Offshore wind power is an essential tool in the transition to 100% renewable energy in the United States. The U.S. government has pledged to promote Offshore Wind (OSW) projects with the hope of having 30 gigawatts (GW) of offshore wind power generation capacity installed by 2030 and 110 GW of offshore wind generation capacity offshore wind energy by 2050. To put this into context, total global offshore wind energy generation capacity was around 32 GW at the end of 2020. These ambitious goals will require an increase in offshore wind projects.
Ongoing offshore wind projects are being planned and developed in locations with less water depth (20-50m) on the east coast. Although there are many reasons for developers to begin offshore development in these areas, one reason is that fixed bottom foundations, which are the most proven foundation technology, are often considered best suited to shallow waters. deep. However, in order to accommodate the projected rise in offshore wind development, projects will need to be built in locations with deeper water depths (i.e. the West Coast and Gulf of Maine). One of the ways the developers plan to make full use of these deeper water depths is to rely on floating foundations. Although still in its early stages of development, floating offshore offers the possibility of accessing wind energy resources previously thought to be inaccessible.
From a legal point of view, an open question regarding a floating wind turbine is whether such a structure is a “ship” under applicable maritime law and whether it is necessary or even possible to be registered as such. . By analogy, a mobile offshore drilling unit (used in oil and gas exploration) is registered and regulated as a vessel in various jurisdictions, even though it is not a mode of transport and therefore would not be considered a a ship in the traditional sense of the word. It appears that at least one classification society is able to “class” floating wind turbines, which has allowed some ship flag jurisdictions (including the Republic of the Marshall Islands and Norway) to register them.
The implications of a qualified vessel structure are many, including regulatory, environmental and tax implications. However, a perhaps notable and significant consequence is that within the framework of the financing of such a structure, a mortgage on ship can be registered to perfect the security of the financier. Depending on the structure of the financing, a ship mortgage would provide greater clarity as to the perfected status of the financier’s security interest than, for example, a UCC financing statement which is typically used to perfect a security interest in equipment. It would be expected that clarity of the security interest of the financier could lead to additional financing alternatives for the construction of mobile offshore units (and other offshore wind structures).
As floating wind turbine technology and specifications become more refined and the industry evolves and matures, market practices will develop, but it is encouraging to see that industry players and registries of pavilions have already taken the necessary steps to provide a framework in which floating wind turbines could be mortgaged in a manner familiar to the financier.
The West Coast is an important and necessary location to increase offshore wind capacity in the United States. Although an evolving technology, the floating mobile turbine can be an essential tool in overcoming the challenges surrounding the geography of the West Coast. Project proponents and other involved parties will need to monitor technological and legal developments to ensure the success of projects.
Keith Billotti is a Partner and Co-Head of Seward & Kissel’s Capital Markets Group. His practice covers all aspects of corporate and US securities law for domestic and foreign clients, primarily in the shipping, offshore drilling and hedge fund industries. Keith regularly represents large, established public shipping and offshore drilling companies.
Hoyoon Nam is a partner in the Corporate Finance group of Seward & Kissel. He primarily devotes his time to representing financial institutions and borrowers in connection with bank financing and restructuring transactions with a particular interest in matters of interest to clients in the transportation industry.
This post is sponsored by Seward & Kissel LLP.
The views expressed here are those of the author and not necessarily those of The Maritime Executive.