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Offshore Wind Journal

Massachusetts deals highlight massive interest in US market

Thu 10 Jan 2019 by David Foxwell

Massachusetts deals highlight massive interest in US market
Randall Luthi: “more lease sales are needed in order to promote investment in the US offshore wind industry and supply chain”

The results of the auction for offshore wind leases off Massachusetts eclipsed the results of all seven offshore lease sales in the US so far, demonstrating the high level of interest in the US market  

Announced by the Bureau of Ocean Energy Management (BOEM) at the end of 2018, the auction saw bids totalling US$405M submitted in what became a ground-breaking auction for offshore wind leases off the coast of Massachusetts. All three sums bid for the leases far exceeded the highest bids so far in the US offshore wind industry. If fully developed, the lease areas could support approximately 4.1 GW of commercial wind generation.

Equinor Wind, Vineyard Wind and Mayflower Wind Energy secured the leases offshore Massachusetts. Surprisingly, leading offshore wind developers including Ørsted, innogy and Northland Power were unsuccessful.

The auction consisted of 32 rounds before determining the provisional winners of Lease Area OCS-A 0520 (128,811 acres), OCS-A 0521 (127,388 acres), and OCS-A0522 (132,370 acres).

As leaseholders, Equinor Wind, Mayflower Wind Energy and Vineyard Wind are now eligible to participate in the next solicitation for offshore wind power that will be held by the state.

“To anyone who doubted that our ambitious vision for energy dominance would not include renewables, today we put that rumour to rest,” claimed outgoing US Secretary of Interior, Ryan Zinke, who resigned at the end of 2018. “With bold leadership, faster, streamlined environmental reviews and a lot of hard work with our states and fishermen, we’ve given the wind industry the confidence to think and bid big.”

BOEM acting director Dr Walter Cruickshank said, “This auction will further the administration’s comprehensive effort to secure the nation’s energy future. The Commonwealth of Massachusetts and members of the Massachusetts Renewable Energy Task Force have been great partners throughout this process. We look forward to working with them and the lessees as we move forward with next steps for developing offshore wind energy in a responsible manner.”

American Wind Energy Association director offshore wind Nancy Sopko said, “The intense competition we’ve seen in this offshore wind lease auction is completely unprecedented. With strong support from Secretary Zinke, Massachusetts and other states, global businesses now recognise the potential of America’s world-class offshore wind resources.

“Today’s biggest winners are the American workers who will help build and operate these windfarms and the consumers who will soon have access to a new large-scale source of clean, reliable electricity.”

Business Network for Offshore Wind president and chief executive Liz Burdock said, “We congratulate Equinor Wind, Mayflower Wind Energy and Vineyard Wind for submitting the winning bids and thank all of the 19 companies who were eligible to bid on these leases, a new record for BOEM offshore wind auctions.

“We encourage the lease winners to work together and work closely with the existing Vineyard Wind, Bay State Wind and South Branch projects to take a regional approach to getting these windfarms constructed.”

National Ocean Industries Association (NOIA) president Randall Luthi said, “Until today, a US$405M offshore wind lease sale in the US was unheard of. 

“In fact, today’s phenomenal sale results eclipse the results of all seven previous US offshore lease sales combined and demonstrate that not only has offshore wind arrived in the US, but it is clearly set to soar.”

However, Mr Luthi said more lease sales were required in order to promote investment in the US offshore wind industry and the service and supply chain it will depend on.

“NOIA continues to call on BOEM to develop an offshore wind leasing plan that schedules at least four 500-MW lease sales annually, with a target of an additional 20 GW of offshore wind by 2034,” Mr Luthi said.

“Today’s spectacular results suggest that goal could easily be met and even surpassed, but America could miss out on this incredible energy opportunity if BOEM fails to open more areas in a timely fashion.”

Before the lease sales, the highest grossing offshore wind lease sale was held in December 2016 for the lease area offshore New York that received a winning bid of over US$42M. After the latest auctions, BOEM has 15 active wind leases. The lease sales have generated more than US$473M in winning bids for nearly 2M acres in federal waters. Money received from offshore wind lease sales go to the United States Treasury.

Not long after the results of the Massachusetts lease auction was announced, the New Jersey Board of Public Utilities confirmed it had received bids from three developers in response to its solicitation for 1.1 GW of offshore wind. The solicitation was the largest single-state solicitation to date. Bids are understood to have been submitted by the due date of 28 December 2018 from Ørsted, Equinor and Atlantic Shores Offshore Wind, a joint venture between Shell and EDF Renewables North America.

Connecticut power purchase agreement

At about the same time it was also announced that an offshore windfarm acquired by Ørsted when it took over Deepwater Wind in 2018 is to provide power to the state of Connecticut. Connecticut’s Department of Energy and Environmental Protection has selected Ørsted’s Revolution Wind project as the basis of a fixed-price power purchase agreement with the state’s power distribution companies.

The proposed deal is for 0.42 terawatt hours per year, equivalent to 100-MW of offshore wind capacity. Subject to contract signing and Ørsted’s final investment decision, the offshore windfarm is expected to be constructed in 2022 and commissioned in 2023.

With the 100 MW of capacity for Connecticut added, Revolution Wind has now secured 700 MW of offshore wind capacity, including previously awarded projects in Rhode Island and Connecticut, which Ørsted will build as one joint project, unlocking procurement, construction and operational synergies. In addition, Ørsted will build the adjacent 130-MW South Fork project at the same time as Revolution Wind, enabling further synergies.

In January 2019, New Hampshire Governor Chris Sununu wrote to Dr Cruickshank of the Bureau of Ocean Energy Management, requesting the establishment of an offshore wind task force for the state. The purpose of the task force will be to facilitate co-ordination and consultation among federal, state and local governments on renewable energy commercial leasing proposals in federal waters offshore of New Hampshire.

Compared with many east coast states such as Massachusetts, Virginia, Rhode Island, New Jersey, New York and Connecticut, New Hampshire has been slow to develop and implement a strategy for offshore wind energy.

According to the Offshore Wind Hub, New Hampshire’s offshore wind resource is estimated at 3.4 GW. Back in 2014, the state legislature assigned a committee to research the offshore wind energy potential off New Hampshire’s coast and make recommendations to the full legislature on how to proceed.

More leases sales needed to maintain healthy growth

Amid all the excitement about the record-breaking Massachusetts auction for offshore wind leases it is important to remember the old adage about supply and demand. The level of competition for leases drove the price up significantly, but so did the lack of supply. In fact, the dearth of upcoming lease sales in the US is in stark contrast to states’ huge appetite for offshore wind. Part of the reason there was such a frenzied response is that the next lease auction is not due to take place until 2020, probably in the New York Bight.

That the prices secured for the Massachusetts leases were to so high is an encouraging sign and clearly demonstrates that the US market is going to expand quickly, but unless more leases are auctioned it could act as a brake on expansion. It could also affect the pace at which the supply chain in the US develops.

More lease sales are going to be required to promote investment and give the supply chain the runway it needs to take off. There have been calls for BOEM to schedule at least four 500-MW lease sales annually, with a target of an additional 20 GW of offshore wind by 2034. Others have called for 2-3 GW a year.

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