When announced this fall, it soon became clear that the US West Coast’s first offshore wind auction would be unlike the two that preceded it on the East Coast.
The main reason: the technology risk involved with the projects-to-be, with the Californian auction being the first in the US to only auction off floating wind farms, rather than bottom-fixed offshore projects. The United States has a goal to reach 15GW of floating offshore wind generation by 2035, while the state of California is targeting 5GW by 2030.
“There’s more discomfort around the technology risk associated with that. Additionally, the infrastructure surrounding the wind farms has to start from scratch in California, while it was already existent on the East Coast,” Jim Berger, a partner at Norton Rose Fulbright specialising in energy, infrastructure and resources, told Infrastructure Investor.
Despite these differences, much remained the same between the California and NY Bight auctions. The list of winners is still largely European, featuring many of the same players: for example, with Copenhagen Infrastructure Partners, Blackstone-owned Invenergy, and Ocean Winds – owned by Portugal’s EDP Renewables and France’s ENGIE – being among the winners. Ocean Winds previously brought in outside capital with Global Infrastructure Partners for the NY Bight, though for the California auction it has partnered with the Canada Pension Plan Investment Board.
“I think you’ll continue to see a lot of repeat players with deep pockets and deep experience in owning and operating offshore wind assets as the industry grows in the United States,” Berger said. “New entrants may come through joint ventures, but experience and money are just too important during these auctions.”
The bargain bin?
The biggest difference was price. While the NY Bight auction generated an eye raising $4.37 billion, this auction was much more subdued, garnering a total of $757.1 million. While the area auctioned off was smaller this time around (at 373,268 acres), the per-expected energy output remains lower, with TGS, an energy intelligence firm, stating in an analysis of the auction that “the price per energy values at the California leases are between a third to a quarter of the values from the New York Bight auction”.
Berger, however, doesn’t see this as a fair comparison. “I don’t think we can compare the NY Bight auction with the California auction because this was the first auction on the West Coast. I think if you look at the first auction on the East Coast, results in California were comparable or even higher,” he said.
Berger similarly does not think PPA disputes in New England had much of an impact on the auction, commenting that “there are several different factors at play. [The California energy market] is different than the markets on the East Coast, so I’m not sure how much of an impact [the Massachusetts PPA dispute] is having. Not to mention that California state policies and the [Inflation Reduction Act] have provided positive tailwinds.”
Moving forward, Berger says to keep an eye on other floating offshore wind projects in Europe, to see if they perform as predicted. Additionally, the hurdles the California winners will have to deal with – negotiations with utilities for offtake agreements, supply chain formation, labour and environmental disputes and more – will be of note.
Nevertheless, the auction marks the beginning of a very long process on the West Coast – one that can only result in growth for the offshore wind industry.
“In the future, there will presumably be a robust ecosystem on the West Coast, with more workers, port facilities, transmission infrastructure, et cetera. So I think that will raise prices in future West Coast auctions. However, it’s hard to say if we’ll ever see prices as high as those seen for the NY Bight”, Berger remarked.
Indeed, future offshore wind auctions will include projects off the coast of Oregon, according to the US Department of Energy.
Invenergy, CIP and Equinor declined to comment.