Power generated from offshore wind will be a cornerstone of the green energy transition. Offshore wind projects boast immense scale and a superior capacity compared to their onshore counterparts. This is due to the more powerful and more frequent offshore wind flow. With these attributes, offshore wind projects hold great potential to de-carbonize large portions of the electricity grid worldwide. Decarbonizing the electricity grid is one of many steps necessary for the green energy transition.

Over the past decades, we’ve seen the offshore wind industry develop. The European market has led the way and can count on energy from offshore wind and other renewables for over 40% of their primary energy production. Today we see the United States laying the groundwork for their offshore wind industry and attempting to meet ambitious goals. With the flurry of activity south of the border, Canada should be watching closely to take note as its offshore strategy takes shape.

‍

Global Landscape: Europe Leading the Way

Europe has already harnessed over 30GW of energy capacity from offshore wind farms. To put this into context, this is a similar level of energy to the record peak electricity demand by the entire state of New York, or my blustery home island of Newfoundland’s electricity demand by 20 times over during the winter months. In the United States, the inaugural commercial offshore wind project, Vineyard Wind 1, is currently being installed in Massachusetts. By 2030, the United States aspires to match the current European production of offshore wind power. In Atlantic Canada, groundwork for future offshore wind developments is also underway with Regional Assessments ongoing for Nova Scotia and Newfoundland. The outcomes of these assessments will shape policies, licensing, and other regulatory aspects for potential offshore wind development.

‍

Industry Maturity, Incentives, and the Role of Government

The offshore wind industry in Europe, the United States, and Canada currently represent varying stages of maturity. Projects at the forefront of the green energy transition share a goal to establish robust local supply chains, job creation, and build capacity. Beyond enhancing energy security, this collective effort serves to alleviate the potential for job loss or displacement within traditional industries. Regulators play a crucial role in ensuring that the positive impacts of these projects directly benefit local communities and foster inclusive growth.

Governments and regulators are using different incentives to drive industry innovation and ensure benefits are being realized by communities. These incentives vary from market-to-market, and even project-to-project. For example, domestic content initiatives are mostly absent in the mature European sector. Yet, incentives in the U.S. offshore wind industry are heavily focused on localizing manufacturing and workforce. State and Federal governments are keen on securing affordable green energy, creating local jobs, and strengthening the domestic supply-chain.

An example of an incentives by the Federal United States government are the tax credits for domestic content in the Inflation Reduction Act. These tax credits serve as a way to reduce costs in an industry facing growing pains and inflationary pressures. However, offshore wind developers will face challenges making use of these credits when the domestic supply chain is not able to support their demands. From a European standpoint, Orsted commissioned the world’s first offshore farm (the 11-turbine Vindeby Farm) in Denmark in 1991 and developing the supply chain to current capacity took over 30 years. Developing a mature domestic supply-chain will take time - even with Federal incentives and a highly competent U.S. industrial base.

‍

Recent Hardships, Financial Pressures, and Industry Development

Despite their ambitious goals and early success, the offshore wind industry in the United States has faced recent hardships. Developers are under financial pressure to cut costs in an inflationary environment, leading to a consortium of developers in New York State attempting to renegotiate their contracts with the Public ServicesCommission (PSC). The PSC unanimously declined their requests, leaving the projects in jeopardy. The proposed financial relief was significant, constituting a 54% price increase in contract terms for the Equinor/BP Joint Ventures. Additionally, major developer Orsted recently canceled its OceanWind 1 and 2 projects in New Jersey, citing inflationary pressure and supply chain constraints. Orsted joins a growing list of developers withdrawing projects due to these constraints.

‍

Leveraging Offshore Expertise in Atlantic Canada

Atlantic Canada is in the early stages of offshore wind industry development. Now is the time to contemplate a future regulatory framework, incentives to put in place, and how to ensure a thriving industry with maximized benefits for Canadians. Other countries and markets are doing the same as the Global Wind Energy Council predicts over 380 GW of offshore wind capacity will be added in 32 markets over the next decade.

However, Atlantic Canada may face a disadvantage in comparison to other markets. Despite the Federal Canadian government's aims to phase out coal in Nova Scotia and New Brunswick by 2030, there is less regional green electricity demand compared to other markets, which developers may see as a major downside of doing business in the region. To position itself as a desirable place to operate, Atlantic Canada must leverage its current strengths and pivot to the demands the global offshore wind supply chain - without attempting to establish a novel supply chain at its shores. This approach will create a cost-competitive market and ensure that developers view Atlantic Canada favourably for future business.

As an added advantage in developing the Canadian offshore wind market, offshore expertise already exists in Atlantic Canada. Leveraging these existing capabilities should be a priority. Consider the offshore oil and gas industry, where the production of hydrocarbons has been supported by onshore ports, vessels, suppliers, and labour in Newfoundland and Nova Scotia for decades. In addition to their offshore expertise, Atlantic Canada can learn from the United States on how to mitigate challenges and close gaps in their domestic supply chain. By tracking procurement and uncovering key metrics within a supply chain, a developer can reveal opportunities for improvement and domestic growth. As the industry matures, local suppliers will begin to close supply chains gaps.

Over the next few years, it will become clear if Atlantic Canada has taken advantage of the lessons that more mature offshore wind industries have learned. If leveraged correctly, we could see another mid-sized market developed responsibly in a way that provides affordable green energy, economic opportunity, and a contribution to the global energy transition.

‍