'US offshore wind leasing rules favour European players but we'll still succeed': Invenergy

The US is pushing hard to create a “Made in America” offshore wind industry, with multiple initiatives at the both the federal and state level linking investment into local industry as a key component of capacity awards.

Nevertheless, the vast majority of the US sector remains solidly in European hands, with European developers being financed by European banks and supplied by European manufacturers.

Chicago-based renewable energy giant Invenergy aims to change that, and led a consortium that won the rights to build an offshore wind in February’s New York Bight lease after bidding $645m at auction - the only American developer to win acreage in the $4.4bn round.

Invenergy is one of the country’s top onshore solar and wind developers, with 191 completed projects totalling 30GW of capacity under its belt, but this win is its first foray into offshore wind.

“Domestic ownership results in jobs that last decades, rather than jobs that last only a few years on a contract basis,” he says. “We need to ensure that the offshore wind business isn't in the US for a decade while these projects get built out and then just moves to the next country. That's a key area of focus for us.”

Yet US leasing rules, which award acreage based solely on price, not only favours deep-pocketed European offshore wind players but adds risk by not ensuring that companies will properly invest into the local supply chain and communities.

“It's very difficult for a domestic organisation to participate, just given the fact that we're primarily a project finance organisation and don't have the unfettered access to capital markets, and we haven't enjoyed two decades worth of subsidies from governments to build our business,” says Weinstein. “We've been having to do it on our own.”

Amendments needed to auction rules

Invenergy has lobbied the Bureau of Ocean Energy Management (BOEM), the federal agency charged with managing offshore wind development on the outer continental shelf, for weighted bids based upon several factors, including companies’ existing US footprints, price caps to reduce the dominance of global offshore wind titans, and limiting bidders to a single lease. So far, BOEM has only instituted the third.

The result was an auction that reached $4.37bn, driving it to the upper reaches of the worldwide industry despite the US being an untested market with only 42MW of actual spinning capacity.

“Nothing about the [auction] process has measured an organisation's ability to deliver competitively. The only thing it has done is measured the size of the balance sheet, and that is not the right proxy for success,” Weinstein asserts. “Proxy for success should be measured by an organisation’s capability to deliver.”

Per-acre prices in the New York Bight nearly breached $9,000 per acre on average, up from a previous high of just over $1,000 set in the country’s previous offshore wind leasing auction, in Massachusetts in 2018.

Record prices were driven by high demand from the adjacent states of New Jersey and New York, which have legal mandates for offshore wind, and strong policy support from a Biden administration that has set a national goal of 30GW by 2030. The paucity of acreage available for offshore wind development both in the US and around the world also contributed.

“There is a surplus of demand and undersupply by the US government for these lease areas, and that is evident by the fact that our last lease auction was in 2018 and the New York Bight planning process was half a decade,” he said. “That's a lot of waiting for a burgeoning and growing global market and in a region and local power economy which is as robust as the tri-state area.”

BOEM has ramped up leasing, announcing lease sale in the Wilmington East wind energy area (WEA) off the Carolinas with 1.5GW of capacity potential for May, followed by 4.6GW offered in California, and possibly more in the Gulf of Mexico.

These are “correct steps to take to stabilise the marketplace and ensure continued investment”, Weinstein says.

Local cost advantage

Market players worry that the enormous prices paid in the New York Bight might trickle down to ratepayers, with research from Danish offshore wind consultancy Aegir Insights indicating that lease prices alone will contribute at least $11 per MWh to the projects’ eventual levelised cost of energy.

“Some organisations may directly reflect the lease price in the offer price that they ultimately bring to the power-contracting environment,” Weinstein says, adding that Invenergy has “specific domestic expertise which can help mitigate that”.

“We're not coming at it with an ‘outside the region’ mindset; we've been doing business here for a long time, so we're efficient in that regard,” he explains, citing experience connecting projects amid the Byzantine US inter-regional transmission market as a key asset.

“We understand multisystem impacts and how to mitigate interconnection risks and reduce project costs.”

Despite a lack of organisational experience in offshore wind, Weinstein suggests the transition from onshore behemoth to offshore player is one that every offshore developer has taken in the past and is well within Invenergy’s competencies.

“Every organisation in offshore — other than the oil majors — was [initially] an onshore developer. This is not a new transition to make,” he observed, noting numerous synergies between the onshore and offshore wind markets, including permitting, overlapping supply chains and the need for stakeholder engagement.

“Over the past two decades we have built the scale, capability, and breadth of experience to step into offshore, it's not a departure from our core business, it's simply a transition or extension of our existing capability.”

Invenergy’s win in the New York Bight hasn’t satisfied its own appetite for acreage, and the company is listed among 16 qualified bidders in the Wilmington East WEA, and it does not exclude entry into further lease auctions.

“We're an ever present company in the onshore space, both technologically and regionally, and we will be the same in offshore,” Weinstein says.