Building North Carolina's Offshore Wind Supply Chain The roadmap for leveraging manufacturing and infrastructure advantages March 2021Subtitle Copyright This report and its content is copyright of BVG Associates LLC - © BVG Associates 2021. All rights are reserved. Disclaimer This document is intended for the sole use of the Client who has entered into a written agreement with BVG Associates LLP (referred to as “BVGA”). To the extent permitted by law, BVGA assumes no responsibility whether in contract, tort including without limitation negligence, or otherwise howsoever, to third parties (being persons other than the Client) and BVGA shall not be liable for any loss or damage whatsoever suffered by virtue of any act, omission or default (whether arising by negligence or otherwise) by BVGA or any of its employees, subcontractors or agents. 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The views expressed in this report are those of BVG Associates. The content of this report does not necessarily reflect the views of North Carolina Department of Commerce. Front cover images, from top to bottom, courtesy of: SGRE (nacelle factory in Cuxhaven, Germany), SGRE (blade factory in Hull, UK), Sif (monopile plant in Maasvlakte, Netherlands) and Green Port Hull (construction base port at Hull, UK). Document history Revision Description Circulation classification Authored Checked Approved Date 1 For client Unrestricted Mike Blanch MJB AGS 16 Feb 2021 Andy Strowbridge Andy Geissbuehler Thomas J. White Steve Kalland Isaac Panzarella Richard Baldwin Rebekah Nagy Joe Hines North Carolina Offshore Wind Supply Chain Registry North Carolina Department of Commerce encourages companies (both inside and outside North Carolina) to join its publicly available supply chain registry by completing a 10-minute survey: https://www.nccommerce.com/business/key-industries-north-carolina/energy/offshore-wind-industry. 2 Building North Carolina's Offshore Wind Supply Chain Executive summary North Carolina leadership 2. Leverage existing manufacturing strength – build upon North Carolina’s manufacturing strengths and “Offshore wind development combined with our strong nation-leading economic conditions for component solar capacity will bring more high paying, clean energy manufacturing to supply the offshore wind market jobs to North Carolina while we continue to ramp up our along the East Coast and beyond. fight against climate change,” said North Carolina Governor Roy Cooper. “This bipartisan [SMART-POWER] agreement 3. Build momentum for a strong pipeline of with neighboring states allows us to leverage our combined windfarms – accelerate the offshore wind opportunity economic power and ideas to achieve cost effective by driving North Carolina’s offshore wind targets and success.”1 new windfarm developments to match the significant electricity consumption of the Southeast and mid- As part of a coordinated approach by North Carolina (NC) Atlantic states, to maximize economic, decarbonization state economic, energy and environmental leadership,2 the and environmental benefit. North Carolina Department of Commerce (NCDOC) commissioned this strategic study to maximize the Offshore wind is delivering globally economic benefit in NC from offshore wind. The study: • Offshore wind levelized cost of energy (LCOE) • Characterizes the offshore wind opportunity for North reduction continues apace. Auction prices have more Carolinians than halved from projects installed in 2018 to those due to be installed in 2023. A further 30% reduction is • Assesses the North Carolina advantages in existing expected between projects installed in 2023 and those assets and business potential in 2030 • Provides engagement and development tools to help • The global market has grown on average by 24% each build partnerships between developers and suppliers year since 20133 with regional companies interested in diversifying into offshore wind • Over 5 GW was installed globally in 2020, bringing the total installations to over 32 GW3 • Reviews existing, and identifies gaps in, business incentives and policies to enhance the already good • Over 8 GW is forecast to be installed globally in 2021, business climate and further develop the workforce, rising to over 30 GW per year by 2030,3 and and • Growth is occurring across multiple regions and • Reviews the Morehead City and Wilmington ports plus countries, and over 300 GW is forecast to be installed other key state infrastructure, including the Carolina by the end of 2030.3 Connector Intermodal Facility being built in Rocky The scale of the US offshore wind opportunity Mount. State-driven offshore wind targets have exceeded 28 GW4 Strategic positioning for offshore wind to date and are expected to result in 41 GW of cumulative North Carolina’s strategic position in offshore wind should installed capacity by end of 2035. Already 9 GW of projects be to: are well on track with offtake agreements, with ongoing solicitations enabling an additional 6 GW to follow by end 1. Strengthen anchor companies – build upon the 2021. strong base of major manufacturing companies already established in North Carolina, and attract The larger this market becomes, the more the supply chain additional ones, to grow and anchor the industrial base will be established on the East Coast. and enable an acceleration effect on the wider supply The rapidly developing economic opportunity will well chain. exceed $100 billion for windfarm development and construction alone (CAPEX), not even accounting for the 1 Memorandum of Understanding Among Maryland, North Carolina 2 Office of the Governor, Department of Commerce (NCDOC), and Virginia to create the Southeast and Mid-Atlantic Regional Department of Environmental Quality (NCDEQ). Transformative Partnership for Offshore Wind Energy Resources (SMART-POWER) 3 BVGA analysis. https://files.nc.gov/governor/documents/files/SMART-POWER- MOU_FINAL.pdf, last accessed February 2021. 4 A watt (W) is a measure of power (energy per second), and there are 1 billion watts in 1 GW. The capacity of large power plants or of many power plants are typically measured in GWs. 3 30 years of operations and maintenance local economic • Manufacturing employs over 470,000 workers in the benefit (OPEX). state in 10,250 manufacturing companies.7 Of the states that have made commitments for offshore • The weekly wages in manufacturing place it 7th among wind capacity, Rhode Island’s 1.03 GW is proportionately the state’s 19 industrial sectors. Manufacturing wages the biggest and enough to generate about 68% of its 2019 are higher on average than healthcare and social electricity consumption. New York’s 9 GW is the largest in assistance, transportation and construction, and absolute terms and is enough to generate about 30% of its 2019 electricity consumption. • The governors of Maryland, North Carolina, and Virginia forming, in 2020, the Southeast and Mid- By way of comparison, the UK has a 40 GW offshore wind Atlantic Regional Transformative Partnership for target by end of 2030; this will generate the equivalent of Offshore Wind Energy Resources (SMART-POWER).8 65% of its 2019 electricity consumption.5 This recognizes that working together, these three Manufacturing is North Carolina’s edge states can make the region the natural choice for the offshore wind supply chain. North Carolina wishes to use its existing strength in quality manufacturing and its enduring manufacturing-friendly North Carolina’s infrastructure and policies support environment that exceeds that of any east coast state to offshore wind supply the physical supply chain and project-specific This report further evaluates North Carolina’s position in marine activities: key areas that include business climate, workforce, infrastructure and location. North Carolina recognizes that • Supply of major components, lower-level components, it has a number of key competitive advantages specific to and materials to the whole of the east coast market, the offshore wind supply chain that include: including for turbines, and • Pro-business climate • Supply of port-based and operations and maintenance services to wind farms off North Carolina, Maryland, • Strategic geographic location Virginia, South Carolina and potentially other states. • Relatively large electricity consumption (9% of east The strengths of North Carolina include: coast states’ electricity) and growing demand for • Ranking 1st among east coast states and 5th in the renewable energy nation in the value of its manufacturing sector’s Gross • Relatively low CO2 electricity footprint Domestic