The United States needs a National Blue Economy Strategy
The U.S. has long had a hot and cold relationship with the marine world. When profitable or required, the U.S. has invested significantly in merchant, military, or offshore energy fleets. These investments appear as isolated “booms” in the historical record and are often followed by long bust periods with little investment. However, the marine world is not suitable for such an investment approach. The maritime industry requires extensive capital investments for production and repair facilities, ports, and the vessels/platforms themselves. It requires a deep supply chain of specialized equipment. It also requires unique human skills gained over years of education and practice. The bust period largely destroy such investments, and re-capitalizing the physical facilities and human workforce when needed is slow and inefficient.
As we move into the 2020s, rapid economic, energy, and security developments in the marine world will reshape the wider world, demanding attention from all nations. The U.S. is approaching this period from a relative “bust” position, with an overtaxed Navy, vestigial deep-sea merchant marine, and having become a technology importer for many marine components, from propulsion to offshore wind technology. Across the industry, supply chain delays and labor availability restrict progress. From this position of relative weakness, the U.S. is challenged on many fronts simultaneously, including:
Offshore wind - Renewable energy from offshore wind will be a key player in decarbonizing the electric grid while meeting demands for electric cars and e-fuel production. The Biden administration’s goal of 30 GW by 2030 would translate into roughly 2,000 15 MW turbines that must be installed over the next decade. Offshore wind projects require numerous specialized ports, installation vessels, and maintenance vessels, many of which may be constructed in the U.S. (such as the $246 million rock installation vessel and the ~$500 million WTIV already under domestic construction), along with a projected 44,000 jobs in wind if 30 GW is achieved. Offshore wind has the potential to help reinvigorate multiple sections of the marine industry. Yet, it is especially vulnerable to rising interest rates as it is so CAPEX intensive. The current financial climate is placing multiple projects on hold, and if this climate persists, investments in ports, vessels, and supporting infrastructure could dry up. Offshore wind also suffers from the same human and equipment supply chain issues common across the marine industry. Meanwhile, Europe and China are significantly ahead, having invested heavily when interest rates were lower. China currently has roughly 26 GW installed, with Europe closing in on 30 GW.
Offshore oil and gas - The Gulf of Mexico oil fields and the associated supporting industries are a large and world-leading component of the U.S. maritime industry. BOEM estimates that offshore exploration and production supports over 176,000 jobs and $38 billion in economic output nationally (larger than the Navy’s shipbuilding and conversion budget). As the world transitions to a decarbonized future, how do we address a potential drawdown in this industry? How do we transfer and retain the engineers, equipment suppliers, shipyards, and operators so we do not lose this expertise, capability, and economic value?
U.S. Navy & USCG shipbuilding and repair - The U.S. Navy is under increasing strain as the world moves from unipolar back to a great power competition, and cracks are clearly showing. The desired total number of vessels in the fleet from various planning studies has fluctuated between 321 to 446 over the last three years alone (!), yet approved shipbuilding budgets are probably only sufficient for < 300 vessels (see Eric Labs’ excellent summary). There are major concerns if the submarine industrial base can support the diplomatically-significant AUKUS agreement or if an embarrassing about-face will occur. The inability to repair ships and submarines on time is also sapping significant fleet strength, with 40% of the current submarine force out of service for repairs after decades of under-investment in public shipyards. Surface ships face similar challenges (see here and here), with extended repair times. The USCG fleet replacement has been much more successful. Still, the polar icebreaker component has revealed the difficulty in constructing specialist vessels in the U.S., even as Japan, Europe, and China have completed icebreakers successfully.
Deep sea commercial vessels - The United States is in a relatively uncommon historical position of having a large navy but a very limited commercial fleet. U.S. deep ocean commercial shipbuilding and shipping has long (>100 years - WWII emergency shipbuilding was fast, not cheap) required subsidies to be internationally competitive. In the post-WWII era, where the U.S. Navy was by far the largest force at sea, the country settled on an approach of allowing both deep ocean shipbuilding and ship operation to migrate overseas with the implicit assumption that allies or neutrals would control this global fleet. The government maintains a limited “surge” sealift fleet and some commercial vessels in security programs for national security needs. With China emerging as a top shipbuilder and ship owner/operator and issues over the capability of the aging surge fleet, there is growing concern over this approach. The scale of investment required to rejoin the world’s leading shipbuilders is somewhere between enormous and unthinkable, and the potential for direct profit is very limited.
