Companies are paying higher and higher prices for sites to install offshore wind farms. After three days and 64 rounds of bidding, the US Department of the Interior’s Bureau of Offshore Energy Management (BOEM) concluded the nation’s highest-grossing offshore energy lease sale in history earlier this year with winning bids from six companies totaling approximately $4.37 billion.
The amount raised at the New York Bight lease sale not only far exceeds the more than $400 million raised during the previous offshore wind sale in 2018, but even exceeds the highest amount raised during any offshore oil and gas lease sale in US history.
For too long, the US has lagged behind other countries in offshore wind energy development.Heather Zichal, executive director of the American Clean Energy Association
The results are a major milestone in the Biden-Harris administration’s goal of reaching 30 gigawatts of offshore wind power by 2030. This week’s lease sale offered six lease areas for potential wind energy development totaling more than 488,000 acres off New York and New Jersey in an area known as the New York Bight, the largest share of any offshore wind lease sale to date.
Of the six leases, the single highest grossing lease attracted a staggering $1.1 billion winning bid from Bight Wind Holdings, LLC on the largest lease area, comprising 125,964 acres. Other winning bids included $765 million submitted by OW Ocean Winds East, LLC, $795 million submitted by Attentive Energy LLC, $780 million submitted by Atlantic Shores Offshore Wind Bight, LLC, $645 million submitted by Invenergy Wind Offshore LLC and $285 million submitted by Mid -Atlantic Offshore Wind LLC.
The wind leases being offered included stipulations designed to promote the development of the U.S. domestic supply chain for offshore wind and enhance engagement with local tribes, the commercial fishing industry, other users and underserved communities. The stipulations also promote flexibility in transmission planning.
The stipulations include incentives to source major components domestically, such as blades, turbines and foundations, as well as commitments to enter into labor agreements to ensure that projects are built by unions.
The scale of this lease sale is historic and shows the strong demand for clean energy.Heather Zichal, executive director of the American Clean Energy Association
BOEM initially solicited information and nominations of commercial interest on 1.7 million acres in the New York Bight, but the acreage offered during the sale was reduced by 72% to avoid conflicts with other users and minimize environmental impacts.
The successful sale of New York Bight is the latest milestone in the current administration’s ambitions to increase domestic offshore wind capacity. In 2021, the Department of the Interior approved the nation’s first two commercial-scale offshore wind projects in federal waters; the 800 megawatt (MW) Vineyard Wind project on Martha’s Vineyard and the 130 MW South Fork Wind project off northern Long Island. Construction of both is already underway.
The exponential increase in auction prices for offshore sites indicates the growing enthusiasm for clean energy projects, in light of growing awareness of climate change and the attractive business case for renewables. More auctions are set to follow as part of the Biden administration’s plans to kick-start the country’s fledgling offshore wind industry. This echoes global moves towards greater reliance on energy from offshore wind farms.
The global leaders in offshore wind such as China, Germany and the UK are committed to strong growth, data from the International Energy Agency shows. China expects to add an average of 2.8 gigawatts of offshore wind power annually for the next three years.
Among the leading offshore wind locations, Germany has ideal locations between the North Sea and the Baltic Sea; China is using its expansive coastal regions. The UK has plenty of coastlines suitable for the deployment of wind farms. According to the International Renewable Energy Agency, global onshore and offshore wind generation totaled 732 gigawatts by the end of 2020.
US Secretary of the Interior, Deb Haaland, announced plans last fall for up to seven potential lease sales by 2025, including the New York Inlet and offshore Carolinas and California later this year, followed by lease sales for the Mid-Atlantic, Gulf of Maine, Gulf of Mexico and Oregon coast.
BOEM expects to review at least 16 plans to build and operate commercial offshore wind energy facilities by 2025, which would represent more than 22 GW of clean energy for the nation.