GIP, Blackstone among winners in US’s historic offshore wind lease

The Biden administration brought in $4.37bn with its first offshore wind land lease auction on 23 February.

The historic offshore wind auction that was announced at the end of last month has finally taken place. Beginning last Wednesday and ending on Friday, the Department of the Interior successfully leased six plots of land off the New York Bight for offshore wind construction purposes – the largest such auction in US history – netting some $4.37 billion.

The six winning consortia include Bight Wind Holdings, a joint venture between Germany’s RWE and National Grid, which as the top bidder won a 125,964-acre parcel for $1.1 billion; Atlantic Shores Offshore Wind Bight, a joint venture between Shell New Energies and EDF Renewables North America; Mid Atlantic Offshore Wind, which is owned by one of Copenhagen Infrastructure Partners’ funds; Attentive Energy, a project between TotalEnergies and EnBW; and Invenergy Wind Offshore, founded by Invenergy and energyRe and funded by Blackstone Infrastructure Partners, Caisse de dépôt et placement du Québec (CDPQ), FirstLight Power and Ullico Infrastructure Fund.

There was also a win for OW Ocean Winds East, a joint venture between Portugal’s EDP Renewables, France’s ENGIE and Global Infrastructure Partners, the latter of which has enjoyed offshore wind success in the past in the UK and Germany.

Seth Kaplan, director of government and regulatory affairs for Ocean Winds, accredited the partnerships to the sheer magnitude of the projects. While offshore wind is typically a higher-ticket subsector, it is too early to estimate how much each project will end up costing.

The group of 25 firms invited to bid on the lots also included oil giant BP, the ArcLight-owned CPV, Diamond Wind North America, and East Wind, among other traditional offshore wind players. The six lots auctioned off ranged from 43,056 acres to 125,964 acres in area, with bids for each typically lying between $650 million and $800 million. The two outliers were the largest parcel and the smallest parcel, the 43,056 acre lot, which was bought for $285 million by Mid-Atlantic Offshore Wind.

Offshore strategies

The leases are strategic to both lessor and lessee alike. On the lessor side, the auctions signify a bold step in the Biden administration’s push to make climate change and clean energy a pillar in its Build Back Better policy agenda, as the completed projects are set to see 30GW of offshore wind capacity by the end of the decade.

On the lessee side, multiple firms told Infrastructure Investor that their prospective NY Bight project would be an invaluable addition to their presence in the US offshore wind market, which is growing and of keen interest to the six consortia.

“[The lease] is a signal of two things,” TotalEnergies’ head of US offshore wind, David Foulon, told Infrastructure Investor. “One is our [Attentive Energy’s] entrance in the US offshore wind market, which we see as a major market in the future, if not the highest growth market in the future; and two, because of the size of the market we just entered though this auction, it is also a signal of what we are ready to do to get to our target of 100GW by 2030.”

Joris Veldhoven, Atlantic Shores’ commercial and finance director, thought that while the US is overall a key market for growth, it is the East Coast that excites investors. Not only is it the most mature of the US offshore wind markets, he said, but it provides the ability to scale clean, renewable energy to major population hubs such as New York City.

Instigating change

The auction, above all, spells success for the environmental movement and the Biden administration alike.

“I think this is a major success for the federal government in terms of outcomes, bringing in new developers to these areas [the NY Bight],” Veldhoven explained. “The amount of money raised is unprecedented; even going back a few years you’d see leases going for far less money.”

He concluded that the relationship between developers and the government helps “deepen the portfolios of existing offshore wind developers like us [Atlantic Shores]”.

Kaplan concurred: “I used to work for an environmental non-profit for 16 years, and over there we used to say, ‘We need solutions the scale of the problem’. In offshore wind, that means substantial projects that are at the scale of the problem.”

Ocean Winds, he concluded, plans to tackle that through this land lease – which will meet the vast energy needs of the greater New York City metropolitan area.

While it is still too early to estimate the potential costs of building the wind farms, and the timeline such projects may take, Veldhoven at Atlantic Shores was able to provide a rough estimate of eight years until for the first wind farms to be up and running.

Bight Wind Holdings, Mid-Atlantic Offshore Wind, Invenergy Wind Offshore and the Department of the Interior did not respond to requests for comments.