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Achievement of the 30 GW by 2030 target will depend on project development activities during the second half of the decade, primarily in New York, New Jersey, and Massachusetts
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The Biden Administration’s target of installing 30 GW of offshore wind capacity by 2030 has been one of the most intensely debated agendas in the country’s renewables sector, ever since the goal was announced in Mar '21. The debate intensified during the last year when climate-positive legislation (such as the Inflation Reduction Act) and measures taken to streamline lengthy permitting processes and enhance the domestic supply chain collided with macroeconomic headwinds. Disruptions in global supply chains raised the price of equipment and delayed timelines of several projects, while inflated power prices and rising interest rates impacted the viability of certain wind farms. As logistical bottlenecks across the world gradually ease and investors adjust to the new fiscal environment, questions on whether the administration will be able to achieve its ambitious target have resurfaced.
As per Enerdatics’ research, the US will witness ~32 GW of cumulative capacity additions during 2023-2030 through the deployment of ~$100bn of capital. This estimate is based on Enerdatics’ analysis of project-level data, company reports, and transcripts. A deep dive into the forecasted capacity buildout and capex deployment through to 2030 can be found in the attached slide, the highlights of which are:
28 GW will be installed during 2026-2030, with 10 GW expected to come online in 2030
Capacity deployment is weighted towards the second half of the decade primarily due to the current permitting procedures, which, as per Enerdatics estimates, will result in nearly 90% of the targeted capacity reaching a final investment decision (FID) during 2024-2027. This would require the administration to approve more than 10 projects that are currently in the early stages of development, within the next 2-3 years, compared to just two projects it has approved in the last two years. The Department of the Interior has announced several measures to streamline the permitting process, most recently in Jan’23, when it stated that the improved regulations will help the administration approve as many as 16 new projects through to 2025.
New York, New Jersey, and Massachusetts are expected to account for 70% of the targeted capacity
As per Enerdatics research, the three states have a pipeline of more than 23 GW of projects scheduled to come online by 2030. Of the three states, New York has the largest capacity target, with the aim of installing 9 GW of wind farms by 2035. Massachusetts and New Jersey follow, with goals to add 5.6 GW by 2027 and 7.5 GW by 2035, respectively. New York has announced several measures to incentivize offshore wind development activities, such as goals to procure 4.7 GW of capacity via Offshore wind Renewable Energy Certificates (ORECs) as well as a collaboration with the state of Maryland to establish a robust supply chain in the region. To that effect, Siemens announced in Jan’23 that it will invest $500mn to establish an offshore nacelle manufacturing facility in New York, and has committed to localizing several new component supplier facilities. Meanwhile, oil majors Equinor and bp - who are developing 3.3 GW of projects in the region - have also announced plans to support the buildout of equipment manufacturing capabilities.
Ørsted leads the investment stack with $14bn of capex (net) to be deployed by 2030
The company is developing 6 GW of projects to maturity by 2030, as part of its plan to increase its installed offshore wind capacity to 30 GW by 2030. The company will invest $64bn during 2020-2027 globally to achieve this target, 80% of which will be allocated to renewables. Avangrid, Dominion Energy, and Shell closely follow Ørsted in net capex deployed through to 2030, with each player accounting for $8-11bn of investments. Enerdatics expects the capital intensity of the forecasted capacity buildout to lead to an increase in farm-in deals, with developers selling a minority stake in the de-risked project at a premium. Cumulatively, European utilities and O&G majors are the dominant investor groups, each accounting for $40bn of net capex by 2030. Enerdatics expects the forecasted capacity buildout to spur farm-in deals, with developers selling a minority stake in the de-risked project at a premium. This trend has dominated the offshore wind segment in Europe, where farm-ins surged by 10X y/y to 21 GW of transactions in 2022. Private equity (PE) firms, in particular, have adopted this strategy as the preferred mode of entry into capital intensive renewable projects.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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