'Keeps up momentum' | US raises sails for Carolinian offshore wind with giga-scale lease

The Bureau of Ocean Energy Management (BOEM), the federal agency charged with managing development on the outer continental shelf (OCS), announced that the auction set to occur on 11 May, will include two zones covering a combined 110,000-acres in the Carolina Long Bay waters known as the Wilmington East wind energy area (WEA) with a total capacity of 1.3GW-1.5GW.

Power from wind farms on the zones, OCS-A 0545 and OCS-A 0546, on which BOEM has already carried out an environmental review, could supply as many as 500,000 homes in the southern US Atlantic states. Water depths across the WEA range from 20-35 meters, allowing for fixed-bottom development.

“This is an historic time for domestic offshore wind energy development,” said US Secretary of the Interior Deb Haaland, “The Biden-Harris administration is committed to supporting a robust clean energy economy, and the upcoming Carolina Long Bay offshore wind energy auction provides yet another excellent opportunity to strengthen the clean energy industry while creating good-paying union jobs.”

The auction will allow developers to bid on one or both lease areas in the Wilmington East WEA, which lies 17miles (27km) off the coast of North Carolina but straddles the maritime boundary line with South Carolina.

The leasing round rules will resemble those of the New York Bight, with mandates for engagement with Tribal Nations, underserved communities, fisheries, and other ocean users and stakeholders, but strengthen local content incentives by offering a 20% credit to bidders if they commit to invest in programs that will advance US offshore wind energy workforce training or supply chain development.

Industry advocacy bodies applauded the news, particularly the local content incentives to drive supply chain investment.

“[We are] encouraged that BOEM will use the Carolina Long Bay leasing process to spur direct investment into the supply chain,” said Liz Burdock, CEO of the Business Network for Offshore Wind. “With demand for US offshore wind leases at an all-time high, this credit could result in a hundred million dollars directly invested into domestic factories, local small businesses and suppliers, and workforce training.”

Offshore industrial advocate the National Ocean Industries Association (NOIA) president Erik Milito called the announcement “fantastic news for the Carolinas and for the nation”.

“A Carolinas lease sale could support 37,200 jobs, $3bn in annual wages, $233m in state tax creation and $44.9bn in capital investment during the development and construction phase of the projects,” he said, citing a study by consultancy Wood Mackenzie commissioned by NOIA. “The Carolina Long Bay lease sale will keep up American offshore wind momentum beyond the US Northeast.”

Whether the leasing round will see similar pricing to the record-shattering New York Bight, which reached $4.37bn on three days of intensive bidding, remains an open question.

Appetite for US offshore wind acreage remains high and the list of bidders includes New York Bight competitors who stayed long into the auction before bowing out, such as Avangrid and Orsted, potentially setting the stage for another fierce round of bidding. Yet important differences distinguish this leasing round from the New York round.

“The market dynamics for New York and New Jersey differ substantially from North Carolina,” noted Bloomberg New Energy Finance wind analyst Chelsea Jean Michel. “New York and New Jersey have legislated offshore wind targets, clear frameworks for procuring capacity, and have already made progress towards meeting their goals.”

North Carolina has set a target for 9GW of offshore wind by 2040, but has not enshrined it in law, and neither state has a legal mandate for offshore wind procurement.

Without “a clear route-to-market for projects off their coasts, despite state support for offshore wind,” the result is “riskier markets that could translate to lower bid prices for leases”, she observed.

Case in point, Avangrid’s 2.5GW Kitty Hawk development off the northern coastline of North Carolina is under development with a construction and operations plan under review by BOEM, yet remains without a contracted offtake.

“We call on Congress to facilitate even more leasing off the Southeast U.S. by acting now to repeal the 10-year moratorium on offshore wind leasing,” industry advocate American Clean Power Association said in a statement.

The announcement carries on BOEM's momentum through what is already the agency's biggest year for leasing offshore wind acreage, and will be followed by 4.6GW of leasing capacity auctioned off the coast of California later this year, and might possibly extend to the Gulf of Mexico.