$4 billion for empty ocean: The energy industry bets big on offshore wind power – Grid News

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$4 billion for empty ocean: The energy industry bets big on offshore wind power

$400 million isn’t cool. You know what’s cool? $4.37 billion.

That’s the record-breaking haul from a federal auction last week of wind-energy sites off the coasts of New York and New Jersey. Energy companies battled across 64 rounds of bidding for the right to develop six aquatic plots in a chunk of the Atlantic Ocean known as the New York Bight. It is safe to say that the results exceeded expectations.

The final tally for the six lease sites was $4.37 billion — more than 10 times the previous record for such an auction ($405 million) and far ahead of the latest offshore oil and gas auction in the Gulf of Mexico ($190 million). In fact, the Department of the Interior’s Bureau of Ocean Energy Management said it was the highest-grossing single offshore lease sale of any kind in history, including all oil and gas auctions. A single site covering around 180 square miles of ocean went for $1.1 billion. The six winning companies, mostly backed by larger European firms like German power company RWE and Shell, now have the right to begin development of offshore wind farms that could power up to 2 million homes.

And not a moment too soon. The windy, spacious shallow seas off European coastlines are home to more than 5,400 wind turbines. They’re contributing gigawatts of clean, emissions-free electricity to the continent — invaluable at a moment when Russia’s invasion of Ukraine has thrown European and global energy markets into chaos, highlighting the need to transition away from fossil fuels. The windy, spacious shallow seas off U.S. coasts, meanwhile, are home to exactly seven turbines. And the Biden administration, running short on options to tackle climate change in a tough legislative and judicial environment, has set a goal of 30 gigawatts of offshore wind power by 2030. If fully developed, the New York Bight auction areas could cover 5.6 of those gigawatts, and the administration has said it may hold similar sales for six other ocean areas by 2025.

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Offshore wind energy in the U.S. has struggled, with decades of false starts and ugly fights shelving ambitious plans. There are still permitting hurdles and other obstacles before turbines begin spinning in the Bight, but there is no question that this represents progress in the nascent offshore wind energy industry in the U.S.

To get a sense of the industry and what the auction means, Grid spoke with David Bidwell, an associate professor in marine affairs at the University of Rhode Island — off the coast of which sit five of those seven American turbines (the other two are in Virginia’s waters). This interview has been edited for length and clarity.

Grid: The Interior Department wrapped up by far its largest offshore wind energy auction on Friday, with the bidding blowing expectations out of the water. What do you think this says about the state of offshore wind in the United States?

David Bidwell: Things have changed a lot since I started working on this issue seven or eight years ago. I think it was hard to get people engaged in it, and a lot of that had to do with the uncertainty of offshore wind development. But what you have seen is those auctions have been getting progressively more expensive. And certainly the New York Bight has created a ton of interest. Since the Block Island Wind Farm [off the coast of Rhode Island] went in in 2016, that has very much raised the hopes of the industry that the United States is the next big market. And certainly right now with the Biden administration — they have been very pro-offshore wind. So I think the industry probably feels that the risk is much lower in terms of them getting a return on these investments.

G: There has been a slow start for the industry here even while it has thrived in Europe. Are there differences in public perception and attitudes, along with the political situations, that help explain that?

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DB: When things started in Europe, they started at a relatively small scale, and they started slowly. It took a couple decades to get there. So there was an opportunity for people to become more accustomed to the technology and for them to grow over time. One of the things that has helped promote offshore wind energy in Europe is that in some of those countries, they’ve had a very focused national energy policy and the creation of national incentives that help build the industry and create a market. That has not happened in the U.S. We don’t have a national energy policy.

What you’re seeing now is that this push for offshore wind that has accelerated so quickly in the U.S. is really being pushed by the states. Federal policy creates a canvas, if you will, for creating this industry by leasing these areas of the outer continental shelf for development. But a developer is not going to spend millions and millions of dollars on a lease area unless they think that they can create and sell electricity, and that is up to the states to drive that market.

