Interior set to auction N.C.’s first offshore wind farm

Source: Daniel Cusick, E&E News reporter • Posted: Wednesday, March 15, 2017

The Trump administration will broker its first offshore wind energy deal this week as the Interior Department auctions development rights to 122,400 acres of the Atlantic Ocean near North Carolina’s Outer Banks.

The Kitty Hawk Wind Energy Area, covering 191 square miles of outer continental shelf roughly 24 miles from the beaches where the Wright brothers achieved first powered flight in 1903, has an opening bid price of $244,810, or $2 per acre.

For a business-minded administration committed to an “America first” energy policy, the sale could come as a welcome exercise in government-supported free-market competition. As many as a half-dozen firms are expected to participate in the auction, including some of the world’s largest energy firms.

“While it appears President Trump’s energy policy is still being worked out, his ambitious economic and job-growth agenda would undoubtedly be strengthened by a robust all-of-the-above energy approach, which would include a strong U.S. offshore wind program,” Randall Luthi, president of the National Ocean Industries Association, said in a statement. “This is clearly a growing market, which should only grow stronger as technology and infrastructure develops.”

Evidence of offshore wind’s promise can be found in the most recent lease sale held by the Bureau of Ocean Energy Management for a 79,000-acre parcel off New York’s coast. Statoil ASA, the Norwegian energy conglomerate, paid a record $42.5 million, or $535 per acre, for rights to explore and possibly develop the New York lease area (Energywire, Dec. 19, 2016).

But it remains unclear whether the Kitty Hawk site, which has been studied for nearly a decade, will draw similarly strong interest.

Key questions facing the site involve the economic viability of offshore wind power in a market like the Carolinas, where coal, gas and nuclear power remain cost-competitive and renewables account for just a small fraction of total generation.

Three of the initial nine companies that qualified to bid in the auction have since pulled out, including Shell WindEnergy Inc. of Houston, Apex Clean Energy of Virginia and Toronto-based Northland Power Inc.

“There are excellent winds off the North Carolina coast and lots of shallow water that extends way offshore,” said Catherine Bowes, director of the National Wildlife Foundation’s Atlantic Offshore Wind Campaign. “What North Carolina doesn’t have is a viable state market for selling offshore wind power, at least for now.

“But that’s almost certain to change,” Bowes added, “and smart businesses know how to get in on the ground floor and wait for that market to develop.”

Trump officials remain noncommittal

There is also uncertainty about the Trump administration’s disposition toward wind power, which the president himself has derided as an unsightly, bird-killing technology, even as wind has solidified its place as the nation’s leading source of commercial-scale, emissions-free electricity.

Since taking office, Trump and his surrogates have said little about where federal renewable energy policy is headed.

Wind power advocates have touted the industry’s meteoric growth over the past decade and the sizable economic benefits wind farms bring to rural America through land leases and tax revenue. Others were heartened by Trump’s selection of former Texas Gov. Rick Perry as secretary of Energy, noting Perry’s long experience with conventional wind energy in Texas.

But offshore technology is new to the United States and only recently began to establish its footing along the U.S. Atlantic Coast. The nation’s first offshore wind farm began operating at Block Island, R.I., late last year, while several other large projects are still in the development phase, notably the 1,000-megawatt Bay State Wind project off Cape Cod in Massachusetts.

Federal officials, including the head of BOEM, declined to be interviewed about the Trump administration’s position on offshore wind power.

In written responses to E&E questions, BOEM acting Director Walter Cruickshanksaid the agency “expects to be busy in both our oil and gas and our renewable energy programs.” But he added that until the Interior Department’s new leadership team has settled in, “we won’t speculate on how [Trump administration] policy goals will translate into specific actions in BOEM.”

A spokeswoman for Interior Secretary Ryan Zinke, who took office March 2, was also careful not to commit the administration to renewable energy, either onshore or offshore.

“Secretary Zinke and President Trump are committed to creating public lands jobs that provide affordable and reliable energy for America,” the spokeswoman, Heather Swift, said in an email. “The administration supports a comprehensive energy solution, and renewable energy will play a role so long as that energy is affordable and reliable.”

But if there’s uncertainty at the top levels of the Trump administration, it hasn’t dampened enthusiasm among the companies that are vying for U.S. offshore leases.

Among the firms expected to bid in tomorrow’s lease sale are Statoil Wind U.S. LLC; Avangrid Renewables, the U.S. subsidiary of Spanish energy conglomerate Iberdrola SA; Enbridge Holdings (Green Energy) LLC, the renewable energy division of the Canadian pipeline company; and PNE Wind USA, a subsidiary of Germany’s PNE Wind AG.

Last week, Statoil and PNE Wind also asked BOEM to open an additional 440,000 acres of wind energy areas off the Massachusetts and New York coasts, where officials estimate the continental shelf could support as much as 4 gigawatts of turbines.

BOEM said the two companies’ unsolicited applications were sufficient to initiate a new competitive lease process, which could draw even more developers into the Northeast offshore wind market.