Analysis | Offshore wind majors wade in for key US state auctions as hopeful supply chains await
Maryland and Massachusetts tenders will add huge volumes to the regional development pipeline – and test the two states' approaches to expanding clean power production and building local industry, writes Tim Ferry
By Sunday, the gavel will have come down on two key US offshore wind power auctions, in Maryland and Massachusetts, that will add up to 2.8GW to an already swelling sector project development pipeline and cap a year of historic progress in the rapidly emerging Atlantic seaboard play.
The allocations to be awarded via the two tenders – Massachusetts is announcing results on 17 December, Maryland the next day – are crucial to reaching both state and national goals as well as for wider industrial and economic development, with vast sums pledged for investment in ports and supply chains, contingent on coming capacity awards.
Depending on the outcome of the auctions, Massachusetts may see a boon in jobs in coastal harbour cities including Fall River, or Salem Harbor, while Maryland may have to choose between its industrial nostalgia for steel-making or a new cable manufacturing site at Tradepoint Atlantic, formerly the Sparrows Point steel mill.
More importantly, the outcomes will result in job creation and economic development regardless of which developers come out on top.
Massachusetts – Vineyard Wind 1 and beyond
Only two of the four companies holding leases in Massachusetts’ coastal waters put in bids to the current round, however, including developers Vineyard Wind and Mayflower Wind, which is currently developing its 804MW project. Equinor, co-owner with BP of the 1.2GW Beacon Wind project, and the Orsted-Eversource team on the 2GW Liberty Wind, both declined to submit bids, put off by price caps.
The lack of interest sparked a crisis of confidence in state government, with outgoing governor Charlie Baker putting forward legislation to remove the price cap to “ensure that Massachusetts retains its leading-edge position in the offshore wind policy debate”.
Vineyard Wind, jointly owned by Copenhagen Infrastructure Partners (CIP) and Avangrid Renewables, put in two bids for 800MW and 1.2GW under the Commonwealth Wind banner, with offers of substantial investment into infrastructure at Salem Harbor, which it will use as a manufacturing and marshalling port.
The Commonwealth bids face competition from Mayflower Wind, a Shell-Ocean Winds joint venture, which recently tabled an $81m package for economic development to the state to bolster its up-to 1.2GW bids, including set-up of an operations and maintenance base in Fall River near the New Bedford Marine Commerce Terminal. The project will make landfall at the refurbished Brayton Point shuttered coal fired power plant.
While Massachusetts has focused most keenly on cost of energy, Maryland has homed in on inward investment, in part to fuel a rebirth of its once-booming steel industry for the offshore wind sector now taking shape, and the two bidders in its current auction, Orsted and US Wind, have made substantial spending pledges with this in mind.
Denmark-headquartered Orsted, already developing Maryland’s 120MW Skipjack 1, put two bids into round 2, a 380MW Skipjack 2 and a revised “best and final offer” (Bafo) submitted early last month for the 760MW Skipjack 2.1.
US Wind, majority owned by Italian renewable energy firm Renexia, which has the 270MW MarWin project under development, submitted three bids in total, one for 411MW, a Bafo bid 2 at 808MW, and 1.2GW bid 3, all under the Momentum Wind banner.
Orsted has committed to spending at least $510m on capital expenditure mostly at Baltimore County’s 3,000-acre Tradepoint Atlantic logistics hub, where it leases 50 acres of space. The investments include a $140m inter-array cable manufacturing facility, being built in collaboration with Greek partner Hellenic Cables, and plans by an as-yet-unnamed contractor to build a $150m tower factory on the site.
US Wind, meanwhile, has earmarked channelling 19% of its project capital expenditures in the state of Maryland, while also pledging a monopile maker at the Tradepoint Atlantic. US Wind claims that its Bafo bid 2 will result in “more than $570m in local expenditures”.
The outcomes ahead
Conversely, two winners results in two export cables and landing points, and doubles the permitting risk.
The math is tougher for Maryland, where its 1.2GW maximum award will result in a winner and loser. The Public Service Commission (PSC) has the option of breaking the 1.2GW allocation into three sub-rounds and awarding as little as 400MW this year, but has given no indication how it intends to rule.
“Ultimately Maryland will have to weigh the pros and cons of bringing a large sum of capacity sooner rather than later,” observed Chelsea Jean-Michel, wind energy analyst with BloombergNEF. “Procuring more capacity now... will enable more projects to contribute to the Biden 30GW by 2030 goal and bring investment into the state sooner. However, there are also technical and cost advantages for waiting.”
US Wind has more to lose, with all of its eggs in the Maryland basket, while Orsted is a global leader with 15GW under contract, 4GW in the US alone.
“With Skipjack Wind I, New Jersey's Ocean Wind projects, and an undeveloped lease area all in close proximity, Orsted could really benefit from regional economies of scale [with a Maryland win],” said BloombergNEF’s Chelsea Jean-Michel.
US Wind CEO Jeff Grybowski is a season veteran of the US offshore wind industry, having led pioneering firm Deepwater Blue and even Orsted's North American operations in the past.
“They have a lot of good leadership and my guess is they've [US Wind] have a pretty aggressive bid, which is more attractive,” offered Wood Mackenzie’s Stavole.
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