The Offshore Support Vessel (OSV) market is seeing new opportunities beyond traditional oil & gas. Due to a new focus on wind, the OSV sector is growing at a rate of 30% year-on-year. While this growth is global, the Americas are an emerging and crucial market for the fleet.
North America is currently seeing the construction phases of its first commercial wind farms underway at Vineyard 1 and South Fork. Meanwhile, recent licencing rounds, including the first floating wind round offshore California, have seen high interest. There are more to follow, including the first in the US Gulf of Mexico, but with the majority located to the Northeast.
Currently, Spinergie has indexed a total of 14 North American projects that are in either the assessment and feasibility or development planning stages. In addition, over 50 are in the initial stages of development. The vast majority of projects in US waters are fixed with just over 18 GW forecasted capacity by 2030 compared to just over 1 GW floating capacity in the same time period.
While much of the focus is on North America, it should also be noted that there is a burgeoning market in South America namely in Brazil and Colombia. Each country has a licensing round planned for later this year with announced fixed capacities of 1.2 GW and 1.0 GW respectively. Colombia’s upcoming round also has an announced floating capacity of 1.0 GW.
While increased activity will have far-reaching effects, here we focus on the impact on the OSV fleet in the Americas.
How the Jones Act impacts the OSV fleet
The US wind market has to contend with an additional layer of complexity as Jones Act-compliant vessels will be needed for many of the required tasks in bringing a wind farm project to fruition. To recap, the Merchant Marine Act of 1920 (known as the Jones Act) is a US federal law that regulates maritime commerce. It states that vessels which transport merchandise, or people, between two US points must be US-built and flagged, majority owned by US entities and crewed/operated by US citizens and permanent residents. The Garamendi Amendment of January 2021 confirmed that wind farm construction falls under these parameters.
As the US currently does not have the vessel capacity or infrastructure to support wind farm developments to the scale required, developers have had to find innovative solutions to work around Jones Act restrictions - many of which will mean yet more vessel capacity is required in an already tight market.
Read more: How to build a wind farm in the USA: three solutions available to developers
The feeder barge technique in particular is set to impact the fleet. It is used to transfer components using Jones Act barges towed by Jones Act tugs to the main installation vessel which is based offshore. Anchor Handler Tug Support (AHTS) vessels will be used extensively in the technique while ocean-class tugs may also be used. Spinergie understands the latter was a possibility for the Vineyard 1 project. In addition, AHTS will be required for floating wind developments due to their requirements for higher bollard pull capacity.
Read more: Hywind Tampen installation illustrates the impact of floating wind on the AHTS market
Alongside installation activities, many more vessels are needed in the construction process from UXO removal to heavy lift support in the commissioning of the turbines. In the US specifically, it is also likely that there will be a higher number of PSVs used than in Europe. As an example, Platform Supply Vessels (PSVs) can be used as geotech survey vessels in the early stages of a wind farm development and will then be used in the supply for key components as construction progresses.
As such, and with the market already facing a supply deficit due to increased demand elsewhere in the world, there must be an increase in the number of available support vessels.
How can vessel managers help meet this demand?
In order to meet increasing US wind demand vessel managers have three main choices: to reallocate their fleet from oil and gas to wind, reactivate laid-up vessels or build new tonnage in the USA. Each of these options come with their own challenges.
The reallocation of vessels from oil and gas to wind will not be a quick process, and for now the dayrates are significantly less attractive on the wind side of the market. Until they are brought up to par, or surpass, oil and gas dayrates it is unlikely that any wholescale reallocation of the fleet will take place.
It is likely that a significant programme of reactivation and retrofitting will be required to meet the specific needs of the offshore wind industry. With 30% of the PSV fleet currently laid-up there are opportunities to be found. However, reactivation adds an additional layer of cost to the process and could be prohibitively expensive for some vessel owners, and so most are looking only to acquire active, suitable vessels to their fleets. However, there are few examples of vessels which are not prohibitively aged and/or also suitable for the busiest wind project environment in the Northeast. In addition, with the supply chain facing a crunch point globally, finding the time and space in shipyards to undertake a retrofitting programme is its own potentially costly challenge.
That said, a number of units are already undergoing retrofitting, or have completed the process. The PSV/Construction vessels Cade Candies (Otto Candies) and North Star Navigator (North Star Marine) completed upgrade works during the second quarter of 2023 while Paul Candies (Otto Candies) is expected to commence works during third quarter. Yet further PSVs have been retrofitted including Edison Chouest Offshore’s (ECO) C-Fighter, C-Rambler, C-Pioneer and Clarence Moore. Some of these vessels have been reallocated from oil and gas to wind after a relatively small modification programme. This was the case for C-Fighter, C-Rambler, Paul Candies and Cade Candies which were all active prior to the retrofit. Meanwhile, C-Pioneer and NorthStar Navigator have been reactivated from lay-up.
Most recently, Hornbeck Offshore Services confirmed that it will convert one of its recently-acquired 280ft OSV’s to an SOV specifically for meeting US wind and petro-energy flotel needs. The vessel will be capable of supporting both O&M and construction activities and is expected to be available in Spring 2025. The unit will be fitted with a 1,500 kW-hour battery hybrid power system to help with meeting emission reduction requirements.
Finally, the building of new vessels would go some way to solving both the supply and the Jones Act challenges. But, as is the case with reactivation, the process is expensive with increased interest rates causing a slow down in financing opportunities. For now, there are limited orders on the books.
Additional points of consideration
Vessel emissions will also be an important point for any of the units used in offshore wind projects. At the moment it is a requirement to estimate carbon emissions within the construction and operation plan which is submitted to the Bureau of Ocean Energy Management (BOEM). However, California has even more stringent emission standards that will be impactful upon which vessels are able to be used when the time comes to bring the recently-awarded floating licences to the construction stage.
With all eyes on the wind market, it is likely that developers will be keen to keep optics in mind when selecting vessels for use in their projects. As such, it is highly likely that local content will come into play in many instances with developers making a point to use local vessel owners where possible.
Finally, it is always important to remember that many of the vessels used in offshore wind are also used in other offshore operations, most notably oil and gas (O&G). While O&G rates remain higher than those in wind, many vessel owners will continue to focus on such operations until wind rates are more aligned.
Therefore, we can see that while increased wind activity in the Americas' is driving significant demand for OSVs, and lucrative opportunities are in the pipeline for vessels owners, there are also a number of challenges posed by this uptick in demand. The main solution for a number of these issues is to increase the number of suitable vessels in the region, especially when new markets come into play in the west coast of the USA and in South America.
Find out how Spinergie can help you track upcoming wind projects and licencing rounds in the Americas by contacting us for a demo today.