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Building an offshore wind industry along the US East Coast: The role of state collaboration

Collaboration among state governments across several tasks will contribute to the timely and cost-effective scaling of the emerging offshore wind industry along the US East Coast.

States along the US East Coast have made bold commitments to deploy close to 20 GW of offshore wind (OSW) energy by 2035 (exhibit). As a result, OSW is poised to become a major source of power for the country’s most densely populated region. Each state’s actions are motivated by its own policy goals, including climate-change mitigation, job creation, and industry development. The result is a complex patchwork of policies and measures, with states seemingly competing with one another for supply-chain investments and industry leadership.

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Several challenges must be overcome to ensure the timely and cost-effective scaling of the industry in the region (for more on these challenges, see the previous article, “Scaling the US East Coast offshore wind industry to 20 gigawatts and beyond”). And the question of collaboration across state lines is of the utmost importance. Recent work among representative agencies from Massachusetts, New York, and Rhode Island not only underscores the importance of regional collaboration—it also acknowledges the importance of a healthy competition between states for securing supply-chain investments. Indeed, the clustering of states with OSW targets, as well as the proximity of OSW lease areas able to serve more than one state, implies a multitude of possible configurations for both OSW power supply and supply chains. Each configuration has important implications for costs and scale and is strongly influenced by state government actions.

This article breaks down state government actions in support of OSW and identifies the tasks for which collaboration between states would contribute to a timely and cost-effective build-out of the regional industry.

Nine tasks state governments are pursuing to support the development of OSW

State governments are focusing on nine core tasks to catalyze the development of a competitive OSW industry at scale. These tasks aim to kick-start technology deployment, spur investments in critical infrastructure, and prompt essential economic inputs. While the scope and nature of government actions will vary, each and every task is essential to the build-out of the industry.

We find the case for strong collaboration among states to be strongest for three tasks: stakeholder management and buy-in, investments in electric-grid extensions and upgrades, and R&D. Four other tasks are best addressed through more targeted collaboration: incentivizing and sequencing OSW deployment, facilitating site development, investing in maritime infrastructure, and establishing supply chains. Finally, the two remaining tasks—providing long-term commitments to growth and developing a qualified workforce—do not require collaboration to advance the industry. In fact, these two tasks could benefit from separate state initiatives.

1. Kick-start OSW deployment

Much like other renewable energy technologies in the early stages of development, kick-starting deployment is at the core of government efforts in support of OSW. This objective starts with targets for capacity build-out and includes sequencing projects and creating incentives. State governments also play an important role facilitating site development and ensuring stakeholders are appropriately engaged in the process.

Provide long-term commitments to growth

The case for state collaboration: Weak

Setting ambitious yet credible goals is a core catalyst of the OSW industry. State commitments for future OSW capacity targets encourage developers, OEMs, component manufacturers, and other actors to invest in the region. Competition among states to set bold targets sends a strong signal to the rest of the industry, with no significant adverse effects on build-out. New York and New Jersey, for instance, have taken turns increasing their respective targets. New York set a target of 2.4 GW by 2030, and New Jersey subsequently set its target at 3.5 GW—New York then increased its target, this time to 9 GW by 2035. Other states, such as Massachusetts and Rhode Island, have also made commitments to demonstrate leadership in this area. And more recently, Maryland increased its target from 0.4 to 1.2 GW by 2030. Ultimately, all East Coast states will benefit from this kind of healthy competition as it will encourage developers and other supply-chain actors to scale their investments in the region.

Incentivize and sequence OSW deployment

The case for state collaboration: Mixed

While costs have decreased significantly, OSW is still relatively nascent compared with incumbent sources of power, and developers require financial incentives to support deployment. These incentives can take many forms, including feed-in tariffs, tax credits, or auctions for renewable energy certificates or power purchase agreements. At present, the dominant incentive mechanism for OSW projects in European countries and the United States involves auctioning, as it most actively seeks competition to keep costs and subsidies down. The United States further benefits from the already-steep decline in costs from European scale and development.

Some degree of cross-state collaboration on the timing and sequence of OSW solicitations and project delivery can optimize supply-chain investments, creating a smooth project pipeline in the region. Working together would thereby ensure that developers, OEMs, and other supply-chain actors rightsize their operations to maximize capacity over time and avoid the need for surge build-out. In Europe, for example, countries around the North Sea agreed to increase coordination of tender procedures for this purpose.

State collaboration on the timing of solicitation can also make certain a critical mass is reached to help developers cut the cost of electricity. As an example, Connecticut’s 2018 solicitation coincided with the solicitations of Massachusetts and Rhode Island. The winning project in Connecticut’s first solicitation was Deepwater Wind’s (now Ørsted’s) Revolution Wind, which was ultimately Rhode Island’s first awarded bid. This enabled the full-project lease area of Revolution Wind to be developed jointly and achieve benefits of scale reflected in lowered cost of electricity.