Decarbonization - The IMO continues to work towards decarbonizing the marine industry by (now roughly) 2050. Leading fuel choices appear to be methanol and ammonia for deep-sea shipping, with hydrogen and batteries possible for harbor and inland uses. The U.S. does not have an organized response to the decarbonization challenge, and given our extensive inland waterways network and major deep-water ports, which fuel mixes to prioritize, and how energy production and distribution will change is an open question. Implementing any move away from diesel (except drop-in biodiesel, whose supply appears insufficient to meet all needs) will require extensive investment.
The challenges covered above are both diverse and linked. Offshore wind, carbon capture, decarbonization, Navy, and commercial shipbuilding require extensive specialized maritime knowledge and intensive capital investments in facilities and vessels. The last 60 years have indicated that a hands-off approach will not produce a robust industry. At the same time, our peers and new competitors have had more success by developing coherent investment strategies. The U.S. currently does not have such a vision across sectors, with strategy documents produced by MARAD and NOAA only addressing the intersection of the blue economy with their own agencies’ narrow responsibility. These efforts compare poorly to the broader strategies published abroad, such as Norway’s or the U.K.’s national strategies, the wide range of blue economy policy guidance provided by the E.U., or even more narrowly-focused naval shipbuilding strategies from Canada and Australia. Looking forward, a Blue Economy strategy for the U.S. must build on our existing strengths while addressing a range of critical issues mentioned above. While I will not propose a strategy here, some of the central questions that such a strategy must answer are:
How does the U.S. provide a sufficient workforce for future maritime needs? The number of naval architects we produce per year pales compared to that of Europe and China. How do we train more naval architects and non-naval architects who can contribute to engineering in the marine space? From component suppliers to the dock floor in shipyards, skilled trades are in short supply; how do we increase recruitment and retention in these areas? How do we provide enough mariners to crew our vessels?
Does the U.S. approach to knowledge generation in the marine world still make sense? The U.S. traditionally funds basic research at universities and applied development with companies (or leaves this to market forces). This creates an uncommonly strong division between these two types of R&D. Internationally, a more integrated approach to technology development and workforce development is used (e.g., Autoship, Flagship, and Flores). European nations are also leading with large education and research facility investments such as the ~$110 million Norwegian Ocean Technology Center. The U.S. has fitfully played with more integrated efforts (e.g., the LIFT center in Detroit) but has little marine-specific in this space.
How much support should offshore wind receive for decarbonization and supporting the growth of the marine industry? What form should this take (electrical tariff support, lower-interest loan guarantees)?
What is the appropriate response for the deep-sea commercial fleet? Should larger operating subsidies be offered to increase the number of foreign-built ships sailing under the U.S. flag with U.S. crews? Or should we open an international registry (similar to NIS) with more limited crewing requirements but an agreement to provide cargo capacity in times of conflict? Does restarting commercial ship construction subsidies make any sense? How many commercial ships would we need to build per year to get U.S. prices down to even 2x what they are in the far east? Would such industrial growth have a beneficial impact on the costs of naval/USCG shipbuilding?
What role should public shipyards play for the Navy, and how do we repair them so they can be effective? They now largely focus on nuclear ship maintenance, but in the distant past, these yards also did general repairs and even new construction. USCG’s public shipyard at Curtis Bay is a highly effective repair yard. Would there be a benefit in having the first-of-class surface ships designed and produced in-house? Should we support new private shipyards, such as the proposed Great Lakes submarine repair yard in Lorain?
How do we stabilize the Navy shipbuilding plan when the political environment and Navy leadership change every 2-4 years? In the U.S. system of government, a cross-party agreement on a naval shipbuilding strategy is likely required but seems politically elusive in the current climate. What can the Navy do without such stability to reduce programmatic risk and improve acquisition?
What role do we wish to play in marine decarbonization? Leader or follower/implementer? Should more support for offshore CCS beyond the Inflation Reduction Act tax credit be available? How will new fuel types impact the work done in our offshore industry, inland industry, and our port infrastructure? Are there national security implications to where these fuels would be sourced from?
What should we do with the generally successful aspects of our industry - fisheries, aquaculture, and small to medium-sized shipyards? They do not receive extensive support at the moment. Do we leave them alone or try to grow these areas?
These questions cut across government agencies involving MARAD, DoD, DOE, FMC, and DHS. The situation is even more complex when one factors in local government and private ownership of many key ports and other aspects of marine infrastructure. Only by developing a national blue economy strategy can a comprehensive approach emerge to position the country for maritime success in the coming decades. But as ocean-dependent energy, food supplies, and security all come under increasing stress, the need for a strong Blue Economy strategy has never been clearer.