A bright future: Will BOEM follow New York template in next US tenders?

Give me your fresh, your rich, your wealthy few...

That is the polar opposite of the poem written on the Statue of Liberty. But those edited lines are appropriate for when the US Bureau of Ocean Energy Management held bidding for six offshore wind sites in the New York Bight. Only the wealthy needed apply, although the winners left tired and poorer.

In February, BOEM held 64 rounds of bidding over three days for leases for six sites totalling 488,000 acres, which could accommodate 7GW of offshore wind farms. Its final bids came to a whopping $4.37bn and final sale notices were confirmed on 28t March with the following bidders:

• Atlantic Shores Offshore Wind Bight (Shell and National Grid)
• Attentive Energy (TotalEnergies)
• Community Offshore Wind (RWE and National Grid)
• Invenergy Wind Offshore (Invenergy with other investors)
• Mid-Atlantic Offshore Wind (Copenhagen Infrastructure Partners)
• OW Ocean Wind East (EDP Renewables and Engie)

The largest individual fee was the eye-watering $1.1bn paid by RWE and National Grid tie-up Bight Wind, now called Community Offshore Wind, for site OCS-A 539. This showed in microcosm how attractive this seabed leasing round was.

But while the tender was profitable for BOEM, the high prices have also raised concerns about whether this could hinder the growth of US offshore wind; and questions on whether this is the right model for future BOEM tenders.

With that in mind -- and the benefit of a couple of months’ reflection -- what can we learn from New York Bight? And does BOEM need to change tack?

BOEM or bust

Concerns about the fees were voiced publicly in the Financial Times by David Hardy, CEO of North America Offshore at Ørsted. He said it was a “missed opportunity” for offshore wind because the $4.37bn would not be reinvested in the supply chain.

Rather, the funds go into government coffers, and winning bidders will have to increase the cost of energy from their projects to make up the difference. This could slow the growth of US offshore wind and be another inflationary issue for wind companies that are already struggling.

However, that pessimistic view has been challenged by the winners.

TotalEnergies has argued that the New York Bight fees showed that offshore wind developers are in a global market; and is confident that its project can deliver competitive electricity.

There will be other opportunities for the losing New York Bight bidders. The Biden administration has set a target of 30GW offshore wind in US waters by 2030, and BOEM is poised to hold six offshore wind tenders in the next three years. They are:

• Carolina Long Bay
• Central Atlantic
• Gulf of Maine
• Gulf of Mexico
• Northern & Central California
• Oregon

This stream of leasing activity is needed to spur investment in ports, factories, grid and the supply chain. However, despite expected high demand, we would not expect leasing prices in these tenders to hit the highs of New York Bight.

New York and New Jersey already have strong offshore wind frameworks, legislated targets, and have made progress towards hitting their goals. Those other states are less developed and that could affect their attractiveness.

As a result, BOEM has not given an indication that it will change its approach for its next tender. In May, it is due to auction sites that could host 1.3GW of offshore wind, just ten weeks before a Trump-era moratorium designed to stifle the development of offshore wind in the area comes into force in July 2022. This month, groups such as American Clean Power stepped up their calls to repeal that offshore wind ban.

After that BOEM will lease sites off California in the third quarter of 2022; the Gulf of Mexico in late 2022 / early 2023; in Central Atlantic in the second quarter of 2023; off Oregon in the second half of 2023; and off Maine in 2023 or 2024, despite a ban on the development of most offshore wind in Maine waters that is currently in place.

Despite the warning that New York Bight could hinder US offshore wind, there does not currently appear any sign of things slowing down.