Finally, collaboration between states, grid operators, and the Federal Energy Regulatory Commission is important to safeguard clear, fair, and transparent market rules for how OSW projects can participate in electricity markets. Recent doubt around the ability of Vineyard Wind in Massachusetts to participate in ISO New England’s 1 capacity markets has generated significant uncertainty of the viability of future revenue streams.

Regarding the design of auctions—or indeed, the inclusion of other types of incentives and features in solicitations—competition among states can further help governments determine the best incentive mechanisms. Over time, as effective incentives are designed and proven, states may ultimately choose to match the design of auctions to streamline the ability of developers to prepare bids.

Facilitate site development of best offshore acreage

The case for state collaboration: Mixed

Site development is the initial assessment of potential OSW areas and may be conducted by either government agencies or developers. This includes wind resource assessments, seabed surveys, geotechnical assessments, and environmental surveys, such as for marine biodiversity assessments.

As sites are made available by the federal government, individual states can independently recommend—by means of the Bureau of Ocean Energy Management (BOEM)—certain areas for leasing. As such, New York State Energy Research and Development Authority (NYSERDA) was instrumental in recommending what would become BOEM’s New York Bight lease areas.

However, all states benefit from the federal government taking a regional and more comprehensive role in making the appropriate amount of acreage available. Given potential interdependencies between possible lease areas over constrained geographies—such as those regarding fishing or trade routes—some level of collaboration between state and federal government may, therefore, contribute to a better outcome.

Similarly, while individual developers will likely lead many of the site-development efforts based on experience accumulated in Europe, all states benefit from building the capabilities for the comprehensive, thorough, and timely management of site development. Some level of collaboration may help accelerate this process.

Facilitate stakeholder management and buy-in

The case for state collaboration: Strong

Buy-in from affected stakeholders, such as the fishing and shipping industries or environmental groups, enables political support toward OSW to hold firm. Several issues raised by stakeholders along the US East Coast have little precedent in Europe: whale migration patterns, the coexistence of fishing and navigation in active OSW lease areas, among others. Acceptance is further complicated by the stakeholders along the coast, who—despite advocating for similar issues—are fragmentated.

Developers are actively engaged with various stakeholder groups and typically work through individual projects and lease areas. For example, Equinor is collaborating with the Wildlife Conservation Society to deploy buoys with sensors to provide near-real-time information of when migrating whales are in the area. However, states have an opportunity for greater collaboration among each other to engage the public across the region. Working with trade groups and sharing best practices and lessons learned can only improve outcomes, streamline successful projects, and contribute to lasting public trust.

2. Spur investments in critical infrastructure

The deployment of OSW raises two major infrastructure challenges. The first is the need for new, dedicated ports that developers and operators can use to stage, transport, install, and operate OSW projects. Port infrastructure’s ever-growing importance in influencing the design of wind turbine installation vessels—highlighted in “Scaling the US East Coast offshore wind industry to 20 gigawatts and beyond”—is a significant source of concern for the timely and cost-effective scaling of the industry.

The second challenge concerns upgrading the transmission grid to enable the smooth integration of increasing levels of intermittent OSW power generation. This too was previously highlighted as a source of significant concern for the scaling of the industry.

Plan and coordinate investments in maritime infrastructure

The case for state collaboration: Mixed

In 2002, the government of Bremen, Germany, invested in upgrades to the port of Bremerhaven to support OSW activity and invited private companies to develop facilities in the area. The port of Bremerhaven is now at the heart of one of the largest global OSW technology clusters.

Such a successful tale of government-led regional industrial development is appealing to state governments along the East Coast wishing to establish a local supply chain. However, states independently replicating the same approach is nonetheless associated with risks. Indeed, while states competing to secure a first-mover advantage helps accelerate industry development, some level of coordination among states may help avoid over- or underbuilding total port infrastructure needs or selecting suboptimal locations for critical ports.

Uncertainty around the optimal configuration of ports in the region further calls for states to actively collaborate. One study estimates that five staging ports are necessary (four in the North Atlantic and one in the South Atlantic) to support the growth of ten GW by 2030. However, structural constraints around existing ports suggest that the East Coast could instead develop a more distributed network of smaller ports. European OSW ports can be significantly larger in upland acreage than American East Coast ports. For example, ports in New Bedford, Massachusetts, and New London, Connecticut, which have made or announced investments for OSW-readiness, are sized at around 30 acres each—the Port of Bremerhaven, in stark contrast, is nearly 15 times larger at 440 acres. The Port of Esbjerg is more than 860 acres and allows for companies across the entire value chain to be located on site. These European ports are scaled to serve a market of similar size to the US industry’s target goals over the next ten to 15 years.

Plan and coordinate investments in electric grid extensions and upgrades

The case for state collaboration: Strong

Integrating OSW into the electric grid requires major transmission grid build-outs and upgrades, including “wet” transmission from the OSW project to the shore and upgrades of the onshore grid. Aging onshore grid infrastructure, as well as known bottlenecks, are a challenge on the East Coast, further raising the level of the necessary grid investments.

