BOEM sets May auction for offshore wind leasing in 2 areas off the Carolinas

Source: By Iulia Gheorghiu, Utility Dive • Posted: Monday, March 28, 2022

Matt Cardy via Getty Images

Dive Brief:

  • The Bureau of Ocean Energy Management completed an environmental review of federal waters off the coast of the Carolinas and will hold an auction for two leasing areas on May 11, the Department of the Interior announced Friday.
  • The areas selected within the Carolina Long Bay could result in at least 1.3 GW of offshore wind energy, based on BOEM estimates. Developers will be able to bid on one or both of the areas, which are similarly distant from the shore and have the same wind resource potential, according to BOEM.
  • DOI has plans for five more auctions in the next four years as the Biden administration continues its efforts to reach 30 GW of offshore wind by 2030. Although the majority of its renewable energy leasing activity has been on the Atlantic Coast, last month BOEM identified three potential areas around southern Oregon for development.

Dive Insight:

Five years ago, BOEM leased about 122,000 acres for offshore wind development off the coast of North Carolina to Avangrid Renewables for $9 million. Leasing auctions have since increased exponentially in value, with the recent New York Bight auction raising $4.37 billion for six leasing areas.

“If anything, the [New York Bight auction results are] a reminder that offshore wind off the Atlantic is a sleeping giant, we have tremendous potential,” Doug O’Malley, director for Environment New Jersey, said.

The smallest lease area in the New York Bight auction had about 43,000 developable acres and went for $285 million. Each of the Carolina Long Bay area leases is about 55,000 acres.

One analysis from Environmental Entrepreneurs and the Southeastern Wind Coalition estimated leasing auction prices for a potential project off the coast of North Carolina to be about $140 million, with the potential for lower prices given more lease sale options. “[S]hould multiple offshore wind leases exist near the coast of a particular state, leaseholders are incented to offer bids at a lower cost than would be necessary to be awarded a contract than absent market competition,” the report said.

Despite the increasing prices in offshore wind, the lease auction in the Carolinas would bring lower bids than the New York Bight auction as there’s more offshore wind activity in that region, according to a separate analysis from Wood Mackenzie commissioned by stakeholders including the National Ocean Industries Association.

“Compared to the high interest in the New York Bight and along the California Coast, the level of interest in the call areas off Carolinas’ coast is lower due to various project economics factors such as a lack of an offshore mandate or offshore renewable energy credit … program, lower power prices, and lower capacity factors,” according to the 2020 report from Wood Mackenzie.

High auction prices are going to cut into the net benefit of a project and lead to higher electricity prices from offshore wind, Dean Koujak, principal at Charles River Associates, said following the New York Bight auction.

SEWC’s analysis concluded that North Carolina’s economy could derive up to $4.6 billion in net economic benefits from the construction of 2.8 GW of offshore wind by 2030.

Offshore wind stakeholders are asking for more opportunities to develop the resource, and some commended BOEM for creating two lease areas within the Wilmington East wind energy area that had been previously identified for potential development.

“Having two lease areas means more economic benefit for the state through additional competition, development flexibility, and multiple players in the space. Additional lease provisions will drive incentive for localized supply chain and workforce development, allowing North Carolina the ability to take advantage of the $100 [billion] at our doorstep,” Southeastern Wind Coalition President Katharine Kollins said in a statement.

The final sale notice for the two leasing areas includes stipulations to encourage project labor agreements and to promote the development of a domestic supply chain for offshore wind.

“[T]he upcoming Carolina Long Bay offshore wind energy auction provides yet another excellent opportunity to strengthen the clean energy industry while creating good-paying union jobs,” said Interior Secretary Deb Haaland.

BOEM will also offer a 20% credit to bidders that commit to investments that will advance the offshore wind supply chain in the U.S.

NOIA is advocating for legislation to overturn a 10-year moratorium that would prevent offshore wind leasing from the coast of North Carolina down through the eastern Gulf of Mexico starting July 1.

“[T]here is a narrow window in holding the lease sale and a prohibition will prevent additional lease sales beyond this one,” NOIA president Erik Milito said in a statement.