United States

United States

4GW lease auction looms for US federal waters

13 companies gear up to compete for just 3 leases

Developers wishing to build offshore wind farms in US federal waters off Virginia, Massachusetts and Rhode Island will have the opportunity to bid for leases next year, the US Department of the Interior (DoI) has confirmed.

Three development leases with a combined capacity of about 4GW are to be awarded, with full proposed sale notices published today.

The DoI auction announcement has come at a time when the US is experiencing "record domestic oil and gas development," acknowledged DoI secretary, Ken Salazar.

Competitive bidding for outer continental shelf (OCS) sites will focus on a 112,799 acre (45,648ha) zone off Virginia, judged to be appropriate for more than 2GW in capacity. A single lease will be awarded for this area.

A second 164,750 acre zone off Rhode Island and Massachusetts is to be divided into north and south sections. The north section has been earmarked for more than 1GW, while the south section "is capable of supporting a project" of between 350MW and 1GW.

The DoI’s announcement is more than two years in the making. Originally, the DoI said it would begin issuing leases by early 2012, later revising this to late 2012. As Windpower Offshore previously reported, a further delay to 2013 has proved necessary.

Fees & charges revealed

The notices published today reveal for the first time the auction format the DoI’s Bureau of Ocean Eenergy Management (Boem) will deploy. Boem will set an asking price at each round of an online auction. Developers’ bids will either meet the asking price and advance to the next round or drop out of the running.

The Massachusetts/Rhode Island notice also specifies that projects of at least 350MW capacity and with approved power purchase agreements or joint development agreements with state authorities will be allowed to bid 15-25% below the bid amount. But "few, if any, developers will have entered into [a] PPA at the time of the proposed lease sale," acknowledges Boem.

In terms of charges, Boem will charge a yearly rent of $3/acre (€2.3/acre), plus $70/statute mile for transmission cable easements. It will also levy an operating fee equal to 2% of wholesale electricity market value, rising to 4% in the ninth year of the lease.

To participate in the auction, companies must submit legal, technical and financial qualifications, a process underway for the 13 companies that have filed expressions of interest thus far. Any companies that have not already filed qualification information must do so by the end of the notice’s sixty-day comment period.

Companies in the running

Three companies – enXco, Fishermen’s Energy and Iberdrola – have expressed interest in both wind energy areas (WEAs). Deepwater Wind, Energy Management, Mainstream Renewable Power, Neptune Wind and US Wind have filed interest only in the Rhode Island/Massachusetts WEA, while Apex, Arcadia, Cirrus Wind Energy, Dominion Virginia Power and Orisol Energy have filed interest only in the Virginia area.

Today’s proposed lease sales may be revised after the expiration of the comment period, on 1 February.  The auction will be held at least 30 days after final lease sales notices are published.

In parallel, Boem is conducting a review of the Rhode Island/Massachusetts site under the National Environmental Policy Act (Nepa). Maureen Bornholdt, Boem’s renewable energy programme manager, says she hopes a consultation with the National Marine Fisheries Service will wrap up by the end of the year, while a coastal management review with the affected states is likely to finish in about 90 days.

Bornholdt said Boem has completed all necessary environmental consultations for the Virginia WEA, and this zone will not require a Nepa review.

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