How much are wind energy leases off SLO County worth? NY auction offers a hint

How big could the Morro Bay wind project be? Maybe $2 billion big?

That could be the case if recent bids for leases off the coast of New York are any indication.

The results are in from the first federal auction for the rights to build wind farms on the Atlantic ocean seabed.

The auction, carried out by the Bureau of Ocean Energy Management (BOEM) on Feb. 25, resulted in bids on six lease areas that brought in a record $4.37 billion.

Once the sites are fully developed, the sale of more than 488,000 acres is expected to produce up to 7 gigawatts of clean energy (7,000 megawatts), enough to power nearly 2 million homes, the agency said.

The Biden administration, eager to secure this renewable energy resource, wants the projects fast-tracked. Some could be operating by 2028.

With the East Coast auction complete, BOEM is now turning its attention to the West Coast, with the agency preparing to lease 241,000 acres of seabed off Morro Bay/Cambria as soon as this fall for floating offshore wind production. Biden has announced the area could produce 3,000 megawatts of power once fully developed, enough to light up 1 million homes.

The energy would come ashore at two key San Luis Obispo County landings that provide existing access to the grid: Morro Bay and Diablo Canyon.

Morro Bay’s grid capacity is only 1,000 megawatts. Needing the additional 2,000-megawatt infrastructure behind Diablo Canyon, one can see why the wind industry is counting on the nuclear plant to shut down as expected.

Using the same formula as the New York auction — $9,000 per acre — the auction off Morro Bay might yield $2.1 billion after the competitive bids are added up.

New joint venture

The price tag is probably not a surprise to the expected bidders who are already lining up for the right to be at the table off the West Coast.

Castle Wind, arguably the best known bidder locally, has a new well-heeled partner, the company announced in early March. That would be French energy giant TotalEnergies, which ”entered the JV (joint venture) and acquired the shares previously held by EnBW North America,” according to the company. Big in renewables, the company is said to be the fourth largest oil and gas company in the world with plenty of experience working offshore.

This new partnership is poised to participate in the anticipated BOEM lease sale in late 2022. TotalEnergies was one of the winners in the NY auction, ponying up $795 million for 84,332 acres, the company announced. The company did it under an LLC called Attentive Energy.

Besides the now deep-pocket Castle Wind/TotalEnergies joint venture, another European company, Ocean Winds, was also a winner in the East Coast auction and is already on record as wanting to bid in the upcoming Morro Bay leases. Ocean Winds is the result of a 50-50 joint venture between EDP Renewables (EDPR) in Spain and ENGIE in France. In the New York auction this partnership paid $765 million to lease 71,522 acres.

What’s next

So what happens next? BOEM spokesman John Romero says next month, look for a draft EIR for the Morro Bay wind area that will be open to public comment, along with more local public meetings.

Also in April, BOEM will release a ”proposed sale notice” that eventually will be modified into the terms outlined in the final sale notice this fall. Romero says the proposed sale notice is expected to include terms on how BOEM will evaluate each bid, perhaps weighing factors besides the dollar value.

That may be a nod to Castle Wind, which has been engaging with the local community and fishing industry to come to a meeting of the minds.

Even if that is part of the equation, companies have to be ready to plop down millions of dollars that are completely at risk and can’t begin to be recouped for another eight to 10 years.

These companies are looking worldwide for opportunity. Here is how TotalEnergies describes the significance of the recent auction.

“This grand entrance into offshore wind in the U.S. is a major step toward our goal of reaching 100 GW of renewable electricity generation capacity worldwide by 2030,” said Patrick Pouyanné, chairman and CEO of TotalEnergies. “This development adds another dimension to our renewable business in the U.S., currently representing 4 GW of solar farms under development. This is the largest renewable energy project TotalEnergies has ever undertaken and we now have a portfolio of over 10 GW of offshore wind projects, a technology in which we aim to be a world leader by leveraging our offshore expertise.”

Alla Weinstein, CEO of Castle Wind, commented on the joint venture. “We have come a long way since first identifying the opportunity for offshore wind development in California in 2016 and stand today at the precipice of a generational opportunity to secure California’s clean energy future. We are excited to begin the next chapter of this journey. TotalEnergies’ experience and expertise, with over 10 GW of offshore wind projects under development, will be invaluable as we work toward making offshore wind a reality in California.”

A company release said, “TotalEnergies has been a long-time renewable energy player in California as the majority shareholder of San Jose-based SunPower since 2012.

In February 2022, TotalEnergies purchased SunPower Corp.’s Commercial & Industrial Solutions business, integrating the team of nearly 300 and further enhancing its footprint in the solar industry. The company has offices in San Francisco and Los Angeles.”

There are other big, transformed oil companies ready to bid on the California leases as well, including Norwegian-owned Equinor, which has other leases off the Atlantic coast, and Dutch-owned Shell, partner in two winning NY auction leases, among others.

According to a 2016 study from the National Renewable Energy Laboratory, California has more than 158,000 GW of wind-energy capacity off its shores. Floating wind energy technology is gaining interest because water depths here drop off rapidly, making most federal and state waters too deep for fixed, bottom-mounted turbines.

John Lindt is the editor of the news site Sierra2theSea.net.

This story was originally published March 15, 2022 at 9:00 AM.