REM: US offshore wind auction nets a record-breaking $4.37bn

The US Treasury has netted an unexpectedly high $4.37 billion in the Biden administration’s first offshore wind lease, off the coasts of New York and New Jersey.

This is a major step towards President Joe Biden’s goal of 30 GW of offshore wind by 2030. The tracts auctioned can accommodate 5.6 GW to 7 GW, said the US Bureau of Offshore Energy Management (BOEM). That’s enough to power 2mn homes.

The US has lagged Europe’s offshore wind industry by several years and its sector is only now getting off the ground. BloombergNEF predicts that by 2030 the US will be third globally in offshore wind installations, after China and the UK.

The US just has two small offshore wind projects, off the coasts of Rhode Island and Virginia, totalling 42 MW. Two commercial-scale projects have recently been approved for development, with both already under construction.

From Wednesday till Friday, six tracts between Montauk Point, New York and Cape May, New Jersey were auctioned totalling 488,000 acres (197,000 hectares). The bidding, spread over three days, extended to 64 rounds. The $4.37bn netted was a record for all US competitive offshore leases, including for oil and gas, said the Interior Department.

“This week’s offshore wind sale makes one thing clear: the enthusiasm for the clean energy economy is undeniable and it’s here to stay,” said Interior Secretary Deb Haaland. “The investments we are seeing today will play an important role in delivering on the Biden-Harris administration’s commitment to tackle the climate crisis and create thousands of good-paying, union jobs across the nation.”

The leases were sold at about $10,700 per acre, more than 10 times the previous record of $1,000 per acre established in a sale in 2018 off Massachusetts, noted the New York Times.

The Interior Department announced the provisional winners as Attentive Energy, Atlantic Shores Offshore Wind Bight, OW Ocean Winds East, Invenergy Wind Offshore and Mid-Atlantic Offshore Wind.

The Business Network for Offshore Wind (BNOW), a trade group, has divulged the companies behind the winners. They were diverse, including two oil and gas companies – and overwhelmingly European.

Attentive Energy is a joint venture between German utility EnBW and French oil supermajor TotalEnergies. Since the auction, EnBW has said it will sell its share to TotalEnergies. Atlantic Shores Offshore Wind Bight is a joint venture between Anglo-Dutch oil company Shell and EDF Renewables of France.

OW Ocean Winds East comprises EDP of Portugal and the French utility Engie. Invenergy Wind Offshore is the US firm Invenergy and energyRe. Mid-Atlantic Offshore Wind is owned by Copenhagen Infrastructure Partners of Denmark.

By 2025, BOEM is expected to lease more areas in the Carolinas, California, Gulf of Mexico, Oregon, Central Atlantic and the Gulf of Maine, which will help put the US on a path to achieving Biden’s more distant mid-century goal of 110 GW, said BNOW.

State deployment goals, currently at 45 GW, are helping the push. For example, New York and New Jersey have offshore wind goals of 9 GW and 7.5 GW respectively.

“The scale of this lease sale is historic and shows the strong demand for clean energy. Development from this sale will create and support tens of thousands of new domestic jobs and help to revitalise our coastal communities,” said Heather Zichal, CEO of American Clean Power.

“We support BOEM’s path forward to conduct six more lease sales through 2024, and we challenge policymakers to provide even more certainty to this new industry, ensuring that the American people benefit from its growth and job-creating potential. For too long the US has lagged behind other countries in offshore wind development,” she said.

Erik Milito, president of the National Ocean Industries Association, added: “The New York Bight is a watershed moment for American offshore wind.” He said: “The record-shattering interest in the New York Bight lease sale (indicates) how confident developers are in the strength of the US offshore wind industry as a whole. Companies continue to invest and innovate, and the regulatory regime has a firm foundation.”

He pointed to the country’s growing supply chain. “Thousands of new jobs and billions of dollars of investment are now on the horizon for New York, New Jersey and the entire US supply chain as a result of this lease sale. We are already seeing an offshore wind substation and a wind installation vessel being built in Texas, an offshore wind service operation vessel being constructed in Louisiana, and transmission cables being manufactured in North Carolina and South Carolina, along with many other examples.”

He continued: “In many ways, the New York Bight lease sale is just the kick-off for a busy 2022 for American offshore wind. We applaud the work done thus far by [the Interior Department] and BOEM and say: 'Well done and keep up the momentum.' We can clearly see the demand for more leasing, and we encourage the [Biden] Administration to sustain progress through continued lease sales and project approvals. Congress can – and should – play a positive role through expansion of key tax credits that will help incentivise projects from the leasing stage through operations.”

Extension of wind tax credits are stalled in the US Senate as part of the Build Back Better bill.