical component to any offshore wind farm.  The first major supply contracts for OWC were announced in 2019. 

The following report attempts to forecast the US market for OWC over the next decade.  The procurement of cable for US offshore wind farms represents a unique set of opportunities and challenges.  The potential market is enormous, but the domestic supply chain is still in its infancy.  Now that there is strong momentum for offshore wind to play an important role in the country’s renewable energy mix, a well-developed domestic supply is vital to the smooth deployment of the massive farms that will be needed in the next decade and beyond. 

At a conference in June 2018, a number of panelists and attendees talked about needing 2-3 GW of procurement annually to have a healthy level of demand that would support the creation of a US supply chain.  At that time, procurement stood at about 1.5 GW. 

According to the Business Network for Offshore Wind, the US Offshore Wind market currently stands at 23 GW. The market is defined as the amount of offshore wind electricity that could be produced by a state-supported financial mechanism. In the US, these financial mechanisms are usually either a power purchase agreement (PPA) or an offshore renewable energy credit (OREC).

In January 2019, New York announced more than a three-fold increase in its commitment to support the development of offshore wind from 2,400 MW to 9,000 MW. This jolted the U.S. market with a 64% increase in market size from this one announcement alone.  Additional commitments came from Connecticut and Virginia later in the year.  Interest also continues to grow in California in particular for large-scale floating offshore wind farms. 

When SCW began its study of the US OWC market in January 2019, six commercial-scale projects and two demonstration projects comprised the US offshore wind project pipeline, which totals close to 1,958 MW. These eight projects received a state-supported financial mechanism—either a PPA or OREC. Developers emphasize that all eight projects will be constructed, installed and operating by 2023.

During 2019, New York announced the winner of its first 800 MW RFP while New Jersey announced the winners of its 1,100 MW competitive process.  These two alone essentially doubled the US offshore wind project pipeline to almost 4,000 MW.  

Procurement on this scale will not just support the creation of a US offshore wind supply chain; it will require it.  The governmental efforts that are driving demand will need to be matched by similar efforts from industry to build a domestic supply chain.  The purpose of this report is to help the industry understand how the offshore wind cable market is developing and what efforts will be needed to meet growing demand.

The entire issue of a supply chain for offshore wind in the US presents an interesting subject for analysis.  In Europe, offshore wind is a developed hi-tech industry with a solid supply chain, but in the US, there is virtually no supply chain at all.  This is a highly unusual situation, as the US is often the leader in the development of a new hi-tech industry.  Whether aerospace, electronics, the Internet or so many other hi-tech industries, US companies have been in the forefront of the technology.  Yet for offshore wind in general, and offshore wind cabling in particular, the US supply chain is starting at almost ground level. 

Specifically for offshore wind cables, there is no domestic production capacity.  Offshore wind cable factories are located throughout Europe and Asia, but not one was operational in the US in 2019.  For the first offshore wind farm, the 30-MW Block Island Wind Farm (BIWF), the cable was imported from South Korea.  The first commercial-scale wind farm, Vineyard Wind, is using imported array cable. 

For offshore wind to thrive in the US, it must have a fully-developed domestic supply chain.  For OWC, this supply chain really began to develop in 2019.

We should first take a moment to look at why the US has no submarine power cable manufacturing capacity, at a time when there are four huge European suppliers and several significant Asian suppliers.  First, the submarine power cable market in the US has always been minimal.  With no offshore wind market and with severe technical limitations on the distances that submarine interconnectors could operate and the depths of water into which they could be laid, there were very few applications for subsea power cables.  In addition, the geography of the US precluded major submarine power cable projects.  The contiguous nature of the Lower 48 states meant that there were very few routes for subsea power cables that could not be reached more cheaply with terrestrial cables.  Most islands off the US coast are very small and sparsely populated, thus the installation of submarine power cables serving these islands is not cost effective.  Large US territories outside of the Lower 48 – Alaska, Hawaii, Puerto Rico, etc. – were well outside the range that submarine power cables could reach. 

As a result, submarine cable projects in the US were few and far between.  With the tiny amount of domestic manufacturing primarily dedicated to the defense industry, it was cheaper to import small amounts of submarine power cable for the handful of small projects, such as crossing a bay, that were required.  With virtually no domestic market and years passing between projects, there was no need for a submarine cable supply chain. 

In Europe, however, the situation was very different.  Many European national suppliers of submarine power cables date back to pre-European Union times.  As with the US, there was a need for subsea cables for defense applications, but unlike the US there was the development of the North Sea oil & gas industry, which created high demand for cables to connect offshore rigs. 

Europe’s geography also played a role.  There are many more islands that can be reached by submarine power cables.  Unlike the US where nearby islands are small and thinly populated, many European countries have a need to connect large islands near the coast that have high demand for reliable power for a variety of reasons – military installations, tourism economies, industrial activities, etc. 

With the advent of the EU, the power cable market really began to take off.  With the EU’s desire to create a single energy market, there became a need for large-scale interconnectors, particularly in Northern Europe.  Technological developments quickly increased the distances and water depths that submarine power cable could operate.  At this same time, offshore wind began to take off. 

Europe’s suppliers grew quickly and also consolidated.  Now there are four major suppliers where there were once twice that number, and all four now have a strong offshore wind cable business. 

However, the European offshore wind cable supply chain did not develop smoothly.  There were many bumps in the road, such as cable design problems, poor installation practices and sudden changes in government policy.  At one point the market outstripped the supply chain (not just for cabling but the entire supply chain), forcing a major slowdown in the market.  But the Europeans worked through these problems and now have a well-oiled supply chain.  The US can learn from the European experience. 

As we begin 2020, a supply chain for OWC is beginning to take shape in the US.  One major European manufacturer, Nexans, began converting a factory located in Goose Creek, South Carolina, to build submarine power cables, including OWC, back in 2017.  The factory is now nearly ready to produce cables for the offshore wind industry.  In December 2019, Nexans signed a frame agreement with offshore wind farm developers Orsted and Eversource to provide up to 1,000 kilometers of subsea high voltage export cables by 2027. 

Another new supplier emerged in 2019.  Mormon Utility, a Connecticut-based company that makes power cables under the Kerite brand, will upgrade a factory to begin building array cable for the US offshore wind market.  Marmon was selected by Vineyard Wind to supply some or all of the array cable for the Park City wind farm offshore Connecticut. 

The other major OWC developments in 2019 were awards to Prysmian for the array cable for Vineyard Wind’s Massachusetts wind farm and for array and export cable for the Empire Wind project off New York.  These will be supplied by Prysmian’s European factories. 

These developments mean that, in the course of one year, the US has begun building an OWC supply chain and that there is real demand for OWC in the US. 

In this report, we have modeled several scenarios for the growth of the US offshore wind market that will be explained in the following sections.  Here we want to note that these models indicate that the US market will be quite small compared to the European market, with the initial years being a relatively small fraction of the global market.  The models show the potential, however, that the US market could reach a level of demand that would add considerably to global demand.  This demand, coming at the same time as new markets open up in Asia, other parts of Europe and elsewhere, will require a significant expansion of the current global supply chain.

The outlook for offshore wind cable in the US is bright.  With demand in the US just beginning and only a fledging domestic supply chain, 2020 is the time to begin looking at this market.  For the domestic supply chain to develop efficiently, information is needed on the US offshore wind market and to what levels the demand for cable will reach.  This is the goal of this report.  If we can start the conversation about the development of the US offshore wind cable market and begin creating models of the market’s growth in the next decade, the supply chain will have a chance to “lead from the front” rather than playing catch-up. 

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