Feds set first auction off New York’s coast

Source: Saqib Rahim, E&E reporter • Posted: Monday, October 31, 2016

The Interior Department will hold an auction in December that could bring offshore wind farms within a few dozen miles of New York City.

Just under 80,000 acres of federal waters, located south of Long Island, will be made available in the auction, which is co-coordinated by the Bureau of Ocean Energy Management. The area has the potential for 800 megawatts or more, according to state officials. It’s the first in New York to be officially designated for offshore wind.

Fourteen bidders are eligible, but the state of New York has made clear that it considers winning the bid key to its energy strategy.

As President Obama wraps up his tenure, the Interior Department and BOEM are pushing to open up federal waters for an offshore wind industry that says its technology is ready to go.

BOEM has awarded 11 commercial wind leases so far, totaling over a million acres. Wind-eligible areas have been designated up and down the coast, with the richest points off Massachusetts and New York.

Five turbines have already gone up off the coast of Rhode Island, and they’re on track to generate their first electrons in the next few weeks. The project, near the summer haven of Block Island, has capacity of 30 MW.

Offshore wind has long been derided for its high cost; it costs more than any other renewable energy source, according to Bloomberg New Energy Finance. And cheap gas supplies from the Marcellus Shale have offered a ready alternative.

But offshore wind companies see an opening in the Northeast, with its dense populations, high power prices and desire for cleaner energy sources. They say technology costs have been slashed in Europe and, if offshore comes to the United States in any scale, can be slashed here, too.

The Block Island project is the only functioning plant so far, but boosters see it as the beginning of the prize.

Commitments to wind

In August, Massachusetts Gov. Charlie Baker (R) signed a law requiring utilities to buy 1,600 MW of offshore wind. That is seen as an anchor policy by the offshore wind industry, which says it won’t commit resources to the U.S. market until it sees a large-scale willingness to buy.

New York has an official goal of 50 percent renewable electricity by 2030, and the state’s top energy official, Richard Kauffman, has said this is not achievable without offshore wind.

Most of the state’s power demand is downstate, where it’s hard to find enough space for the necessary wires and renewable generators.

“This is a natural marriage of a great resource located to a great market,” said John Rhodes, president and CEO of the New York State Energy Research and Development Authority, during a conference in Rhode Island this week.

To make sure it gets offshore wind, New York state will go up against private companies in the federal auction, including DONG Energy, the largest developer in the world.

NYSERDA, the state’s clean energy arm, will do the bidding.

NYSERDA doesn’t build wind turbines or deliver projects. Rather, it intends to win the leases, then turn around and sell them to the private sector.

The agency says it will promise the winner a long-term contract to sell power to utilities: a power purchase agreement, or PPA. For wind developers, this contract is considered essential to raising capital.

The state hopes this strategy will bid down the price of a technology whose major hangup, historically, was cost.

“New York has successfully used competition to develop 2,000 megawatts of large scale renewables cost effectively,” the state said in a statement. “A similar competition for offshore wind development will yield the lowest costs.”

The federal auction is on Dec. 15. BOEM said it will consider monetary and non-monetary factors in its award. For example, government authorities will get a 10 percent credit.

BOEM also said it snipped about 2 percent off the proposed New York lease area, since that part contained sensitive habitats.