U.S. firms and giant European developers have offered more than $757 million for five ocean tract leases off central and northern California for offshore wind energy projects in deep water that will require floating wind turbines—the first use of the technology in the U.S. and the first such clean energy development plan in West Coast waters.
After 31 rounds of U.S. Interior Dept.-sponsored bidding on Dec. 6- and 7—among those participants that proceeded out of 43 eligible—five entities won the leases, the agency said.
Two are major European clean energy developers—Norwegian state owned Equinor, which developed the first floating wind farm, the 30-MW Hywind that has operated in 120-m water off Scotland since 2017, and Germany-based RWE. The latter teamed with Copenhagen Infrastructure Partners, which is already involved in fixed-base Atlantic Ocean projects. The fourth is the team of Spanish firm EDP Renewables and France’s Engie—called Ocean Winds—and the Canada Pension Plan Investment Board; and the fifth is Chicago-based U.S. private energy company Invenergy.
While analysts say the California lease sale bidding was not as robust as it was in February for leases in the New York Bight ocean area south of New York City that raised more than $4 billion, Interior Secretary Deb Haaland said the lease sale "is further proof that industry momentum, including for floating offshore wind development – is undeniable."
Auction proceeds can provide the U.S. “a premier opportunity to develop a robust floating wind turbine supply chain that can compete on the global stage,” said Liz Burdock, CEO of sector trade group, the Business Network for Offshore Wind.
The leases are for areas in Morro Bay in central California and Humboldt Bay in northern California, which the department said have the potential to produce more than 4.6 GW of offshore wind energy.
The state has set floating wind energy goals of up to 5 GW of capacity by 2030 and 25 GW by 2045.
“The California lease sale gives the U.S. a chance to lead the emerging floating wind sector,” said Erik Milito, president of the National Ocean Industries Association, an offshore energy trade group. “Floating wind technology is in its early stages but it is an advanced technology that will lead to strong growth in the deployment of offshore wind.”
Jeff Hunerlach, district representative in Eureka, Calif. for the Operating Engineers union, said efforts are underway to develop project labor agreements with lease-winning firms, possibly by February or March, noting “tens of thousands of jobs from construction phase to operation and maintenance and supply chain.” But he did not provide details on any expected terms.
Prices Differed By Location
Offers were highest for areas off the northern coast, with leases of $173.8 million and $157.7 million offered for tracts of less than 70,000 acres. Leases for Morro Bay areas ranged from $130 million to $150 million for tracts larger than 80,000 acres.
Despite Morro Bay's access to adequate transmission and high load centers as well as larger leases, its lower wind speeds, lack of access to a floating wind port and few options to build one in time to meet state clean energy goals kept prices low, according to industry publication Recharge.
The $2,000 per acre average for the California leases was less than the $2,900 per-acre price in the offshore North Carolina auction last spring and well below the $8,900 per-acre average bid for New York Bight tracts.
Philip Totaro, founder and CEO of energy sector analysis firm Intelstor, told ENR that he expected the auction results to be higher, in the $900 million to $1.2 billion range, “but it’s not a bad result.”
The winners have varying degrees of floating wind technology experience. Michael Brown, CEO of Ocean Wind, the partnership of EDP and Engie, said in a statement that it has nearly 3.7 GW of floating wind operating or in development in Portugal, France, South Korea and the UK.
Sam Eaton, executive vice president of RWE’s U.S. arm, said the California win is the company’s “first ever awarded commercial-scale floating offshore wind project.” The company has floating demonstration projects, including foundation concepts, he said.
“Floating platform are not a problem but keeping them in place in a commercially viable way is the question,” Totaro said, adding that sites in Europe and Asia are at a maximum depth of 120 meters while sites in California start at a depth of 550 meters. “A lot of existing tethering technology may not be adequate for the California sites.”
Meeting Challenges Ahead
There are also questions about how power transmission costs will be allocated by state transmission system managers and what actions California will take beyond setting an offshore wind energy target. “There are no definitive rules on how it gets done,” Totaro said, adding that there is no allocated state budget yet for offshore wind transmission and and no effort to seek federal funds.
"But maybe this will inspire them," he said.
