Offshore Wind Giant Bets Big on the US Market

Anyone doubting if the US offshore wind market is taking off should look no further than Orsted, the largest offshore wind plant owner in the world. Orsted announced its acquisition of US-based developer Deepwater Wind for $510 million in October. This price is a big commitment for a wind developer that has much more theoretical project pipeline than actual operational capacity (30 MW). 

Orsted (formerly Dong Energy) is looking to jump-start its foothold in the US market and plans to replicate its offshore success in other markets where it currently operates over 4 GW of capacity. After falling behind in securing an offshore contract earlier this year in a competitive request for proposal (RFP) in Massachusetts, it is acquiring its way into the US market. 

In its RFP, Orsted submitted a bid through a 50:50 partnership with US utility Eversource Energy for 400 MW-800 MW from its Baystate Wind site. The Orsted-led effort failed to secure a win, and instead a 50:50 consortium between Avangrid and Copenhagen Infrastructure Partners won approval for the 800 MW Vineyard Wind project. 

Deepwater Wind (which submitted a 200 MW-400 MW project) also lost out against the Vineyard Wind project. However, it was bidding simultaneously in Rhode Island’s competitive offshore contract auction and won the rights in May 2018 to build its 400 MW Revolution project, planned for commission in 2023. Shortly thereafter, Deepwater won a concurrent bid for 200 MW in nearby Connecticut in an RFP for the same Revolution site, suggesting the total wind plant size will be around 600 MW when fully built.  

If You Can’t Beat Them, Buy Them

Despite Orsted’s pedigree, the company’s failure to secure project approvals during the first two state-based offshore project bids forced an expansion of its strategies to enter the US market. 

Orsted targeting Deepwater Wind was a logical and strategic entry—the well-heeled acquirer able to buy a head start. Deepwater is a capable developer, and overcame first mover challenges by being the first company to bring an offshore wind project online in the US. This came via the 30 MW Block Island project, completed off the coast of Rhode Island in 2016.

In addition to winning the 400 MW bid in Rhode Island and the 200 MW bid in Connecticut, in mid-2017 Deepwater Wind won the right from Maryland’s Public Service Commission (PSC) to build the 120 MW Skipjack offshore wind plant just north of Ocean City, Maryland (two projects won awards). The PSC awarded the project renewable energy credits worth $131.93/MWh. 

In 2017, Deepwater Wind also won a 20-year power purchase agreement from the Long Island Power Authority for its 90 MW South Fork wind farm off the New York coast. This is the first phase of what could be a larger 1,000 MW project at the same site. 

While Deepwater has been successful at developing a solid contracted pipeline of projects, Orsted can use its experience and finances to bring those projects to the operational stage. The company can also find additional synergies and cost savings leveraging its own existing development pipeline in the US. 

Deepwater’s steady development success shows it has strong local, state, and federal wind development acumen, along with connections to politicians, state regulators, supply chains, and other stakeholders throughout the East Coast that will help advance its development goals. This now becomes Orsted’s anchor in the US market and likely guarantees large project commissioning beginning by 2023 for the ambitious offshore player.