Inside Clean Energy: Explaining the Record-Breaking Offshore Wind Sale

After days of bidding, six corporations emerged as winners final week in a record-breaking public sale for the rights to develop offshore wind in federal waters off New York and New Jersey.

The entire of the successful bids was $4.37 billion for 488,000 acres unfold throughout six lease areas. The method was overseen by the Bureau of Ocean Vitality Administration.

Of the successful corporations, all however one, Invenergy Offshore Wind, are based mostly in Europe or embody European companions. Two European oil corporations, Shell and TotalEnergies, had been among the many winners.

The lease areas can assist growth of as much as 7,000 megawatts of offshore wind, which may generate about 25 terawatt-hours of electrical energy per 12 months. For perspective, New York state’s energy crops generated 129 terawatt-hours in 2020.

However acquiring leases is just the start of an extended course of. The businesses now must receive permits and mission financing, looking forward to a day, they hope earlier than the top of this decade, when they’re putting in wind generators.

The brand new tasks can be close to a number of others that had been beforehand leased, together with Empire Wind 1 and Empire Wind 2, which is a partnership of two European oil corporations, Equinor and BP.

Listed here are 4 issues which might be essential to grasp on this second:

1. The entire of the successful bids is a wide ranging quantity.

In writing about vitality, I throw round plenty of huge numbers, and it’s straightforward to lose monitor of the variations between numbers which might be huge and ones which might be staggeringly big. The entire of those successful bids is staggeringly big.

The $4.37 billion complete is greater than 10 occasions the earlier U.S. document for offshore wind leases, which was $405.1 million for 390,000 acres in 2018 for 4 lease areas off Massachusetts.

Wanting on the complete when it comes to {dollars} per acre, final week’s sale was about $8,950 per acre, in comparison with about $1,040 per acre for the 2018 leases in Massachusetts.

Final week’s sale was additionally big in comparison with leases of different federal vitality property, like areas to drill for oil and fuel. In 2021, corporations set a brand new document for successful bids for oil and fuel leases with $191.7 million for leases within the Gulf of Mexico.

The costs for offshore wind leases are a sign that corporations see sturdy economics for potential tasks, mentioned Aaron Barr, an vitality analyst for the analysis agency Wooden Mackenzie, in an electronic mail.

“The excessive public sale costs are a perform of the massive lease areas and the quickly maturing U.S. offshore business,” he mentioned in an electronic mail. “These specific lease areas maintain vital worth because of the proximity to load facilities of New York and New Jersey, which can have an unrelenting demand for extra and cleaner electrical energy.”

2. The businesses behind the successful bidders present Europe’s dominance of the offshore wind business.

Listed here are the six corporations that received leases:

• Atlantic Shores Offshore Wind Bight, a three way partnership of Shell, the oil and fuel firm based mostly in the UK, and EDF Renewables, a French energy firm.
• Attentive Vitality, a subsidiary of TotalEnergies, the oil and fuel firm based mostly in France.
• Bight Wind Holdings, a three way partnership of RWE, Germany’s largest energy firm, and Nationwide Grid, an influence firm based mostly in the UK. Nationwide Grid’s property embody native utilities that serve Massachusetts, New York and Rhode Island.
• Invenergy Offshore Wind, a partnership of Invenergy, the Chicago-based renewable vitality developer, and energyRe, a clear vitality developer with places of work in New York and Houston.
• Mid-Atlantic Offshore Wind is owned by Copenhagen Infrastructure Companions, a Denmark-based firm that is also a co-owner of the Winery Wind offshore wind mission in Massachusetts.
• OW Ocean Winds East, owned by International Infrastructure Companions, a New York-based funding agency, together with Ocean Winds East, a three way partnership of two giant vitality corporations, EDP Renewables of Portugal and Engie of France.

The listing is crammed with European corporations which might be giants of their residence markets, a number of of which have in depth expertise in offshore wind.

And that’s a very good factor, an indication that the most effective gamers on this area see sturdy alternatives within the U.S. market, mentioned John Rogers, an vitality analyst for the Union of Involved Scientists.

“Europe’s been doing offshore wind for 30 years,” he mentioned. “It’s a world market, so I feel bringing not simply their capital however their experience to our shores makes plenty of sense.”

Because the U.S. market develops, he expects to see extra American corporations main tasks. However even when European corporations are in cost, the tasks would require billions of {dollars} in funding and hundreds of jobs in the USA, as proven by bulletins in coastal states of recent companies opening to serve the offshore wind business.

