BOEM 'blown away' by offshore lease bidding frenzy

Records were shattered as operators bid a combined total of $405 million to secure three lease areas for offshore wind development off Massachusetts. Equinor, Vineyard Wind and Mayflower Wind Energy were the last names standing.

The three lease zones had areas of 521km2, 515km2 and 535km2 (pic credit: BOEM)

Equinor Wind (pink zone, see below), Mayflower Wind Energy (purple zone) — a joint venture between Anglo-Dutch oil and gas major Shell together with the US arm of Portuguese developer EDP Renovaveis — and Vineyard Wind (green zone) have won the three leases.

Two offshore zones (pink and purple) were awarded priced at $135 million and a third (green) at $135.1 million.

All three bids are more than triple that of the previous highest lease bid in the US

The record was Equinor’s US subsidiary's bid of $42.5 million to lease a 319km2 site in December 2016 off New York. It is now being developed as the Empire Wind site.

The three new Massachusetts leases — of 521.3km(pink), 515.5km(purple), and 535.7km2 (green) respectively — form a combined area of more than 1,500km2 and are each valid for 33 years.

"I'm just going to say at this point, wow," said Walter Cruickshank, acting director at the Bureau of Ocean Energy Management (BOEM).

"We are truly blown away by this result. It's an indication of the growing industry of offshore renewable energy. The results make me optimistic about the future of the offshore wind sector," he told reporters.

In a measure of how fast offshore wind is moving in the US, in January 2015 the BOEM's lease sale for the same area of federal waters off Massachusetts attracted no bids at all.

This time the online auction lasted a day and a half and consisted of 32 rounds with sometimes frenzied bidding.

Major offshore wind heavyweights like Ørsted, which acquired US wind pioneer Deepwater Wind in October, Innogy and Northland Power were all left empty handed.

The BOEM estimated approximately 4.1GW of wind capacity could be built across the three lease areas.

The provisional winners must be vetted by anti-trust regulators and the Department of Justice over the next 30 days.

The remainder of the multi-year permitting process before construction can begin must be completed by the potential developers within five years and six months.

The clock then starts ticking on a 33-year lease for both construction and operation of the project.

"These lease prices, and the fact that we had 19 companies eligible to bid on these leases, is great news for the overall US offshore wind marketplace," said Liz Burdock, CEO of the Business Network for Offshore Wind.

"Remember that just three years ago, these lease areas had no bidders at all.

"This strong interest from the offshore wind marketplace demonstrates the economic potential of the offshore wind industry," Burdock added.

Get more reaction from the auction here

First auction

By comparison, RES Americas paid $281,285 for a 759km2 parcel off the Massachusetts coast in January 2015.

Ørsted is now developing the zone as the Bay State Wind project.

OffshoreMW, a subsidiary of Germany’s WindMW, bid $166,886 for a 675km2 zone in the same lease auction.

A joint venture of Copenhagen Infrastructure Partners (CIP) and Iberdrola's US subsidiary Avangrid Renewables is now developing the area as the 800MW Vineyard Wind project

The Vineyard Wind JV will now be able to benefit from economies of scale across the two lease areas it now has off of Massachusetts.

Prior to the auction, 19 bidders were pre-qualified: Avangrid Renewables, Camellia Wind Energy, CI III Blue Cloud Wind Energy, Cobra Industrial Services, Deepwater Wind, East Wind, EC&R Development, EDF Renewables Development, EDPR Offshore North America, Enbridge Holdings, Innogy US Renewable Projects, Mayflower Wind Energy, Northeast Wind Energy, Northland Power America, PNE Wind USA, Equinor Wind US, Vineyard Wind, Wind Future, and wpd offshore Alpha.

Source: BOEM

However, only 11 developers participated in the tender when it kicked off at 9.20am ET on 13 December with modest bid range of $254,776 to $264,740.

Bid prices escalated rapidly before the tender was paused on the evening of 13 December — with a combined $285 million ($91 million-$101 million) offered across the three lease areas.

The tender resumed with a 25th round at 9am on 14 December as total prices exceeded $300 million ($101 million-$110 million).

After 32 rounds it finally came to an end with two zones priced at $135 million and a third at $135.1 million, for a combined $405 million.

Following the latest auction, the BOEM has 15 active wind leases.

"These lease sales have generated more than $473 million in winning bids for nearly two million acres [8,000km2] in federal waters. Money received from offshore wind lease sales go to the US Treasury," the BOEM said.