In 2014, Gulf Island Fabrication, a U.S. manufacturing company that builds support structures for offshore oil rigs, decided to try something new. They won a contract to manufacture parts for the first offshore wind farm in the United States, Block Island.
“It was a good project. The little foundations that we built were jacket-type foundations that we have built for years and years on the oil and gas side of things,” said Bill Blanchard, senior vice president of business development at the Texas and Louisiana-based manufacturer.
Blanchard said his company is now bidding on contracts for a wave of new U.S. offshore wind farms planned over the next decade.
“There are more and more states that are committing larger quantities of electricity to be produced through the renewable side,” he said. “This seems to be a wave of the future.”
Fourteen states along both coasts have projects or proposals in motion to place wind turbines off their shores, growing the country’s offshore wind output from a single 30-megawatt site, Rhode Island’s Block Island, to up to 18,600 megawatts by 2030. The industry could generate up to $70 billion in capital expenditures and create thousands of new jobs for the U.S. manufacturing sector.
But the U.S. hasn’t developed a supply chain for offshore wind yet and building new manufacturing facilities or modifying existing ones will require time and a significant upfront investment. In the near term, most primary turbine parts will need to be imported from more mature markets like Europe. U.S. manufacturers with experience in industries adjacent to offshore wind, like Blanchard’s Gulf Island Fabrication, are the domestic companies best positioned to win contracts for offshore sites launching in the next few years.
Blanchard says a 400-megawatt offshore farm, half the output of planned offshore sites in Massachusetts, New York and Rhode Island, would create between 100 and 200 jobs for American workers.
“That would primarily be blue-collar, welding and coating and equipment-operating type jobs,” he said.
Charles Popenoe, CEO of the Maryland-based manufacturer, Industrial Indicators, said he’s well-positioned to participate in the burgeoning offshore wind supply chain. He plans to sell the nuts and bolts that will secure offshore turbine parts along the eastern seaboard.
Industrial Indicators makes a special kind of bolt that changes color to indicate whether it is loose or tightly fastened, a safety feature that will make inspections easier at hard-to-access offshore wind sites.
“Offshore wind turbines are a great example of a device with a lot of critical fasteners that’s out offshore and needs to operate without a lot of attention,” Popenoe said.
A typical wind turbine might use 1,500 of the company’s trademark SmartBolts, he said. But G.E.’s new 12-megawatt Haliade, one of the newest offshore wind turbines that stands nearly as tall as New York City’s Chrysler Building, will create an even greater sales opportunity for the company.
Popenoe currently employees 12 people, a number he hopes to expand once U.S. offshore wind projects kick off.
“It’s a tremendous opportunity because it’s an entirely new business in the United States that is going to be developing rapidly in a matter of about a decade,” he said.
Creating a new industry comes with enormous upfront costs, and one of the greatest challenges for offshore wind developers is getting investors to sign on in the face of market uncertainty.
“What we are still trying to bridge is the return on investment, or I guess the financial return, for setting up manufacturing, or investing in the manufacturing of the components that go into offshore wind,” said Ross Tyler, CEO & president of the non-profit Business Network for Offshore Wind.
“Up until now, we haven’t had sufficient demand for investors to be able to justify committing to manufacturing facilities,” he said.
None of the four largest wind power manufacturers, Denmark’s Vestas Wind Systems, Spain’s Siemens, China’s Goldwind and G.E. from the United States, have U.S. manufacturing facilities capable of building key offshore components like foundations, blades, towers and nacelles.
Without an existing supply chain for offshore wind in the United States, many of the large turbine components for U.S. offshore sites will still need to be imported from Europe.
“Europe has a 25-year head start on us,” said Nancy Sopko, co-director of the Special Initiative on Offshore Wind. “We don’t want to rely on foreign parts and foreign components. We will have to do so in the near term.”
With competition from a mature market abroad, many U.S. manufacturers entering the offshore wind economy face steep upfront costs without any guarantee of a return.
Carl Horstmann, a Massachusetts-based manufacturer, faced these market realities back in 2010 when he attempted to win contracts for an offshore wind site planned in his home state. Because his steel tank company, Mass Tank, had no experience building wind turbine parts, he spent $500,000 over several years to find the right technical and business partners with plans to eventually roll steel for turbine support structures.
But Horstmann’s plans fell through when Mass Tank’s contract bid lost to a German company with more offshore wind experience.
“We spent a lot of time and money chasing the project,” Horstmann said. “We’re all very busy with our core business and would like to expand, but there’s some risk and some money to that.”
Gulf Island Fabrication is considering building new manufacturing facilities close to the coastal sites of offshore farms in the northeast, but they’re waiting until they have a better sense of the market opportunity.
“We’ve identified certain areas that could be suitable, but the type of investment they’re talking about could be significant,” said its SVP, Bill Blanchard. “We’ll just have to see if there’s enough of a backlog of work.”
While proceeding cautiously, most U.S. manufacturers with products or facilities that can participate in the offshore wind supply chain are actively bidding on projects so as not to miss out on the enormous upside of building parts for a completely new American industry.
Even after losing his initial investment in the industry a decade ago, Mass Tank’s Horstmann hopes to find another opportunity to build parts for offshore turbines coming to Massachusetts over the next several years.
“We’re certainly interested in making money, so if we can build some of the secondary steel and we can make money, we’ll do it,” he said. “We’re hopeful that we can get a piece of the pie.”