Adam Stern, executive director of state advocacy group Offshore Wind California, said that “Looking ahead, we need to keep our focus on the essential next steps to bring California offshore wind online, which include investments in transmission and port infrastructure, a clear roadmap on permitting, procurement, a robust supply chain, workforce training and more call areas to reach the state’s 25 GW goal.”
In a Dec. 8 webinar sponsored by the Business Network for Offshore Wind, California Energy Commission Chair David Hochschild said he "did not want to sugar coat challenges ahead," noting "a lot of work to do" related to project permitting, port upgrades and procurement. "It will Involve a lot of cooperation and dialogue."
Hochschild said the commission will publicly release on Dec. 19 its "permitting roadmap and workforce assessment," which is set for approval by the agency on Dec. 28. An overall offshore wind strategic plan is set for release by next June, he said.
The trade group also held ifs first California-focused offshore wind supplier day event in San Diego on Dec, 14, with developer representatives on hand, said Nancy Kirsher-Rodriguez, its senior director of public policy & outreach.
"We are watching totally new industries get born and seeing them scale," said Hochschild. "It can feel daunting, but it will soon become mainstream."
The California lease sales include a 20% credit for winners who committed to a monetary contribution to programs that support workforce training and the supply chain, which yielded $117 million for the programs.
“The U.S. west coast is one of the most attractive growth regions for floating offshore wind in the world due to its favorable wind conditions and proximity to markets that need stable reliable clean energy,” Molly Morris, president of Equinor Wind US, said in a statement.
Port Development Starts
The Humboldt Bay Harbor District already has signed an agreement with Crowley Maritime Corp., a Jacksonville, Fla., marine logistics company, to negotiate exclusive development rights for a heavy lift marine terminal to support offshore wind installation and operations. Other services include manufacturing, use of large heavy cargo vessels and crewing and marshaling services in Pacific waters.
Jeff Andreini, vice president of the firm's wind services unit, noted in a late November interview that floating turbines up to 300 meters tall would "dwarf anything from a fixed component standpoint." He said pre-construction could be done in San Francisco or Los Angeles, with components "shipped to Humboldt Bay where the actual buildout will take place.”
The offshore wind push "affords us the ground floor opportunity to make a difference not just in California, but also on the U.S. West Coast to structure a supply chain and a workforce,” said Andreini, noting outreach to local community colleges and universities and state building trades apprentice programs.
“We are going to need people on the ground in 2023 to work on planning and permitting issues with the Harbor District [and] ... ready to work in the construction phase," he said.
The California Energy Commission provided a $10.45 million grant to conduct technical studies, preliminary design and pre-permitting services for the terminal. The port expects permitting and design will finish in mid-2024.
Crowley also is developing an offshore wind terminal in Salem, Mass., in a public-private partnership with the city, that will support New England projects, with work set to start in summer 2023 and expected competion in 2025. Project developer Avangrid is set to be its anchor tenant.
Central California municipalities also released on Dec. 15 what media described as a $250,000, seven-month-long study by design consultant Mott MacDonald on floating offshore wind assembly and maintenance port configurations in San Luis Obispo and Santa Barbara counties, with a focus on Morro Bay, Port San Luis and an area near the Diablo Canyon nuclear power plant in Avila Beach.
Such facilities could range from smaller hubs costing between $11 million and $40 million, to possibly larger ones from $1.3 billion to $6.2 billion, said the study, with each likely to need new breakwaters built around the ports.
Turbine component manufacturers should "think about the west coast" as they also develop similar east coast facilities, Alla Weinstein, CEO of Castle Winds and a pioneer in floating offshore wind technology and West Coast development, told a Recharge conference in November, noting the economic growth potential.
In a related offshore wind energy development, New Jersey announced it has raised the target for its next offshore wind solicitation to 4 GW from 1.2 GW to help reach the new state goal of 11 GW of offshore wind by 2040. The auction is set for early 2023 with a selection expected by the end of the year.
A draft rule released by state regulators on Dec. 6 includes an inflation adjustment mechanism, but also requirements for protecting fisheries and the environment and for increasing supply chain and transmission grid investments. The state said bid evaluation would be weighted 70% on price and 30% on other factors.
New Jersey has awarded contracts for 3.7 GW of offshore wind energy projects, with its $488-million New Jersey Wind Port manufacturing and assembly plant set for first-phase completion next year and fully operational by 2026.