Offshore wind energy is coming to the U.S.

Several European oil majors are turning their attentions to the U.S. coastline, but they aren’t looking for oil. Instead, the companies are bidding for leases to create offshore wind farms.

The offshore wind leases opened up last year, and the European energy companies are rushing in to fill the void. Denmark-based DONG Energy, Norway’s Statoil, and Royal Dutch Shell are just a few of the companies with bids to build wind farms off the U.S. coast.

Statoil will develop a wind farm of the coast of New York and is in the process of pitching their floating turbine to California and Hawaii. DONG Energy is in possession of a lease of the coast of New Jersey, and Royal Dutch Shell made a bid for a lease along the North Carolina coastline.

Offshore wind farms in the U.S. will come with a very high price-tag, in the billions of dollars range. This will make them dependent on subsidies to be sustainable. However, the current federal subsidies will expire by the end of 2019 with no guarantee of renewal. To compensate for operating without subsidies, companies will have to push into deeper waters and use larger turbines.

Samuel Leupold, chief executive officer of DONG Energy’s offshore wind business commented, “Undeniably, offshore wind is a big boys’ game because it requires large amounts of capital because scale is such an important cost driver.”

DONG Energy is wholly focused on renewable energy now, having sold off their oil and gas side of the company earlier this year. The company was able to place a zero-subsidy bid in Europe this year since costs for offshore wind farms have fallen across the pond.

U.S. energy companies do dabble in renewables such as solar and onshore wind farms, but as far as offshore wind farms are concerned, the U.S. energy producers plan to hold off until costs come down and government support won’t be needed. As of last December, analysts from Lazard estimated the cost of U.S. offshore wind energy at $118 MWh, which is more than double the cost of onshore or combined-cycle gas turbine energy.

“Chevron supports renewables that are scalable and can compete without subsidies,” answered Morgan Krinklaw, a spokesman for Chevron, when asked about offshore wind energy.

Statoil plans to keep costs down by using existing oil and gas staff to perform operations for the offshore wind farms, including some of the 1,000 odd employees they have in the U.S. oil industry. The company also plans to use their existing supply chain to drive down costs.

Elin Isaksen, a spokeswoman for Statoil commented, “We expect to see – and will help – the supply chain evolve rapidly in step with the broader industry as offshore wind takes hold in the U.S. in the coming years.”

Offshore wind farms are still in their infancy but the energy industry and other advocates plan to keep pushing the renewable energy source forward.

Article written by HEI contributor Raymond Arrasmith.

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