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Offshore Wind Auction Blows in $4.4 Billion to Topple Record

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(Bloomberg) Renewable developers spent a record $4.4 billion buying the rights to install wind turbines off the New York and New Jersey coast in a blockbuster auction that underscores surging enthusiasm for carbon-free electricity.

The sale shattered previous records, a sign of growing momentum for the country’s nascent offshore wind industry and President Joe Biden’s bid to decarbonize the electric grid. The bidding frenzy was driven by state commitments to buy offshore wind power, the closeness of sites to large cities and growing confidence that developers can obtain necessary permits to build projects along the U.S. East Coast.

The U.S. government auction concluded Friday, after three days of bidding for six tracts that initially attracted 14 companies. Provisional winners are Bight Wind Holdings LLC, Atlantic Shores Offshore Wind Bight LLC, Attentive Energy LLC, OW Ocean Winds East LLC, Invenergy Wind Offshore LLC and Mid-Atlantic Offshore Wind LLC, according to the Interior Department.

It was not immediately clear what companies were behind some of the ventures, though Atlantic Shores involves EDF Renewables Inc. and Shell Plc, and Ocean Winds East brings together EDP Renewables, Engie SA and Global Infrastructure Partners.

Exceeded Expectations

The auction blew expectations out of the water, said Heather Zichal, who heads the American Clean Power Association, an industry trade group.

“This is a major step forward for the U.S. in terms of standing up a new industry” as well as “the domestic manufacturing opportunities that come with it,” Zichal said in an emailed statement. “There is a strong demand for the benefits these clean energy projects will provide to the residents of New York, New Jersey and across the country as we build out a domestic supply chain.”

The six parcels snapped up in the sale span 488,201 acres (197,570 hectares) in the New York Bight, a shallow stretch of the Atlantic between Long Island and New Jersey. The tracts, located as little as 27 miles (43.4 kilometers) from the coast, have the potential to fit hundreds of turbines — enough to supply 5.6 gigawatts of electricity or about 2 million homes, according to the Interior Department.

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Bids mounted rapidly over the three days and 64 rounds of bidding, ultimately reaching an average price per acre of $8,951 — more than eight times the previous record of $1,043 set in a December 2018 auction of leases near Massachusetts, when three tracts were sold for $405 million. Still, the sums are well below what oil companies historically have paid for drilling rights in U.S. waters — as much as $33,780 per acre — with no similar assurance those plots will contain the crude they’re searching for.

The hottest property was a 125,964-acre parcel 32 miles from the New Jersey shore that Bight Wind Holdings LLC agreed to buy for $1.1 billion. The site, the largest available, could fit multiple projects capable of generating 1.4 gigawatts of electricity, with potentially lower costs to transmit that power because of the tract’s proximity to the coastline.

No Guarantees

The leases sold come with no guarantees of construction. Companies must still secure permits and authorizations from state and local authorities as well as the Interior Department, in a process that can take years. The New York Bight sale itself is under a legal challenge amid objections from conservationists, local residents and fishing interests. A federal court ruling against the government could halt activity on the newly sold leases or invalidate them altogether.

Still, the auction offers a down payment toward Biden’s goal of getting 30 gigawatts of offshore wind-generating capacity installed by the end of the decade. The administration has approved projects in waters off Rhode Island and Massachusetts and is weighing additional wind lease sales from the Carolinas to California.

Existing wind farms along the East Coast currently provide less than 100 megawatts of generation capacity.

Erik Milito, head of the National Ocean Industries Association, called the auction “a watershed moment for American offshore wind.”

“The record-shattering interest in the New York Bight lease sale is testament to how bright the American offshore wind outlook is and how confident developers are in the strength of the U.S. offshore wind industry as a whole,” he said by email. “Thousands of new jobs and billions of dollars of investment are now on the horizon for New York, New Jersey, and the entire U.S. supply chain as a result.”

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