US offshore wind blows into the big time on billion-dollar New York bidding wars
Giant tender in New York Bight –now into its third day – exceeding all industry expectations, with bid prices climbing to stratospheric heights on even the smallest leases
A single lease bid in the New York Bight auction has now breached the $1bn mark in the US’ biggest-ever offshore wind auction – now in its third day – while two other lots now exceed $700m as prices skyrocketed to a unprecedented $3.86bn all-in.
As action resumes today in the tender, a six-lease lot off the eastern seaboard in the New York Bight, nearly all lease areas remain highly competitive, not least on the emergent darling of the auction, No. 0539, a 125,000 acre site that as of 1040ET today has smashed all previous records to reach a bid of $1.04bn.
A single bidder remains in the contest, but as has been seen throughout this US Atlantic auction that could easily change, and several lease areas that went through multiple rounds with zero bidders all of sudden sprung to life with revived interest and skyrocketing prices.
“The auction demonstrates a greater commitment to the offshore wind industry than we ever expected,” said Mike Matthews, US representative for industry advocacy body World Forum Offshore Wind. “America has arrived in offshore wind.”
Six lease areas are up for sale by the Bureau of Ocean Energy Management (BOEM), the government agency charged with managing development on the outer continental shelf (OCS), totalling 488,201 acres, 461,326 of them developable due to navigation and fisheries related restrictions. BOEM estimates the lease areas offer between 5.6GW-7GW of potential offshore wind capacity.
Day two of the auction offered numerous surprises. Lease area 0542 went from having no suitors as of midday the day before (23 February) to shooting up late in the afternoon, seemingly closing out this morning at 0950 at $205m with zero bidders, only to revive again in the next round with three bidders. The area closed day two at $390m with two bidders.
The smallest lease area, 0544, also a laggard at the midday mark yesterday likewise skyrocketed to close out last night at $100m, where it sat with zero bidders for multiple rounds today before once more gaining suitors who drove up its price to $140m by day's end, with two bidders in the running.
The remaining lease areas are all very much in play with two bidders each as the industry awaits to see which firms have pockets deep enough to afford what is essentially a speculative bid. Lease winners do not obtain the right to develop the lease, only the right to submit a plan to develop the lease, and BOEM will need to approve the construction and operations plan for each. In theory, environmental and other concerns could derail any development.
Timelines run to around eight years from lease award to development, and companies will need to pay rent and other fees long before the projects begin earning.
“This really signifies just how hot the offshore wind market is and much how much interest there is in acquiring leases,” said Josh Kaplowitz, vice president for offshore wind at industry advocacy body the American Clean Power Association.