11 December 2022 |

Venturing offshore


Normally we cover venture deals in this section, but it’s worth taking a slight detour today. Let’s venture offshore. Earlier this week, California hosted an auction for offshore leases, marking the first opportunity for global renewable energy firms to develop wind farms off the West Coast of the United States. 

Offshore wind turbines near Liverpool (photo credit to Carl Raw)

While there are operational utility-scale offshore wind farms on the East Coast, the total offshore wind capacity in the U.S. is a paltry 42 MW. Compare that to the U.K., which has more than 10 GW of installed offshore capacity. Even if the U.S. managed a draw with the British in the World Cup, we trail them by a factor of ~250 in installed offshore capacity. As an aside, our neighbors to the north aren’t much more advanced regarding their offshore wind capacity, either. 

The extent to which the public sector has incentivized offshore wind development plays a key role in this divergence. Offshore wind wasn’t a priority in the U.S. until more recently. The first tax credit for offshore wind didn’t materialize in the U.S. until the beginning of the Biden admin in 2020.

Since, several offshore wind projects have been proposed on the East Coast and even on the Great Lakes. But the auction that finished on Wednesday was the U.S.’s first-ever in the Pacific Ocean, drawing ~$750M in bids, mainly from European energy developers seeking a larger foothold in North America. 

The auction included five lease areas in Northern and Central California. If fully developed, the leases could yield close to 5 GW of capacity, making a dent in the U.K.’s lead over the U.S.’s. Notably, the auctioned leases are also for floating offshore wind turbines.

Whereas most offshore turbines are moored to the ocean’s floor, floating designs are also viable. If that sounds like it adds additional complexity to operating heavy machinery in the ocean, you’re right. The first floating wind turbines internationally weren’t deployed until 2017 in Scotland. See below for various offshore wind turbine designs. 

See more here from the San Diego Tribune


While offshore wind capacity globally is growing rapidly, headwinds for the industry are picking up. For one, wind turbine manufacturers are scuffling in general, especially those not based in China, where the government can effectively prop up the industry as necessary. And recent shortfalls in wind energy production in Europe and the U.K. highlight the need to complement wind and solar capacity with more storage, transmission (and natural gas).   

Further, the fossil fuel industry has poured money into sophisticated campaigns to derail offshore wind in the U.S. These campaigns are deceptively guised as pro-environment by purporting to document offshore wind’s negative impacts. To be sure, building big machines in the ocean isn’t inconsequential for ocean ecosystems. But it’s a far cry from burning oil or coal. 

The net-net

Headwinds aside, renewable energy developers are pressing ahead in the U.S., buoyed by public spending and global catalysts to decarbonize. Offshore wind is an important bellwether for the U.S.’s ability to get shit done. Building the requisite infrastructure for the energy transition is difficult in this country. As I often cite per this article, since 2009, China has built 18,000+ miles of ultrahigh-voltage transmission lines. How much did the U.S. build? Goose egg. 

Sure, locals may complain about wind turbines in the ocean being an eyesore for their beachfront property. But sometimes we all need to make a little sacrifice for the greater good, significantly when the alternative disproportionately impacts more vulnerable people & countries globally. Particularly in places where oil rigs dot the horizon over the ocean, why not welcome the wind turbines?