President-elect Joe Biden’s climate change agenda is the US’s most ambitious to-date, and it is tipped to be a boon for both the country’s nascent offshore wind industry and its European investors who have been waiting in the wings.
Mr Biden’s 10,000-word plan for a clean energy revolution sets lofty goals such as eliminating emissions from power plants by 2035, transitioning to a net-zero economy by 2050, and upgrading the energy efficiency of four million buildings in his first term.
This is in stark contrast to the current administration which, according to a study by The New York Times, has dismantled around 100 environmental protections deemed burdensome to the fossil-fuel industry and as holding back the US economy.
Mr Biden has pledged to “reverse all the damage Trump has done” and will start by rejoining the Paris Climate Accord on his first day in office. He has even appointed one of the pact’s architects — former secretary of state John Kerry — in the recently elevated role of US climate envoy. The government plans to fund $2tn of climate-related investment during its first term, and entice around $3tn of private and state-level investment over the next decade.
Unlocking offshore wind
The biggest opportunity for foreign investors could be offshore wind, which has stalled over the past four years owing to no permits being awarded. “The offshore wind sector was really brought to a complete halt by paralysis in Trump’s Department of the Interior,” said Gregory Wetstone, president and chief executive of the American Council for Renewable Energy (Acore). “We fully expect the Biden administration to be willing to make decisions that allow for tens of billions of dollars of investment in offshore wind development to go forward.”
Mr Trump’s antipathy towards the sector is thought to be behind the slowdown in approvals, but projects will be accelerated under his successor who is committed to the sector. With just 42MW of installed capacity, US offshore wind is more than 500 times smaller than Europe’s (22GW). But with nearly 30GW in the US pipeline, things could be about to turn around.
European firms are leaders in offshore expertise and technology, and the likes of Orsted, Equinor and Shell are keen to expand their US footprint. In November, Spain’s EDP Renewables and France’s Engie launched a North American joint venture for this exact purpose. As in other parts of the world, the nascent US sector faces complaints by the fishing industry and other groups claiming the turbines are eyesores. “If those problems can be overcome, that is a fantastic opportunity for investment into the US,” says Ed Crooks, vice-chair of Americas at Wood Mackenzie. “It’s one of the sectors with a lot of FDI interest right now.”
Carrots not sticks
Speeding up permits embodies Mr Biden’s expected approach to climate change — removing regulatory barriers to clean investment rather than upping penalties for polluters. The divided Senate will make it difficult to get anything through Congress that will hurt the economy or lacks bipartisan support.
“That means it will be carrots, not sticks,” says Mr Crooks. “Climate policy will be more focused on creating incentives and trying to encourage action than on measures that disadvantage industries and might cost jobs.” Areas with bipartisan support include nuclear power, R&D grants, carbon capture and storage, and, to a lesser extent, the renewal of tax credits which have been instrumental in expanding wind and solar investments, but will soon expire.
Legislation aside, other levers at the president’s disposal include government procurement, rules on energy use by federal facilities and even trade policies. The current administration’s tariffs on solar panels, for instance, have created some hesitancy among would-be investors. More broadly, Mr Biden is expected to focus on supporting entire supply chains and innovations in emerging technologies, such as green hydrogen.
His policy targets, including the promise to build 500,000 electric vehicle (EV) charging stations by 2030, are also a ready-made tool. “Without going down the legislative route, that sends a strong signal that the government is committed to a future of electrified transportation,” said Devashree Saha of the World Resources Institute. “This provides confidence to automakers to accelerate the rollout of electric vehicles and step up investment in the US EV market.”
Reversing Mr Trump’s rollbacks will involve ‘sticks’ on fossil fuel players, meaning they will likely be done via executive order. These can be challenged in court and are less durable than legislation, but are the quickest way to reimpose important rules, such as limits on methane emissions from oil and gas operations.
Progress against the odds
Despite the regulatory headwinds, investment in US renewables grew from $44.4bn in 2016 to a record high of $59bn in 2019. Acore expects a record 27GW of renewable power will be added to the grid in 2020. Data from fDi Markets shows foreign firms have supported this trend, establishing 83 greenfield projects in 2019 — more than double any year in the Obama era.
This is partly down to the attraction of the US’s strong economic fundamentals, well-established energy industry and highly-skilled labour force. But it is also because states have stepped up into the renewables leadership vacuum.
Massachusetts, Rhode Island and New York are prime examples. “These states have been taking a multi-pronged approach to advancing the offshore wind industry which has sparked a high level of investor interest,” notes Ms Saha, who helps policymakers develop clean energy policies. They have created tax credits, set generation targets and invested into local supply chains, all of which have helped European firms, including Orsted, Iberdrola and Royal Dutch Shell, progress projects off the north Atlantic coast.