Earlier this week, in a lease auction conducted by the Bureau of Offshore Energy Management (BOEM), part of the US Department of the Interior (DOI), leases worth $757 million were awarded for five lease area offshore California- two off Humboldt Bay (the northern California coast), and three off Morro Bay, in the middle part of the state.
According to DOI, electricity that might be produced from these tracts, “the first ever for the Pacific region”, the agency noted, has the potential to power 1.5 million residences.
The bidders awarded leases are:
The timeline will extend towards the end of the 2020’s, with typically lengthy planning discussions, including public hearings involving numerous stakeholders, and environmental reviews. Importantly, the water depths in the Pacific lease areas will necessitate deployment of floating turbines, rather than the fixed turbines that are set to be installed along the US East Coast, where the first commercial scale fields might come online in 2025- 2026.
The winning bidders, not surprisingly, are already involved in the wind business. RWE is active in European offshore wind, and has a foothold into US onshore wind power. California North Floating is tied to Copenhagen Infrastructure Partners- active in Europe and also involved in two US efforts including Vineyard Wind, a joint venture with Avangrid Renewables, which is presently under development. The Central California Offshore Wind LLC is tied to Ocean Wind, a joint venture of EDPR and ENGIE, with a large stake in European projects. Invenergy, while not as well-known is privately-held, based in Chicago, and has also participated in leases in US Atlantic waters.
Equinor, one of the winners for waters off Morro Bay, will be adding to what is already a significant US footprint. Along the East Coast, the Scandinavian behemoth, is working alongside BP as two areas in the New York Bight, Empire Wind and Beacon Wind, are set to be developed. In a statement, Pål Eitrheim, Executive Vice President of Renewables at Equinor, said: “We were among the first movers into US offshore wind and are now one of the first movers into California, a market we believe will become a strategic floating market globally.”
The longer-term evolution of the market from fixed bottom turbines to floaters is already underway, with Equinor being a developer of Hywind, where floating turbines will be used off the Scottish coast. Equinor has stated: “Our offshore experience from the North Sea and around the world makes us uniquely qualified to lead the way and further develop floating offshore wind. …. We believe that floating offshore wind is the next wave in renewable energy”>
In the States, the Inflation Reduction Act, which was signed into law in mid August, 2022, is offering incentives to offshore wind developers though the timings of the legislation presently on the books may not align with the five California leases.
Among these incentives, the main federal tax provision supporting offshore wind is the energy investment tax credit (ITC), which provides a hefty 30% tax credit for offshore wind projects where construction starts before the beginning of 2026. Because offshore wind is expected to bring high-skilled jobs and the development of port areas, projects are also seeing a broad array of incentives at the state and the local levels, as well.
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