California’s first-ever offshore wind auction nets $757M from developers

A two-day auction to determine who will develop the first-ever offshore wind projects off the coast of California raised a combined total of $757 million from developers.

The Bureau of Ocean Energy Management auctioned development rights for the five areas— two in the Humboldt Wind Energy Area of Northern California and three in Morro Bay in Southern California— on Dec. 6 and 7.

The two areas up for grabs in Northern California received the auction's two highest bids.

Copenhagen Infrastructure Partners, through the subsidiary California North Floating LLC, secured the rights to develop 69,031 acres for an auction high $173.8 million. RWE had the next highest winning bid at $157.7 million for 63,338 acres.

Equinor, Invenergy, and a joint venture between ENGIE and EDP won the rights to develop areas in Morro Bay for $130 million, $145.3 million, and $150.3 million, respectively.

The total development area offered in the auction covers 373,268 acres with the potential to produce over 4.6 GW of offshore wind energy and power 1.5 million homes, BOEM said.

"Today’s lease sale is further proof that industry momentum – including for floating offshore wind development – is undeniable,” said Interior Secretary Deb Haaland. “A sustainable, clean energy future is within our grasp and the Interior Department is doing everything we can to ensure that American communities nationwide benefit.”

The lease sale included a 20-percent credit for bidders who committed to a monetary contribution to programs or initiatives that support workforce training programs for the floating offshore wind industry, the development of a U.S. domestic supply chain for the floating offshore wind energy industry, or both.

The credit will result in over $117 million in investments for these programs or initiatives. The auction also included 5% credits for bidders who committed to entering community benefit agreements.

Adam Stern, executive director of the trade group Offshore Wind California, commended the success of the auction and called on stakeholders to address the challenges that still face the industry's efforts to develop offshore wind along the West Coast.

"Looking ahead, we need to focus on the essential next steps to bring California offshore wind online, which include investments in transmission and port infrastructure, a clear roadmap on permitting, procurement, a robust supply chain, workforce training, and more call areas to reach the state’s 25 GW goal," Stern said in a statement.

Because of the deep waters along the U.S. Pacific Coast, floating offshore wind technology is needed to unlock California's 200 GW offshore wind development potential, according to an assessment by the National Renewable Energy Laboratory.

California could feasibly and responsibly develop as much as 3 GW of offshore wind by 2030, 10-15 GW by 2045, and 20 GW by 2050, according to proposed targets from the state's energy planning agency.

The California State Assembly directed the California Energy Commission (CEC) to evaluate the maximum capacity of offshore wind development and establish planning goals for 2030 and 2045.

CEC released the draft goals on May 6 and must complete a final strategic plan for offshore wind by June 23, 2023.

Additional reports informing planners on the economic benefits of seaport investments and workforce development, as well as the establishment of a permitting roadmap, are due no later than Dec. 31, 2022.

In its latest integrated resource plan, the California Public Utilities Commission included, for the first time, offshore wind, although at a modest target of 1.7 GW by 2032. The CPUC said it will evaluate the results of a CAISO study on the transmission needs and costs to interconnect around 8 GW of offshore wind which will be included in the next IRP cycle.

The CEC's strategic plan aims to inform grid regulators, policymakers, and developers on the steps needed to achieve the development targets.

The CEC draft goals take into account the two federal lease auctions executed by BOEM this week.

The Humboldt WEA contains 132,369 acres of the ocean for potential offshore wind development, which could bring up to 1.6 GW of clean energy to California’s grid. The 240,898 acres within the Morro Bay WEA are some 20 miles off San Luis Obispo County, California. The area is expected to bring 3 GW of clean energy to the grid when fully developed.

The respective depths of 900-1,300m and 500-1,100m for the Morro Bay and Humboldt WEAs require floating offshore wind technology.

With the auctions now complete, the race is on to build out the infrastructure needed to help the industry thrive for years to come. Both electric grid constraints and port availability remain challenges for the first two development areas offshore California.

The Humboldt Bay area can support around 150 MW of additional capacity without substantial grid upgrades, according to a report on the U.S. floating offshore wind market by the Global Wind Energy Council. Morro Bay is less constrained due to the impending retirement of the Diablo Canyon nuclear plant.

When it comes to transmission planning, California has the benefit of a single grid operator in CAISO. Necy Sumait, regional supervisor for BOEM's Office of Strategic Resources, said CAISO has been proactive on transmission planning to meet the needs of offshore wind with support from the agency.

In February, CAISO released its first-ever 20-year transmission outlook that factored in transmission support for 10 GW of offshore wind.

"The North Coast, where there's greater wind, that's a little more challenging in terms of transmission but California has already started the planning process," Sumait said. "I think there's a good roadmap going forward."

There are currently no ports along the West Coast that are capable of supporting floating offshore wind activities, according to a recent report by the National Renewable Energy Laboratory.

Principle Power, while based in California, had to go to Europe to demonstrate the viability and the bankability of its floating offshore wind platform technology. But Antoine Peiffer, the company's vice president of engineering, said he has seen encouraging progress on port planning in recent months.

In March, the California Energy Commission approved a $10.5 million grant for renovations at the Port of Humboldt Bay to support floating offshore wind activities. The grant will fund preliminary engineering and design work, conducting site surveys and special studies, preparing necessary environmental impact assessments, implementing early construction, and initiating environmental mitigation measures.

Floating offshore wind developers and suppliers will also have to comply with the Jones Act for vessel deployment. The industry has some advantages over fixed-bottom offshore wind, though, since floating offshore wind turbines and platforms are largely completed at port.