G: Is the state push purely an economic trend? Or is it more the possibility that the economics are lining up a bit better with climate goals?

DB: Part of it is climate policy, but a lot of it is economic development, and the goose that lays the golden egg is not so much the development of offshore wind farms — although that creates some jobs, it creates some economic enterprise — but it’s who can win manufacturing onshore. If you can create a pipeline of projects that is big enough, in your state, you may be able to get manufacturing on shore. And that’s a lot of jobs, and long-term jobs. For those of us who watch the industry, who study parts of the industry, it’s even difficult to keep track of what’s going on. It has just become so big, so quickly.

G: Do you think the industry’s apparent bullishness will translate into wider public acceptance of a technology that, as you said, hasn’t had a lot of exposure in this country just yet?

DB: It’s always difficult to introduce new technologies somewhere. When something is new, there is a very high perception of risk and a lot of uncertainty, and that’s very, very difficult for the public or policymakers to stomach, that level of uncertainty. So one would say that as we gain more experience with the technology, that people are going to become more comfortable with it over time. Some of the studies that we’ve done around the Block Island Wind Farm have shown some of that dynamic. We may also go the opposite direction for some stakeholders — they may find that the experience is very bad with development and that’s going to make it more difficult on some fronts.

The second area where things could change is that we’ve seen this polarization of attitudes toward climate. And I think in our current social and political environment, it is easy for things to become polarized politically or ideologically. I’m very interested to see if that sort of polarization is taking place, or continues to take place, about this kind of technology as well.

G: Given the challenges of that sort of polarization, do you think the record-breaking auction tells us anything about the future of offshore wind? Do these companies think they can fight past the potential issues with this technology and actually build the wind farms?

DB: The industry seems very, very optimistic and confident at this point. I don’t know how well-founded that is. I think we’re going to learn a lot with the construction of Vineyard Wind, of the South Fork wind farm. We haven’t talked yet about the commercial fishing industry — that certainly seems to be the biggest area of risk at this point. And we’re going to have to see where that lands.

G: Where do you see that conflict heading? A fishing industry group expressed concern about the new auction and has opposed various offshore wind developing plans. Could this be a real roadblock?


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DB: A lot of this is going to hinge on perceptions around fairness, equity and justice. And I think those issues stretch beyond the commercial fishing realm. One of the things that we are likely to hear about the size of the numbers that they’re talking about for the New York Bight — who is gaining from that kind of investment? How should that amount of money be distributed? Who is it that should be benefiting from that? In Europe, there’s been a lot of conversation about this idea of community benefits.

And it’s not just about what’s happening out on the ocean. There is always going to be an interaction between these projects and the shore as well. Where does the cable come ashore? There’s also a lot of money being invested in ports redevelopment. States have said, ‘OK, we’re going to accept this bid, but you have to invest X amount of money in port redevelopment.’ What does that mean for the communities who rely on those ports? What does it mean for the communities around those ports, which in many places are communities of color? A lot of these issues that have yet to be resolved.

G: Taking all that into account, what do you see coming for the offshore wind industry in the next two years, five years, 10 years down the line?

DB: I think the next two years are going to be a really important time in learning how this is going to shake out legally. How do people respond to the first larger projects being constructed? What do we actually see in terms of impacts, and how does the public and the rest of society perceive those impacts?

When you look out a little further, there are questions of can this boom outlast a particular administration, at the state or the national level? Is it something where it becomes politicized and becomes a football as we go on? And then you look 10 years down the line, and it has a lot to do with our greater energy system. Does electrification move forward? If it does, finding new sources of more electricity is going to become more and more important.

Correction

An earlier version of this article misstated David Bidwell's title. This version has been corrected.

  • Dave Levitan
    Dave Levitan

    Climate Reporter

    Dave Levitan is a climate reporter for Grid where he focuses on interconnected stories about climate and science, and politics shaping action around both.