The first offshore wind facility, the Block Island Wind Project off Rhode Island, achieved commercial operation in 2016. Since then, development efforts have stalled, with developers abandoning[i] early stage projects unable to overcome permitting challenges. But a recent spate of record-breaking sales of offshore wind leases appears to indicate renewed optimism for the future of the industry in the United States.
On December 14, 2018, three companies, Equinor, Mayflower Wind Energy (a joint venture between Royal Dutch Shell and EDP Renewables) and Vineyard Wind, bid a record-breaking $405 million for offshore wind leases near Massachusetts[ii]. The three leases span nearly 390,000 acres, which is at least 22 times the size of a typical U.S. offshore oil block, and the price is nine times the previous record sale of a 2016 New York offshore wind lease of $42.5 million.[iii] The Bureau of Ocean Energy Management estimates that when fully developed, the Massachusetts leases could support approximately 4,100 MW of commercial wind generation to power nearly 1.5 million homes.
On December 20, 2018, U.S. Wind sold its New Jersey offshore wind lease to EDF Renewables North America for $215 million.[iv] The lease will develop up to 2,500 MW of energy encompasses approximately 750 square kilometers.[v]
Going forward we may see even more large lease deals. On December 28, 2018, New Jersey Board of Public Utilities (NJBPU) received bids for its 1,100 MW offshore wind solicitation, the largest single state solicitation to date.[vi] In January 2018, Governor Murphy signed an Executive Order directing NJBPU to implement Offshore Wind Economic Development Act and move the state toward its 2030 goal of 3,500 MW of offshore wind generation.[vii] The 1,100 MW solicitation was NJBPU’s response to implement the Executive Order. In addition, Governor Murphy has asked NJBPU to consider two additional solicitations of 1,200 MW in 2020 and 2022.
The drivers behind the growing interest for offshore wind include dramatically lower cost, the perception of a more favorable political environment, and a strong state commitment to buy clean energy. In 2018, analysts describe growing investor confidence in the stability and predictability of the market, as President Trump continues to make territory available for new projects.[viii] Coastal states’ strong commitments to buy renewable electricity also strengthen wind developers’ confidence in the U.S. market and demand for offshore wind developments. A Bloomberg Intelligence analyst said that the Massachusetts bids “reflect the strength of state commitments to offshore wind”. According to Bloomberg New Energy Finance, U.S. offshore wind power is expected to reach 10,000 MW by 2030, compared to 30 MW today.