While most companies acknowledge that this theirs is a long term game, in Europe however former oil companies are embracing change and are harvesting key technological experience and expertise in this maturing market.
In a significant development that could potentially be a harbinger of change, several European oil majors are making big inroads into the emerging U.S. offshore wind energy market, and are aiming to leverage their experience at deepwater development and offshore wind energy.
Norway-based Statoil has recently won a license to develop a wind farm off the coast of New York and is marketing its latest floating turbine to California and Hawaii.
Sensing change, Royal Dutch Shell placed a bid for leasing an offshore wind farm in North Carolina earlier this year.
Denmark’s DONG Energy, a pioneer in wind energy has agreed to sell its oil and gas business in May.
As strange as it may sound, the development of offshore wind energy actually took off in the United States after President Donald Trump took the oath of office.
In fact, a series of federal seabed leases were awarded to companies even before Trump took the oath of office. More such leases are planned in the near future, however what is keeping them at bay is the required investment.
“Undeniably, offshore wind is a big boys’ game because it requires large amounts of capital because scale is such an important cost driver,” said Samuel Leupold chief executive of DONG Energy’s offshore wind business.
While DONG has clearly and decisively toward renewables, Shell and Statoil are moving slowly towards it and are still somewhat rooted in fossil fuels.
According to an estimate, the potential for offshore wind energy in the United States is 2,000 gigawatts (GW), many times the anticipated capacity in Europe of 25 GW by 2020. However, with U.S. federal subsidies set to expire by 2019, they will have to be renewed by Congress before this industry becomes a viable force.
However costs in Europe have fallen to a level that allowed DONG to place a zero subsidy bid earlier this year. Still, offshore wind farms are still multi-billion dollar projects.
Costs are higher in the States since the country does not have any carbon price mechanism, unlike Europe.
While U.S. companies have made some investments in onshore wind farms and in solar, they are however waiting for, what many say, a time when they will receive government support.
“Chevron (CVX.N) supports renewables that are scalable and can compete without subsidies,” said Morgan Krinklaw, a spokesman for Chevron, which owns an onshore wind farm.
As per a report penned by Lazard’s analysts in December, the cost of setting up an offshore wind in the U.S. is $118 MWh, nearly twice as much as onshore wind or combined-cycle gas turbines.
When asked to comment on this figure, Statoil, which is building its first floating wind turbine park off the Scottish coast, said costs are retreating and it is working to drive them down even lower by partly redeploying existing staff.
“There’s scope for us to plug into our existing oil and gas supply chain,” said Stephen Bull, senior vice president of Statoil’s wind business.
“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,” said Statoil’s spokeswoman Elin Isaksen and went on to add that she does not expect any of the company’s offshore wind projects in the U.S. to begin construction by 2019.
“As excited as we are for offshore wind in the U.S., we are still in the early days of the industry,” said DONG’s North America wind power president Thomas Bostrom.