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New York-listed Eneti says it plans to commission a Jones
Act-compliant wind turbine installation vessel (WTIV), the latest
expression of confidence in the nascent US offshore wind industry
and the Biden administration's plans for an American energy
transition.
Eneti, formerly known as Scorpio Bulkers, became the third
prospective owner of a US-flagged WTIV to make its plans public,
although sources say talks are progressing for as many as five such
vessels, of which there are none in operation at the moment.
In March, the Biden administration announced plans to build 30 GW
of US offshore wind capacity by 2030, equivalent to a 1,000-fold
expansion of current commercial capacity of 30 MW.
This announcement provided assurance to prospective WTIV owners,
said IHS Markit analyst Catherine MacFarlane, that the American
market was finally gathering a head of steam after years of lagging
its European and Asian counterparts.
And Eneti, which previously focused on the dry bulk shipping
sector, said 11 May it is in talks with "several" American
shipyards to build a WTIV -- vessels that have a large deck, legs
that allow the vessel to lift out of the water, and a tall crane to
lift and place turbines -- that would meet Jones Act rules. The
company didn't divulge which shipyards it is talking to.
The Jones Act requires goods shipped between US ports to be
transported on ships that are built, owned, and operated by US
citizens or permanent residents. It applies to offshore wind
facilities because of Section 9503 of the $740.5 billion National
Defense Authorization Act for Fiscal Year 2021.
Eneti sees this as an opportunity, despite the substantial cost
involved. "The growing calls for a safe, efficient,
American-constructed and American-operated asset have been clear
and loud. We are intent on providing a state-of-the-art solution to
our customers so that they can comply with the Jones Act as they
bring renewable energy to the US consumer," CEO Emanuele Lauro said
in the statement announcing the company's plans.
Lauro said during an investor call 13 May that he expected
Eneti's US WTIV to provide a significant return to the company's
investors. Lauro emphasized how attractive the US East Coast's
offshore wind growth prospects and power demand requirements were
during the call.
In addition, discussions with US-based industry stakeholders
exposed a preference for Jones Act-compliant WTIVs over
foreign-flagged vessels, for which supply is set to be tight later
this decade, Chief Operating Officer Cameron Mackey said during the
same call.
Eneti's announcement, according to American Clean Power
Association Senior Director of Policy and Regulatory Affairs for
Offshore Wind Laura Morton, "is a signal of growing confidence in
America's offshore wind market, which represents up to 83,000 jobs
and $25 billion in annual economic investment by the end of this
decade. With certainty that projects are moving forward, companies
can increase investments to build this brand-new source of clean
energy for the US."
Chasing Charybdis
But Eneti and any of the other companies who may build a Jones
Act-compliant WTIV and compete for business are all chasing
Richmond, Virginia-based Dominion Energy.
Dominion was first on the board with a May 2020 announcement it
would build its own $500-million, Jones Act-compliant WTIV. In the
second half of December, Dominion said keel laying was underway at
Keppel AmFELS' Brownsville, Texas, shipyard.
Dominion said the vessel -- the Charybdis -- is
designed to handle current turbine technologies as well as next
generation turbines of 12 MW or more and will also be capable of
installing foundations for turbines and other heavy lifts. The
vessel is expected to enter service in 2023.
Dominion initially intends to use the Charybdis to
build the 2.64-GW Coastal Virginia Offshore Wind (CVOW) project,
the largest offshore wind farm announced so far in the US.
Construction on the CVOW project is scheduled to begin in 2024 and
finish in 2026, according to Dominion.
As a result of Dominion keeping the Charybdis for its
own use initially, other companies are seeing an opportunity. The
same day Dominion provided its keel update saw Lloyd's Register
North America announce it had teamed up with Ohio-based Northeast
Technical Services Co. to design and develop a Jones Act-compliant
WTIV.
The vessel will focus on servicing US Atlantic Coast and Great
Lakes offshore wind developments, they said, adding that the plan
was to adhere to a hull shape familiar to US shipyards. However,
the companies have not said any more publicly about their plans
since and did not respond to requests for comment this week.
Higher cost
Jones Act-compliant vessels carry additional risk and costs,
according to IHS Markit's MacFarlane. The same day Eneti announced
plans for its vessel, the company said it had inked a binding
agreement with Daewoo Shipbuilding and Marine Engineering for the
construction of another WTIV, of a similar size to the
Charybdis, but it has a price tag of just $330
million.
And questions remain for such pricey investments, according to a
US-based lawyer. "The Biden administration has signaled that it is
a strong supporter of the Jones Act. That said, the administration
granted a waiver for the Vineyard Wind project because there are no
Jones Act-compliant WTIVs in existence currently," Jocelyn Knoll, a
partner at global law firm Dorsey & Whitney, told IHS
Markit.
"The real question is whether the waiver will be a permanent
waiver for other offshore wind projects in the US," said Knoll, who
is chair of Dorsey & Whitney's Construction and Design Practice
Group. "The offshore wind farm developers would like a permanent
waiver to keep their costs down."
But the era in which turbine size has increased massively is
coming to an end, which will provide a much clearer idea of the
risk involved in building a WTIV, and therefore developers can have
greater reassurance about paying back their funding, said
MacFarlane.
"Everybody needs a lot of assurances," she said.
The US market doesn't exist in a bubble. According to IHS
Markit, the global WTIV fleet consists of 49 units, owned by 27
companies across 11 countries, although more than 65% of these
units are located in mainland China. Of the global supply of WTIVs
outside mainland China, 80% are based in five European countries
around the North Sea, wrote Andrei Utkin, IHS Markit principal
research analyst, in an April report.
Although six new non-China vessels are expected to get online by
2023, the global fleet will still experience difficulties to cover
the global demand in 2026−27 and will most certainly fail to do so
post-2028, according to Utkin. The industry will have to invest
$1.2-$2.0 billion in at least four new vessels to meet the global
demand outside mainland China, he added.
Alternatives and opportunities
One alternative to a Jones Act-compliant WTIV is a waiver for
the vessel. Under the waiver, the foreign-flagged WTIV cannot enter
a US port, requiring a feeder vessel to bring parts from the port
to the non-Jones Act-compliant WTIV — the path taken by the
800-MW Vineyard Wind project, which earlier this week received its final approval, a
record of decision from the US Bureau of Ocean Energy
Management.
The feeder vessel path is attracting companies that want to
provide options, and they argue, efficiencies, in the offshore
service vessel field. In the past couple of months, motion
compensation options -- which seek to keep decks of vessels
supporting WTIVs steady -- have been gathering pace.
In April, Dutch company Ampelmann and C-Job Naval Architects
said they had joined forces to develop a feeder vessel concept with
motion compensation technology for the US market. Separately, on 25
April, Huisman said it was developing a Jones Act-compliant
solution for wind turbine component supply in US waters using a
motion compensated platform.