Identified energy communities line an estimated 3,818 miles of continental US coastline. By connecting to onshore substations within these geographies, offshore wind projects may receive an incremental 10% break on top of base 30% production and investment tax credits under the Inflation Reduction Act of 2022 — a windfall that would help the space offset mounting development costs amid persisting inflation and the Federal Reserve's hawkish monetary policy to fight it. Including Alaska and Hawaii, shoreline within US energy communities extends an estimated 14,700 miles.

Under the energy community special rule of the Inflation Reduction Act (IRA), offshore wind projects with onshore interconnection facilities in a qualifying census tract, metropolitan/nonmetropolitan statistical area or brownfield are eligible for the law's 10% tax credit adder, bringing IRA-related tax breaks to at least 40% — and a maximum of 50% when some domestic component quotas are met.

S&P Global Commodity Insights estimates that more than 28% of the continental US shoreline is bordered by energy communities. The metric comes in at 20% for Hawaii and rises to 100% for Alaska. The western half of the Gulf Coast is made up almost entirely of energy communities.

Mapping known and proposed onshore substations with available coordinates for currently operating and planned offshore wind projects shows only one qualifying facility as of the time of writing: the Indian River (NRG) substation in Millsboro, Del. It is associated with Momentum Offshore Wind Project, Ocean City Offshore Wind Project (Marwin) and Skipjack 2 Offshore Wind Project.

The percentage of coastal miles that include energy communities varies markedly across the continental US, ranging from 19% on the East Coast to 41% on the Gulf Coast. Turning these metrics into absolute energy community-bordered shoreline, however, shrinks the gap between the three geographies due to the actual length of their respective coasts. Stretching across more than an estimated 6,600 miles (about twice the width of the US), the East Coast has nearly 1,270 miles of shoreline comprising energy communities. The much shorter Gulf Coast — a little over half the length of the US Atlantic seashore — offers a calculated 1,420 miles of energy community coastline. Outside the contiguous US, the entire Alaskan coast is made up of energy communities.

Note that coastline and shoreline are used interchangeably in this report, despite slight differences, for the sake of simplicity.

That said, a greater percentage of qualifying seaboard maximizes the probability that an offshore wind developer will benefit from the IRA's 10% tax credit bonus when targeting specific areas. For example, identified energy communities border an estimated 92%-plus of the Texas coastline, more than two-thirds of the Louisiana seashore, and the entirety of the coast of Mississippi. At these levels, the western half of the Gulf Coast provides ample latitude for onshore substation prospecting while pursuing the extra 10% subsidy. The opposite is true along the West Coast, where energy communities cover only about a third of the oceanfront in California, Oregon and Washington.

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Mapping operating and planned offshore wind plants against the assessed energy community footprint along the US coastline suggests that multiple projects may qualify for the IRA's 10% tax credit adder. That is the case for the 300-MW Galveston-Offshore Wind project, for instance. Planned 24 nautical miles off the coast of Galveston, Texas, the Coastal Point Energy LLC-owned project faces a wall of qualifying coastland. This virtually guarantees that Moody Reit, the tracked onshore substation proposed for the wind farm, will reside in an energy community. S&P Global Market Intelligence data coordinates were not available for Moody Reit. Two of the wind planning areas in the Gulf of Mexico appear to be ideally located to benefit from the IRA's energy community special rule.

On the West Coast, the coordinates of the planned 150-MW Redwood Coast Offshore Wind Project, to be situated about 25 miles off the northern tip of California, suggest eligibility possibilities. The project's proposed onshore interconnection facility, the Humboldt substation, is in Eureka, Calif., which appears to be in the state's identified energy community footprint. Market Intelligence data coordinates were not available for the Humboldt substation. Most of California's energy community coast is in the south, stretching from Los Angeles down to the border with Mexico — an area without any offshore wind activity.

Of note, the Pacific Ocean has the world's deepest sea basin, featuring an average depth of 4,000 meters, according to the US National Oceanic and Atmospheric Administration Ocean Exploration. About two-thirds of US offshore wind resources are in deep waters, according to the US Energy Department. Most are in the Pacific. Given these conditions, most wind projects along the US West Coast will necessitate floating wind turbines, which are more expensive than traditional fixed-bottom solutions. The average threshold to resort to floating offshore wind turbines is 60 meters. On Sept. 15, 2022, the Biden administration announced the Floating Offshore Wind Shot initiative — an effort to reduce the cost of floating offshore wind by 70% to $45/MWh by 2035.

