NJ approves offshore wind funding mechanism, rejects demonstration project

On December 18, the New Jersey Board of Public Utilities took two actions affecting offshore wind: approving the state’s Offshore Wind Renewable Energy Certificate (OREC) funding mechanism, but rejecting a petition by Nautilus Offshore Wind, LLC to install a 25 MW offshore wind demonstration project in state waters off the coast of Atlantic City. Meanwhile, developers have formed a new joint venture to develop offshore wind in federal waters farther offshore New Jersey.

New Jersey Governor Phil Murphy has set a goal of 3.5 gigawatts of offshore wind capacity by 2030, and in May 2018 he signed into law a renewable energy bill codifying that goal into statute. On September 17, 2018, the NJBPU opened the nation’s largest single-state solicitation to date, seeking 1,100 megawatts of offshore wind. Applications will be accepted through December 28, 2018. Winning projects will be compensated through the OREC mechanism approved this week, which requires electric companies to buy defined quantities of ORECs from offshore wind developers, much like a traditional renewable portfolio standard mechanism.

Also on December 18, the BPU rejected a 25 megawatt demonstration project proposed by Nautilus (under development by EDF Renewables and Fishermen’s Energy). The Nautilus project would feature three turbines in state waters about 2.8 miles offshore Atlantic City. But the BPU found the Nautilus project did not demonstrate the economic and environmental benefits required under the Offshore Wind Economic Development Act for the state to commit ratepayer funds. In particular, the BPU found that Nautilus didn’t provide sufficient information to substantiate claimed economic benefits, and further that Nautilus demanded a price that was too high given the unsubstantiated benefits.

But offshore wind development may soon occur farther offshore New Jersey. On December 19, 2018, EDF Renewables North America and Shell New Energies US LLC announced the formation of a 50/50 joint venture, Atlantic Shores Offshore Wind, LLC to co-develop offshore wind generation in federal waters offshore New Jersey. The site is about 8 miles offshore Atlantic City. At issue is the 183,353-acrea OCS-0499 lease area, the rights to which were initially auctioned by the federal Bureau of Ocean Energy Management in 2015. That auction was won by Toto Holding Group subsidiary US Wind Inc., with a winning bid of $1,006,240.

More recent federal auctions for offshore wind site leasing rights have brought much higher winning bids -- for example, a December 2018 auction for sites offshore Massachusetts brought in about $135 million for each of three lease areas, totaling over $405 million in winning bids for about 390,000 acres.

Federal auction set for Massachusetts offshore wind leases

The federal agency responsible for managing ocean energy development on the Outer Continental Shelf has scheduled an auction for about 390,000 acres offshore Massachusetts, to be held on December 13, 2018.

Under federal law, the U.S. Bureau of Ocean Energy Management is responsible for conducting auctions to lease parcels of federal waters for offshore wind energy development.

On October 17, Secretary of the Interior Ryan Zinke announced that BOEM will hold its next offshore wind auction in December. According to the Final Sale Notice published in the Federal Register on October 19, the agency will hold its Atlantic Wind Lease Sale 4A, covering 388,569 acres offshore Massachusetts. The sale will cover three separate leases, located within an area previously offered but unsold in 2015.

BOEM map of the proposed lease areas available through the December 2018 auction.

Nineteen companies have qualified to participate as bidders in the lease sale:

• Avangrid Renewables, LLC
• Camellia Wind Energy LLC
• CI III Blue Cloud Wind Energy II LLC
• Cobra Industrial Services, Inc.
• Deepwater Wind New England, LLC
• East Wind LLC
• EC&R Development, LLC
• EDF Renewables Development, Inc.
• EDPR Offshore North America LLC
• Enbridge Holdings (Green Energy) L.L.C.
• Innogy US Renewable Projects LLC
• Mayflower Wind Energy LLC 
• Northeast Wind Energy LLC 
• Northland Power America Inc .
• PNE WIND USA, Inc.
• Equinor Wind US LLC
• Vineyard Wind LLC
• Wind Future LLC
• wpd offshore Alpha LLC

According to BOEM, if fully developed, the areas available for leasing could support about 4.1 gigawatts of commercial wind generation.

NY offshore wind lease auction set

The U.S. Bureau of Ocean Energy Management has issued a Final Sale Notice, setting December 15 as the date for auctioning the right to lease sites in federal waters off New York for commercial offshore wind development.

The U.S. federal government is pursuing a national strategy to facilitate the domestic development of offshore wind energy.  Under federal law, the Bureau of Ocean Energy Management is responsible for administering renewable energy project development on the offshore Outer Continental Shelf.  The strategy calls for BOEM to identify areas suitable for wind energy leasing, and to then offer leases through auctions or other sales.

