U.S. offshore wind project costs have fallen 75% since 2014, across contracts for 1.2 gigawatts (GW) of projects that will be built over the next five years. The 9 GW capacity target recently announced by Governor Cuomo in New York pushed U.S. targets to a combined 18 GW of offshore wind capacity in six Atlantic states. With all this momentum, did we vastly underestimate the potential contribution of offshore wind to our clean energy future?

Offshore wind power is following a similar, but faster learning curve to onshore wind and solar over the past decade. Since 2010, onshore wind’s levelized cost of energy (LCOE) fell 66%, and solar’s LCOE fell 86%. The glut of upcoming auctions and capacity targets in Northeast and Mid-Atlantic states mean the coming years will determine how fast offshore wind’s cost will fall, and the National Renewable Energy Laboratory’s Annual Technology Baseline suggests plenty of room for improvement over the current LCOE.

Still, only 30 megawatts of offshore wind have actually been built in the United States to date, and consumers paid a heavy price for it at $244/megawatt hours (MWh), roughly four times what utilities pay for wholesale electricity. But recent auctions in Maryland and Massachusetts revealed fast-falling prices for new, larger projects. Maryland utilities recently executed long-term offshore wind contracts for $132/MWh over 20 years. Massachusetts utilities then cut those prices in half with contracts at an average price of $70/MWh for 800 MW of offshore wind in the Vineyard Wind project—implying roughly $90/MWh without the federal tax credit. Though there are still risks associated with siting and permitting, such as satisfying environmental, viewshed, shipping, and other local concerns, these prices make offshore wind cost-effective in the Northeast.

Source: Energy Innovation/America’s Power Plan

None of this remarkable progress would be possible without thoughtful policy design. De-risking early projects through stakeholder engagement, federal and state permitting cooperation, and robust competitive auctions has already helped the nascent offshore industry climb the learning curve without placing undue risk on customers.

However, even those policies won’t be enough. Complementary policies like reforming utility business models, increasing grid flexibility to complement variable renewables, and reforming wholesale energy markets will be key to a carbon-free, affordable energy future.