Along the northeastern US, off which most of the US offshore wind action is taking place, energy community 10% tax credit bonus opportunities are far and few between. This is despite more than half the coastline of both Maine and Delaware being estimated to be eligible. Of the region's roughly dozen offshore wind-associated substations with Market Intelligence coordinates tracked for this report, we found only one in an identified energy community: Indian River (NRG) in Millsboro, Del. A combined 24.2 GW of operating and planned US offshore wind capacity falls in waters off the coast of this region, accounting for about 63% of the current US total, according to Market Intelligence data.

Energy communities are geographies eligible for an incremental 10% tax credit on top of the base 30% production and investment tax credits under the Inflation Reduction Act. Economic revitalization of communities historically reliant on environmentally damaging fossil fuels underlies this special rule of the legislation.

Qualifying energy communities per the Inflation Reduction Act of 2022:

– Census tracts, and all adjacent ones, in which any coal mine has closed after Dec. 31, 1999, or in which any coal power plant has been retired after Dec. 31, 2009.

– Metropolitan and nonmetropolitan statistical areas where, after Dec. 31, 2009, fossil fuel occupations have accounted for at least 0.17% of direct employment or contributed 25% of local tax revenues and where the unemployment rate is at or above the national average for the previous year.

– Brownfield sites — broadly, land where the presence or potential presence of pollutants, contaminants or hazardous substances impedes development.

With criteria concerning land-based geographies, and offshore wind projects, by definition, being at sea, questions around access to the supplemental 10% tax credit quickly arose after President Joe Biden enacted the legislation in August 2022. In a notice on April 4, the IRS issued offshore eligibility clarifications, saying that offshore wind projects with "land-based power conditioning equipment that conditions energy generated by the ... project for transmission, distribution, or use that is closest to the point of interconnection" were entitled.

With the inclusion of the 10% step-up, IRA-related tax breaks rise to 40% and can reach 50% when some domestic component requirements are met — a significant windfall amid mounting economic challenges. With the US Federal Reserve staying the course on monetary tightening to combat persisting inflation, the sector is facing both rising capital costs and higher rates of financing. The Fed has raised the benchmark federal funds rate 11 times in its last 13 Federal Open Committee meetings, to a 5.25%-5.5% range, and Fed Chairman Jerome Powell hinted Sept. 20 at another hike before the end of 2023.

The rate of inflation has declined for most of 2023, but it could pick up again, given unfolding geopolitical developments. On Sept. 5, Saudi Arabia and Russia announced the extension of voluntary oil production cuts to year-end, sending crude oil prices to their highest levels in 2023. On Sept. 21, Russia declared a temporary ban on gasoline and diesel exports — save to Armenia, Belarus, Kazakhstan and Kyrgyzstan — further weighing on global energy supplies. In prepared remarks Sept. 22, Susan M. Collins, President of the Federal Reserve Bank of Boston, said she expects rates to stay higher for longer, adding that further monetary tightening was not off the table.

Supply chain disruptions are adding to the headaches across the wind — and, more broadly, renewable — energy sector. In this context, wind developers are trying to renegotiate power purchase agreements; some are hinting at backing out of some projects outright. Denmark-based renewable energy giant Ørsted A/S on Aug. 29 announced impairments totaling 16 billion Danish kroner, or about $2.27 billion, on the company's US East Coast pipeline. US offshore wind delays or cancellations would jeopardize the Biden administration's target of 30 GW of offshore wind capacity deployed by 2030.

Total coastline values in this report were calculated based on the Claritas National Boundary Line file. They were then projected to the North America Equidistant Conic coordinate system and split into coastal regions before being measured.

As of Sept. 25, 2023, US$1 was equivalent to 7.04 Danish kroner.

Map by Jonathan Paul Lalgee, Manager, Cartography.

Coastal analysis by Carmen George, Manager, Geographic Data.

Data visualization by Chris Allen Villanueva, Senior Designer.

For wholesale prices and supply and demand projections, see the S&P Global Market Intelligence Power Forecast. 

Regulatory Research Associates is a group within S&P Global Commodity Insights.