The U.S. Maritime Administration (MARAD) last Friday designated offshore wind vessels as vessels of national interest making them eligible for financial support through the Title XI Federal Ship Financing Program (Title XI).
The Federal Ship Financing Program - commonly referred to as "Title XI" based on the part of the Merchant Marine Act of 1936 that established the program - provides for a full faith and credit guarantee by the United States Government to promote the growth and modernization of the U.S. merchant marine and U.S. shipyards.
Through long-term debt repayment guarantees, the program encourages U.S. shipowners to obtain new vessels from U. S. shipyards. It also assists U.S. shipyards with modernizing their facilities for building and repairing vessels. According to MARAD, the repayment term allowed under the program generally is much longer, and the interest rates are lower, than those available from the commercial lending market because of the obligations guaranteed by the U.S. Government.
"This designation [of offshore wind vessels as vessels of national interest] will facilitate more offshore wind construction and will prioritize applications for such projects for review and funding through Title XI," MARAD, part of the Department of Transportation (DOT), said.
The Title XI program assists the domestic shipbuilding industry by providing support for U.S. shipyards to modernize their facilities, to build and retrofit vessels, and assist U.S. shipowners cost-effectively in purchasing new domestically produced vessels.
"It can provide a full faith and credit loan at longer terms and a lower interest rate than traditional private loans. To date, Title XI has provided $9.3 billion in loan guarantees," MARAD said.
The approximate subsidy available for Title XI is $35.5 million, as of March 2022. Based on the average risk for projects MARAD previously guaranteed this amount of subsidy could support approximately $475 million in new loan guarantees.
Strong domestic supply chain
“From modernizing our ports to investing in the U.S. shipbuilding industry to educating the next generation of mariners who will help advance these wind projects,” said Deputy Transportation Secretary Polly Trottenberg. “U.S. DOT is helping create both a strong domestic supply chain and a robust U.S. offshore wind industry to help bring costs down for American families and build a clean energy future.”
The Title XI statute was amended in 2019 to add the authority to designate Vessels of National Interest. Such a designation informs and encourages shipbuilders and shipowners that DOT/MARAD will prioritize and expedite applications for loan guarantees for offshore wind-related vessels.
“We’re excited that some American shipyards have already secured contracts to build vessels to service offshore wind developments,” said Maritime Administrator Ann Phillips. “By growing this industry, we further support essential offshore wind installations, and continue to add jobs and strengthen our important domestic industrial base, including our shipyards and shipbuilding industry.”
The announcement follows the White House meeting with 11 governors from the East Coast to announce the new Federal-State Offshore Wind Implementation Partnership that will accelerate the growing offshore wind industry. According to the White House, these actions have unleashed historic private sector investments to expand an American-made wind energy supply chain.
The partnership is expected to advance the industry’s rapid development and provide more green electricity to the U.S., helping accelerate President Biden’s goal of 30GW of offshore wind capacity by 2030 and 100% clean electricity by 2035.