US Department of Energy Calls for Expanding Federal Incentives for Offshore Wind

Expanding federal incentives related to offshore wind in the US would increase demand for offshore wind energy and grow the domestic supply chain at lower cost, according to the latest report from the US Department of Energy (DOE), which also listed four other strategic priority areas that could help the country achieve its goal of deploying 30 GW of offshore wind by 2030 and thus supporting the creation of 77,000 jobs.

Illustration; Coastal Virginia Offshore Wind (CVOW) demo project, first wind turbines in US federal waters; Photo: Dominion Energy

With the existing 30 per cent investment tax credit for offshore wind set to expire in 2025, not supporting offshore wind projects expected to begin construction in 2026 or later, the report recommends extended or expanded tax incentives. Furthermore, the DOE also suggests establishing new tax credits to support the development of the domestic supply chain, especially in manufacturing and port facilities.

“To achieve the national 30-GW-by-2030 deployment goal, it will likely be necessary to continue and expand incentives at the state and Federal levels”, the Offshore Wind Energy Strategies report states, saying that incentives at the federal level could also promote economic development, job creation, and community economic benefits.

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While technology-neutral incentives may be the most efficient way to accelerate the deployment of clean energy technologies overall, they would favour those with lower cost in the near term, which are currently land-based renewable energy technologies. Therefore, targeted incentives for offshore wind could accelerate technology maturation, cost reduction, and deployment of this particular technology.

“Ambitious state targets—totaling 39 GW by 2040—have been the primary driver for offshore wind development to date, but until offshore wind energy is more broadly competitive with other sources of electricity, its deployment may be constrained to these states in the absence of the market demand created by specific national policy support”, the report says.

Extending the tax credit for all offshore wind deployment can help realise consistent industry growth and maximise economic benefits, while incentives for other parts of the sector could stimulate investment in offshore wind installation vessels, port equipment, and manufacturing facilities.

In the extension of investment tax credits for offshore wind, the DOE also calls for setting up support for floating offshore wind energy projects that may begin construction later than 2025, which would drive economic deployment of floating offshore wind energy technology.

To spur growth of a cost-competitive domestic supply chain, the US should make manufacturing equipment, port-based equipment, and offshore wind vessels eligible for the new tax credit for offshore wind manufacturing facilities, which the report recommends to be established.

“[The] immature US supply chain, lack of suitable port infrastructure, and lack of specialized offshore wind installation vessels could limit rapid offshore wind deployment. Manufacturing incentives could help boost the domestic offshore wind supply chain”, the report states. “Federal and state incentives could include detailed procurement requirements to enhance economic development such as diverse supplier requirements (e.g., small and disadvantaged business set asides) and incentives for local sourcing, job creation, or community ownership”.

Establishing tax credits before large-scale commercial deployment starts would enable simultaneous construction of multiple projects, allow US manufacturers to establish a role in domestic and global markets, and maximise near-term economic benefits, the report states.

The Department of Energy published the new report on 12 January, the same day the Department of the Interior announced an offshore wind auction for the New York Bight, which could lead to up to 7 GW of offshore wind energy capacity being added in the US.

The report was developed with input from other agencies, including the Interior Department’s Bureau of Ocean Energy Management and Bureau of Safety and Environmental Enforcement, the Transportation Department’s Maritime Administration, the Commerce Department’s National Oceanic and Atmospheric Administration, and the Federal Energy Regulatory Commission, as well as DOE’s Office of Electricity, Loan Programs Office, and Advanced Research Projects Agency–Energy.