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Copper Tip Energy Services
Hazloc Heaters
Copper Tip Energy

Offshore Wind Bonanza Beckons Developers in High-Stakes Auction

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These translations are done via Google Translate
Dec 13, 2018, by Jennifer A. Dlouhy

Eleven companies were vying on Thursday for the opportunity to install wind turbines in Atlantic waters off Massachusetts, setting the stage for a record-breaking auction driven by growing demand for renewable power in Northeast U.S.

After eight rounds of sealed bidding, companies had already pledged $24 million toward the three offshore wind leases that are up for grabs — eclipsing the $9.07 million the U.S. government collected for territory off the North Carolina coast in 2017.

And with the prospect of dozens of bidding rounds before victors are declared, analysts and industry lobbyists said the total could exceed the previous high-water mark: Norwegian energy company Equinor ASA’s $42.47 million bid in 2016 for the rights to build an offshore wind farm near New York.

“The unprecedented interest in today’s sale demonstrates that not only has offshore wind arrived in the U.S., but it is set to soar,” said Randall Luthi, head of the National Ocean Industries Association.

Active Bidders

Some 19 companies were deemed qualified by the U.S. Interior Department to participate in the auction — higher than in any of the previous seven competitive sales of wind leases in U.S. federal waters. The firms included units of established offshore wind developers, renewable power companies that have primarily focused on land, as well as oil companies, such as Equinor and Royal Dutch Shell Plc.

The number of companies that were actively bidding at the start of Thursday’s sale was nearly twice the most-recent record, in 2016, when six developers vied for the New York offering. The Interior Department’s Bureau of Ocean Energy Management, which is conducting the sale, will name participants after the auction ends, potentially some time Friday.

One company dropped out of bidding after the fifth round, when the total pledges hit $8 million.

The frenzy reflects growing interest in U.S. offshore wind, which has surged since 2016, when the nation’s first such facility, a 30-megawatt facility development near Block Island, Rhode Island, went online.

“We’ve seen a massive uptick in momentum,” said Nancy Sopko, director of offshore wind policy at the American Wind Energy Association. “Offshore wind in the U.S. went from an idea to a reality. Folks understand the U.S. is the next frontier for this technology.”

Playing Catchup

Sky Eye Measurement

Although the U.S. is a relative latecomer, it’s making up for lost time. Wind developers are being lured to U.S. waters by near-guaranteed demand, as coastal states ratchet up commitments to buy renewable electricity. For instance, in August, Massachusetts enacted a target for buying 1,600 megawatts of offshore wind.

Sky Eye Measurement

“Looking up and down the East Coast — and specifically in the Northeast — we see states with huge commitments to buying this power,” Sopko said. “That is driving incredible demand for this energy.”

Declining installation costs and uncertainty about the timing of the next U.S. sale of an offshore wind lease also were feeding activity on Thursday.

Analysts also describe growing investor confidence in the stability and predictability of the market, as President Donald Trump continues making territory available for new projects. The U.S. has held eight auctions of federal offshore wind rights since the Obama administration started competitive lease sales in 2013, including two under Trump.

Rising Demand

And the extent of offshore wind power is expected to surge over the next decade — reaching 10,000 megawatts by 2030, compared to just 30 megawatts installed in the water today, according to Bloomberg New Energy Finance.

Companies are plunking down ever higher sums for the offshore development rights. Five years ago, Deepwater Wind’s $3.8 million bid was enough to win two tracts for the Block Island project.

But as of midday Thursday, two of the leases near Massachusetts were going for $9 million, with another at $6 million. The territory spans nearly 390,000 acres (157,800 hectares) south of the resort islands of Martha’s Vineyard and Nantucket.

The higher prices reflect the transition to a more established market, said Tom Harries, an offshore wind analyst with Bloomberg NEF.

“Five years ago, you’d acquire a lease, and it would be more speculative — you were speculating there would be a market at some point. And that’s why there were fewer bidders and the prices were cheap,” Harries said. “Now that there is a route to market for your project and somebody who is incentivized to buy your power, then prices will be higher and competition will be higher.”

Companies with U.S. government qualification to participate in Thursday’s auction include Avangrid Renewables LLC, which won the rights to build an offshore wind farm near North Carolina last year, EDF Renewables Development Inc., Cobra Industrial Services, Inc., EDPR Offshore North America LLC, EC&R Development LLC, Enbridge Holdings Green Energy LLC, Equinor Wind US LLC, Mayflower Wind Energy LLC and Vineyard Wind LLC.

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