OFFSHORE WIND IN AMERICA

A classic example of how protectionist legislation can impede progress and add unnecessary cost is seen in the offshore wind industry in the United States. Circumventing the law makes money for lawyers and others, but it is those on the job who suffer, and the electricity consumer who pays

The specialist vessels developed in Europe for transporting and installing wind turbines at sea are legally banned from operating out of American harbours. For the country’s first offshore wind project, an inventive workaround was devised to enable installation without contravening the law, but the wind farm consists of just five wind turbines. The much bigger offshore projects coming up next represent a logistical challenge of far greater dimensions.

The Merchant Marine Act of 1920, commonly known as the Jones Act, is a century-old federal law designed to protect American maritime trade. It requires that vessels carrying cargo and equipment between two points in the US must be American built and sail under the American flag.

“By not making landfall between two points on American soil the ship did not contravene the letter of the law”

Installation of the 30 MW Block Island Wind Farm off the coast of Rhode Island was completed in December 2016. The first of its kind facility is likely to be dwarfed by what comes next. The US Bureau of Ocean Energy Management has issued 11 licenses for wind farms off the Atlantic coast, several of which have a projected capacity of 1000 MW. Projects in the Great Lakes are moving ahead and proposals are being considered based on floating foundations off California.

EXPERTISE ON TAP

America benefits from the experience that Europe’s 25 year lead in offshore wind provides. Block Island has strong European ties. The design of its GE Energy wind turbines, made in France, was obtained through the American company’s acquisition of French industrial giant Alstom, which in turn had bought a privately held Spanish wind turbine maker.

Installation of the five turbines was carried out with European technology and expertise. Around the North Sea, strong government support has helped the wind industry develop a sophisticated system of offshore wind logistics, including custom built vessels with special holders for the huge components, particularly rotor blades and cylindrical tower sections. The vessels are able to maintain stability and position during the installation of the heavy parts using 100-metre tall cranes mounted within the hulls.

“It will be difficult and expensive if you have to repeat the Block Island model for large offshore wind farms,” says Andrew Ho, senior analyst at industry association WindEurope.

Towing turbines and blades to the project area from American ports by American ships and loading them onto European installation vessels at sea is not an ideal arrangement.

Adaption of an installation vessel currently used by the US oil and gas extraction industry is possible, but European experience suggests it can be problematic.

“If a US installation vessel must first be built, that becomes very expensive and it may take four to five years,” Ho explains. Some Americans predict that American-built installation ships will cost two to three times as much as European vessels, because the process must start almost from scratch in the US.

According to British sources familiar with the UK-US trade negotiations post Brexit, the UK government will make a strong case for an exemption to the Jones Act to allow its offshore wind farm construction vessels to operate from American ports

STRANGE LEGAL ANOMALY

Charlie Papavizas, an American lawyer specialising in maritime law, calls the Jones Act’s lack of compatibility with the needs of its offshore wind industry “a strange thing.” The act’s reference to “coastwise points” at sea means that it clearly applies to offshore wind, he says. While the law covers the US territorial sea, which extends 200 nautical miles, it specifically includes permanent or temporary devices attached to the seabed.

Conversely, Papavizas is doubtful that the term “natural resources” in the law’s 1953 revision includes wind energy. The revision increased the law’s reach from three to 200 nautical miles to encourage development of oil and gas at sea. “But everyone is acting as if the law applies to offshore wind,” he says.

WORK AROUND THE LAW

Most project developers in the new offshore areas off the US Atlantic Coast are European. Denmark’s DONG Energy, a leading offshore developer, has secured access to two large sea areas: south of the island of Martha’s Vineyard in Massachusetts and off the coast of Atlantic City in New Jersey. The company’s Thomas Brostrøm confirms it is aware of the issues related to the Jones Act. “There are ways to work around the law,” he says, though declines to give further detail.

Vattenfall, a Swedish utility and close competitor of DONG’s in the water, see the US as the most prosperous market for offshore wind outside Europe. “The Jones Act is an important question in search of an answer,” says wind boss Gunnar Groebler.

In the case of the Block Island wind turbines, a Norwegian vessel carried them from France, crossing the Atlantic Ocean, but staying at sea when it reached the site rather than docking safely in harbour between work shifts. By not making landfall between two points on American soil the ship did not contravene the letter of the law, but it was a stopgap solution impelled by the Jones Act.

TRUMPED TALKS

The European Commission is seeking to obtain US concessions on the Jones Act through the Trans-Atlantic Treaty and Investment Partnership (TTIP) talks between the US and the EU. During the 15th round of talks in October 2016, the Commission presented proposals concerning cooperation on renewable energy. Since then there has been no sign of movement in the discussions. After Donald Trump was elected, EU Trade Commissioner Cecilia Malmström announced in November, “There is a natural pause and we have to wait for the new US administration to see what happens.” Malmström’s decision was likely prompted by Trump’s highly critical position on free trade agreements, including the TTIP.

The modification of the Jones Act urged by the European Community Shipowners Association (ECSA) does not seem likely any time soon. “We have designated offshore services as suitable for waivers from the Jones Act when no suitable American vessel is available,” says ECSA’s Lieselot Marinus.

The organisation’s efforts may be in vain. Paul Ryan,Speaker of the House of Representatives, says the Tump administration intends to negotiate trade deals that benefit the American economy. “That means we level the playing field and get other countries to play by our rules. This is a shared priority for the Republican Congress and the Trump administration,” he says.

If anything, enforcement of the Jones Act had intensified before the election, rather than weakened. In July 2016, US Customs and Border Protection established a special body, the Jones Act Division of Enforcement, to support compliance with the law.

The US Department of Energy envisions wind power providing 10% of America’s electricity by 2020 and 20% by 2030

AMERICAN SHIPS

Jones Act or not, American installation vessels will eventually be necessary for the US to achieve its offshore wind aspirations, say both DONG’s Brostrøm and Michael Hannibal, offshore wind CEO at Siemens, a major wind turbine supplier.

“It’s sort of a chicken-or-the-egg problem,” says Hannibal. “What should come first? A large market that makes it profitable to build US installation vessels or the building of such vessels, which kick starts offshore wind energy in the US?”

Although vast regions of the US are blessed with strong winds on land, the biggest centres of population tend to be clustered in overbuilt coastal areas. Offshore wind can be a more attractive proposition than importing wind from other states, necessitating the construction of hundreds of miles of transmission lines, often aesthetically unpopular with the public.

Wind power is rapidly gaining ground in America for its clean energy attributes and low cost. Most states have set targets for the volume of electricity that has to come from renewable energy. The rapid decline in the cost of offshore wind in Europe, which has more than halved in the past five or six years, has been noted across the ocean.

In August 2016, Massachusetts gave offshore wind energy a specific boost with a ground breaking law that may inspire other states. It requires power companies in the state to buy energy from 1600 MW of offshore wind as part of long term contracts by June 2027. “The Jones Act is a barrier in the US, but it is possible to overcome it,” says Hannibal. •

TEXT Regner Hansen