Independent systems operators along the East Coast have established procedures to identify, vet, and resource grid investments. Yet a risk remains that these will prove inadequate, considering the size and timeline of investments needed to support regional OSW goals. Furthermore, as the share of OSW in the power mix increases, states will benefit from greater regional grid integration as it serves to better manage the impact of resource variability on achieving goals at lower costs. That said, existing procedures for transmission projects across systems operator boundaries are even less likely to be conducive to adequate investment decisions. There is, therefore, a clear need for greater cross-state and cross-systems operator collaboration.

3. Catalyze essential economic inputs

Kick-starting deployment and spurring investments in critical maritime and grid infrastructures may not be enough to guarantee a smooth build-out of the OSW industry. Indeed, without access to a qualified workforce or competitive local supply chains, the OSW industry is likely to face both delays and cost escalations.

Develop a qualified workforce

The case for state collaboration: Weak

The scale of the OSW workforce challenge was underscored in the previous article as a significant concern to the timely and cost-effective scaling of the industry. As exemplified by the business clusters that formed around ports in the North Sea region, partnerships between industry organizations, trade unions, community colleges, and vocational schools can help build a pipeline of skilled, experienced, and accredited workers needed to support the OSW industry. The need for a qualified workforce can ramp up quickly. For example, in Germany the OSW industry employed close to 30,000 people in 2016, up from less than 10,000 in 2010 and less than 1,000 in 2007. And in the United Kingdom, OSW employed more than 20,000 people by 2015.

US state governments play an important role in facilitating and accelerating this process through coordination and financial support. New York and Virginia have so far allotted $47 million to $57 million for workforce and safety training. Given the limited scale each individual training institution can achieve, many entities across several states need to build robust curriculums and graduate qualified candidates. In this process, cross-state collaboration is not critical. In contrast, to make sure curricula are consistent with the skills needed, collaboration with developers, OEMs, and other supply-chain actors is most important.

Promote the establishment of a supply chain

The case for state collaboration: Mixed

From a state government’s perspective, supply-chain development is essential to attracting and building the OSW industry. In fact, Ørsted’s 400-MW wind farm off the coast of Rhode Island is expected to generate more than 800 new jobs and result in $250 million in investments in the state. Each state has its eyes set on capturing as big a share of the job-creation opportunity as possible.

States typically include requests for local economic impact information as part of their solicitation decision making. For example, as part of the bidding process, New York’s and New Jersey’s solicitations toward the end of 2018 both included separate requests for detail on the local economic development investments. States also provide financial incentives for in-state manufacturing facilities. For example, the New Jersey Economic Development Authority recently launched the Offshore Wind Tax Credit Program to provide up to $100 million in incentives for investment in southern New Jersey.

From a regional industry perspective, these state-level efforts run the risk of leading to suboptimal supply-chain investments, which can add unnecessary costs to the industry. Developers and OEMs have notably expressed some wariness of too much government involvement, which could interfere with market-based decisions. Some level of cross-state collaboration may therefore help sustain sound, timely supply-chain investments and avoid the risks of “overdesigning” stale-level schemes.

Invest in offshore wind research and development

The case for state collaboration: Strong

Given the unique regulatory, environmental, political, and cultural nuances of the US market, the public and private sectors are both investing in R&D to reduce cost and accelerate deployment. The expectation is that public-sector investment in innovation will help private-sector developers more quickly tailor their global experience to an American context and reduce overall cost and timelines.

A September 2018 report by the Partnership for Offshore Wind Energy Research emphasizes the importance of broad collaboration across sectors and disciplines to maintain the United States as a competitive and attractive market for OSW energy. 2 The report details how coordinated investment can help achieve the scale and focus on the critical areas needed for innovation. As an example, the National Offshore Wind R&D Consortium—a partnership between Maryland, Massachusetts, New York, and Virginia with federal funding—has three research priorities: reduce development costs in early phases of US OSW projects; streamline site characterization for OSW developers; and improve efficiency of project construction, installation, operations, and maintenance.


Through the impetus of state governments, the US East Coast is on the cusp of becoming a major global hub for OSW. However, as highlighted in the previous article, “Scaling the US East Coast offshore wind industry to 20 gigawatts and beyond,” there are significant challenges ahead to successfully scale the industry. While the breadth of state government action in support of OSW is broad, collaboration among states along a specific and well-defined subset of tasks can help address these challenges and ensure a more timely and cost-effective industry build-out.

About the author(s)

Nicolas Lefevre-Marton is an associate partner in McKinsey’s Stamford office, where Richard Sellschop is a partner; Humayun Tai is a senior partner in the New York office, where Amy Tsui is a consultant.

The authors wish to thank Matias Melero, Jesse Noffsinger, and Bogdan Rozhkov for their contributions to this article.

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