Offshore

New York Bight: 5 takeaways from the record-breaking offshore wind auction

New York Bight: 5 takeaways from the record-breaking offshore wind auction
(The New York Bight offshore wind lease auction fetched a record $4.37 billion from companies looking to develop the waters.)

On Feb 25., the U.S. completed its most successful offshore wind lease auction in history.

New York Bight is an area of ocean off the coasts of New York and New Jersey that was divided into six leases for offshore wind development.

The expected installed capacity for the 488,000 acres within New York Bight is expected to be between 5.6 GW and 7 GW, enough to power 2 million homes. The Bureau of Ocean Energy Management (BOEM) said capacity could be even higher depending on development plans.

Here are five takeaways from the New York Bight offshore wind auction:

1. Record-shattering

The New York Bight offshore wind lease auction fetched a record $4.37 billion from companies looking to develop the waters.

New York Bight was the Biden administration’s first offshore wind lease auction and the first for the U.S. since 2018. The last auction, for development rights off Massachusetts, set the previous record for an individual lease sale at $135.1 million and an overall auction total of $405 million.

The $4.37 billion secured for the New York Bight auction is “more than three times the revenue received from all U.S. offshore oil and gas lease auctions over the past five years,” according to a report by Reuters.

2. Thank you, Europe!

Courtesy: BOEM

BOEM announced the six provisional winners following the 64 round lease auction. The origins of the winning bids tell a positive story about international interest in the U.S. offshore wind market.

Five of six winning bids have roots in Europe, which has a more advanced offshore wind market than the U.S. Europe's offshore wind capacity totaled 25 GW at the end of 2020, while the U.S. has only two small offshore wind installments in operation — the Block Island Wind Farm off Rhode Island and the Coastal Virginia Offshore Wind test pilot.

German energy giant RWE and British utility National Grid had the most expensive winning bid at $1.1 billion. The pair partnered to form Bight Wind Holdings LLC and won the development rights to OCS-A 0539 — the largest area up for grabs in the New York Bight in terms of both acreage and expected installed capacity.

The other winning bids with European partners included EnBW and TotalEnergies, EDP Renewables and ENGIE, and Shell and EDF Renewables. Copenhagen Infrastructure Partners (CIP) won a lease on its own.

CIP co-founder Christian Skakkebæk called the New York Bight auction a “strong investment opportunity” given the trajectory of the U.S. offshore wind market. CIP is also supporting the Vineyard Wind 1 offshore wind project off Massachusetts, which is under construction.

Chicago-based Invenergy was the lone American company without a European partner to have a winning bid.

3. Supply chain opportunities abound

A look at New York’s wind projects (Source: New York State Energy Research and Development Authority).

Just as the U.S. offshore wind market is in its infancy, so is its supply chain. Ports along the Eastern Seaboard will soon become home to manufacturing and assembly hubs to meet the need of a rapidly expanding market.

Who is best positioned to take advantage?

Now that New York Bight represents the largest offshore wind area in the U.S., Northeast states have the opportunity to become the center of the east coast supply chain.

New York and New Jersey are taking the lead, having already released a report with BOEM detailing their intention to collaborate on building out supply chain and manufacturing infrastructure in the coming years. New York also intends to spend $500 million to support the buildout of an offshore wind supply chain. BOEM said it is committed to improving the permitting process for offshore wind projects and revising industry outreach efforts. The agency also plans to incentivize domestic procurement of manufacturing components.

New Jersey is establishing a Wind Institute in an effort to foster workforce development, training, and research for the offshore wind industry in the region. The state said it aims to help small businesses participate in offshore wind supply chain opportunities.

New York said it will encourage economic benefits and supply chain development in its competitive bidding for offshore wind renewable energy certificates.

Together, BOEM, New York, and New Jersey agreed to coordinate on mutual offshore wind goals through a working group.

“We must have a robust and resilient domestic offshore wind supply chain to deliver good-paying, union jobs and the economic benefits to residents in the region,” said BOEM Director Amanda Lefton. “Because we understand the value of meaningful community engagement, we are requiring lessees to report their engagement activities to BOEM, specifically noting how they’re incorporating any feedback into their future plans.”

Pieces of the U.S. offshore wind supply chain are already being built.

Erik Milito, president of the National Ocean Industries Association, said the success of the New York Bight offshore wind lease auction will lead more manufacturers and developers to the market.

"We are already seeing an offshore wind substation and a wind installation vessel being built in Texas, an offshore wind service operation vessel being constructed in Louisiana, and transmission cables being manufactured in North Carolina and South Carolina, along with many other examples," Milito said in a statement.

Milito encouraged Congress to expand tax credits for wind energy to further incentivize the development of projects and supply chain infrastructure.

4. BOEM sets the tone

Courtesy: BOEM

Companies involved in the New York Bight offshore wind auction praised BOEM for its efficiency and execution over the three-day process.

New York Bight, the Biden administration’s first offshore wind lease auction, set the tone, and expectations, for auctions to come.

BOEM has six more offshore wind auctions planned over the next three years. Areas of the Carolinas are expected to be next in line, followed by Northern and Central California, the Gulf of Mexico, the Central Atlantic, Oregon, and the Gulf of Maine.

Offshore Wind California Executive Director Adam Stern said the New York Bight auction is a positive "preview of things to come" for the California auctions that are expected in the fall of 2022. 

Join us on April 13th for the next edition of the Renewable +Series on offshore wind. Developers, advocates, and policymakers will discuss the future of offshore wind energy along the Pacific Coast. Register here. 

5. Biden’s goal is within reach

The Biden administration's goal of developing 30 GW of offshore wind capacity by 2030 is within reach, according to S&P Global Market Intelligence.

The offshore wind project pipeline is now 30.7 GW by 2030.

Now just 41 MW, S&P analysts expect U.S. installed capacity of offshore wind to reach 4,733 MW by 2025.

Ørsted, Iberdrola SA, Dominion Energy, and BP were the top owners of planned offshore wind capacity in the U.S. as of Jan. 2022.

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