The increased cost of building Jones Act vessels is one of several factors contributing to rising project costs in the US offshore wind industry, according to research carried out by analytics firm Intelatus Global Partners.
Intelatus has found that the price to build service operation vessels (SOVs) for the US offshore wind market comes with a 40% to 140% premium compared to SOVs being built for Europe, which coincides with US offshore wind projects such as South Fork and Vineyard Wind looking at project capex of around $4,500 to $5,500 per kW, some 30% to 50% higher than those of European projects.
When the entire number of vessels required is taken into consideration, higher shipbuilding costs will have a major impact. Developer building and operations plans and announcements to date show a market potential of more than 10 SOVs earmarked for long-term operations and maintenance support in the US. Inteleatus said operator demand for SOVs is expected to exceed 20 units by 2035, with turbine makers also chartering several SOVs.
The US, which has set ambitious targets of 30 GW of offshore wind capacity by 2030 and 110 GW by 2050, has a number of programs in place to aid offshore wind developers and their supply chain partners as project costs largely continue to escalate.
The US Maritime Administration (MARAD) announced in June 2022 the designation of offshore wind vessels as “vessels of national interest”, making them eligible for financial support through the Title XI Federal Ship Financing Program, which provides credit loans at longer terms and lower interest rates than traditional private loans. To date, several vessels destined for the offshore wind segment have sought a total sum of more than $1.5bn in federal loans ranging from 15 to 25 years under Title XI.
Legislation known as the Inflation Reduction Act of 2022 (IRA) also contains multiple provisions related to offshore wind, including a 10% tax credit for the domestic production of offshore wind vessels. However, Intelatus said “that the implementation is still being considered, and doubts remain about whether shipowners will see lower vessel pricing as a result of these tax incentives.”