3. European oil corporations proceed to broaden into offshore wind.

Shell and TotalEnergies had been already gamers within the offshore wind market. They’re indicative of a bigger pattern of European oil corporations shifting rapidly to spend money on renewable vitality. The businesses are sometimes responding to local weather objectives of their residence international locations and strain from shareholders and environmental advocates.

U.S.-based oil corporations like ExxonMobil are additionally working to develop renewable vitality, however to not the identical extent.

“By rising our portfolio and deepening our energy synergies within the New York and New Jersey markets, we’ll assist scale our personal low-carbon ambitions whereas offering cleaner vitality choices the world wants,” mentioned Wael Sawan, Shell’s built-in fuel and renewables director, in an announcement.

Rogers mentioned oil corporations’ curiosity in offshore wind is an encouraging signal, though a lot of them are nonetheless increasing fossil gasoline manufacturing.

“We all know that oil corporations, in the event that they’re going to hold by way of the twenty first century, they’re going to wish to cease being oil corporations,” he mentioned.

4. After an prolonged prologue, it’s time to begin constructing stuff.

I began writing this article in 2018, across the time that builders introduced plans to construct Winery Wind off of Massachusetts, a mission that, with 800 megawatts of capability, was going to be the nation’s first super-size offshore wind farm.

Since then, progress has been sluggish regardless of plenty of bulletins and investments. The one working offshore wind tasks are tiny, in Rhode Island and Virginia, with a complete of seven generators.

Winery Wind went by way of years of delays earlier than getting a federal allow in 2021, whereas greater than a dozen different giant tasks have been introduced and are in numerous phases of planning.

Now, the development part of the U.S. offshore wind business appears tantalizingly shut.

Winery Wind’s builders held a ceremonial groundbreaking in November, and say they’ve begun onshore building work. The following step can be offshore building work, with plans to start producing electrical energy in 2023.

A second mission, South Fork Wind Farm, which is able to produce 130 megawatts east of Lengthy Island in New York, acquired federal approval in November and held its ceremonial groundbreaking final month.

Different tasks will comply with.

Final week’s lease outcomes had been the most recent of many indicators that the offshore wind business is wholesome and about to start a constructing growth. However the growth isn’t right here but.

Different tales concerning the vitality transition to be aware of this week:

Coal Big Peabody Pronounces Enterprise Targeted on Photo voltaic Energy and Vitality Storage: Peabody Vitality, the world’s largest private-sector coal firm, has mentioned it’s a part of a three way partnership that can develop utility-scale solar energy and vitality storage. St. Louis-based Peabody is engaged on the enterprise with Riverstone Credit score Companions and Summit Companions Credit score Advisors, and intends to develop 3,300 megawatts of photo voltaic and 1,600 megawatts of battery storage over the following 5 years, as Bryce Grey experiences for the St. Louis Put up-Dispatch. Peabody has in depth land holdings, which it will possibly use for clear vitality tasks.

Midwestern Utility Says It Will Stop Coal by 2025: AES Corp., a multinational vitality firm that owns utilities in Indiana and Ohio, mentioned final week that it’ll cease burning coal by 2025. That’s probably vital for the corporate’s Indianapolis Energy & Gentle and Dayton Energy & Gentle service territories, besides it’s not clear whether or not AES intends to make the change by shutting down coal crops or merely promoting them, as Sarah Bowman experiences for The Indianapolis Star. AES, with headquarters in Virginia, has been a number one developer of vitality storage and renewable vitality tasks, most of them in locations outdoors of its utility service territories. AES’ lack of dedication to shutting down its coal crops, just like the Petersburg plant in Indiana, “sort of takes the shine off” of its announcement, mentioned Wendy Bredhold with Sierra Membership’s Past Coal marketing campaign in Indiana.

Supreme Court docket Hears Main Environmental Regulation Case: The U.S. Supreme Court docket is exhibiting some willingness to put new limits on the Environmental Safety Company’s capacity to manage greenhouse gases from energy crops, based mostly on feedback in oral arguments this week. The case, led by the state of West Virginia, may sharply cut back the federal authorities’s powers to encourage a transition to wash vitality, as my colleague Marianne Lavelle experiences.

Ford to Cut up Its EVs and Legacy Autos into Completely different Items Inside Firm: Ford Motor has mentioned it plans to reorganize its operations to place its electrical car operations right into a unit separate from its autos that run on gasoline and diesel. The corporate expects the transfer to assist maximize revenue in its rising EV enterprise, as Michael Wayland experiences for CNBC. “We’re asserting one of many greatest modifications in our historical past at this time,” mentioned Jim Farley, Ford’s CEO.

Inside Clear Vitality is ICN’s weekly bulletin of reports and evaluation concerning the vitality transition. Ship information suggestions and inquiries to dan.gearino@insideclimatenews.org.