BOEM is now moving forward with plans to auction leasing rights for an area offshore New York.  In June 2016, BOEM first issued a Proposed Sale Notice for leasing rights off New York.  BOEM solicited public comment on its proposal over the summer.

On October 27, 2016, BOEM announced the designation of a final New York Wind Energy Area, starting approximately 11.5 nautical miles from Jones Beach, NY, and running approximately 24 nm southeast.  The final New York Wind Energy Area differs from BOEM's earlier leasing proposal primarily in its removal of about 1,780 acres due to environmental concerns over sensitive habitat on a feature called Cholera Bank.

BOEM's announcement also identified 14 companies that it has deemed legally, technically and financially qualified to participate in the New York lease sale:

• Avangrid Renewables, LLC
• CI-II NY Inc.
• DONG Energy Wind Power (U.S.) Inc.
• Innogy US Renewable Projects LLC
• wpd offshore Alpha LLC
• Deepwater Wind Hudson Canyon, LLC
• Energy Management, Inc.
• Convalt Energy LLC
• Clean Power Northeast Development Inc.
• New York State Energy Research and Development Authority
• Statoil Wind US LLC
• EDF Renewable Development, Inc.
• Fishermen’s Energy, LLC
• Sea Breeze Energy LLC 

BOEM will offer the lease as Lease OCS-A 0512, using a multiple-factor auction format.  Changes to the auction rules originally proposed include a 10% bidding credit for entities that establish that they are a “government authority” as defined in the Final Sale Notice, along with an adaptation to the auction format allowing bidders a “limited opportunity to revoke” a provisionally winning bid without penalty if the next-highest bid was submitted by a governmental entity.

Meanwhile, state energy agency NYSERDA is pursuing the New York State Offshore Wind Master Plan to advance offshore wind development in the state.  NYSERDA has expressed interest in bidding in a BOEM auction for project leasing rights, and was included in BOEM's list of entities qualified for the December 15 auction. Moreover, NYSERDA could be a beneficiary of the "government authority" provision in BOEM's Final Sale Notice; if so, it could receive a 10% credit on top of its cash bid.

BOEM will conduct the auction electronically, through a contractor, starting at 8:30 EST on December 15, 2016.

Feds to hold first offshore wind auction

The U.S. Department of the Interior has announced plans to hold a competitive lease sale for renewable energy on the Outer Continental Shelf offshore Rhode Island and Massachusetts.  According to a Final Sale Notice published in today's Federal Register, the auction, scheduled to be held by the Bureau of Ocean Energy Management on July 31, will be the first auction of its type for offshore wind site leases in U.S. waters.

Map of the Rhode Island and Massachusetts Lease Areas, courtesy of BOEM.

The auction will cover about 164,750 acres of sea space in a previously defined Wind Energy Area located 9.2 nautical miles south of the Rhode Island shore.  For leasing purposes, the BOEM has divided the area into two leases.  The North Lease Area (Lease OCS-A0486) consists of about 97,500 acres, and is estimated to have the potential for an installed capacity of 1,955 megawatts of electric generation.  The South Lease Area (Lease OCS-A0487) covers about 67,250 acres, and is estimated to have the potential for an installed capacity of 1,440 megawatts.

Based on a review by the National Renewable Energy Laboratory, the Bureau of Ocean Energy Management has concluded that the North and South Lease Areas have significantly dissimilar attributes that make the North Lease area "a more competitive and cost effective area for near term commercial development."  The Bureau thus set the minimum bid for the North Lease Area will be $2 per acre, or $194,996, while the minimum bid for the South Lease Area will be $1 per acre, or $67,252.

BOEM has pre-screened and approved nine companies as bidders in the auction:

• Deepwater Wind New England, LLC
• EDF Renewable Development, Inc.
• Energy Management, Inc.
• Fishermen’s Energy, LLC
• IBERDROLA RENEWABLES, Inc.
• Neptune Wind, LLC
• Sea Breeze Energy, LLC
• U.S. Mainstream Renewable Power (Offshore) Inc.
• US Wind Inc.

Bidders' proposals will be evaluated based on a variety of factors, including their cash bids as well as nonmonetary factors including whether a bidder holds a Joint Development Agreement or a Power Purchase Agreement. 

BOEM has described the auction as the "first-ever competitive lease sale for renewable energy on the U.S. Outer Continental Shelf."  How the auction runs -- and its results -- will be informative as to the future of offshore wind in U.S. waters.