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California wind auction exceeds $700m, winners revealed

Offshore wind turbines

The provisional winning bids for the first offshore wind auction held on the US’ west coast totaled more than $700 million on December 7.

The US Department of the Interior (DOI)’s Bureau of Ocean Energy Management’s (BOEM) wind energy auction for offshore projects in California is the third major offshore wind lease sale this year and the first ever for the Pacific region.

Today’s sale drew competitive high bids from 5 companies totaling $757.1 million, from a total of 43 accredited bidders showing that interest was once again strong as momentum for US offshore wind gathers speed. Back in February, the BOEM’s New York Bight auction drew winning bids totaling $4.3 billion from 6 winning companies.

BOEM’s lease sale offered five lease areas covering 373,268 total acres off central and northern California. The leased areas have the potential to produce over 4.6GW of offshore wind energy.

The lease sale included a 20% 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 US domestic supply chain for the floating offshore wind energy industry, or both. The auction also included 5% credits for bidders who committed to entering community benefit agreements.

The winners were:

· RWE Offshore Wind Holdings - $157,700,000   

· California North Floating - $173,800,000 

· Equinor Wind US - $130,000,000  

· Central California Offshore Wind - $150,300,000

· Invenergy California Offshore - $145,300,000 

“The US West Coast is one of the most attractive growth regions for floating offshore wind in the world due to its favorable wind conditions and proximity to markets that need reliable, clean energy,” said Molly Morris, president of Equinor Wind US. “The US is a key market for Equinor’s offshore wind activities and one where we aspire to be a leader in growing this new energy industry.”

Equinor’s winning lease will be added to Equinor’s existing US portfolio – which includes the Empire Wind and Beacon Wind projects on the US Northeast coast – and has the potential to generate a total capacity of at least 2 GW of renewable power for the West Coast.

The biggest standalone lease was picked up by Copenhagen Infrastructure Partners (CIP) through its fund CI IV and its affiliate California North Floating. Since entering the US offshore market in 2016, CIP has built a position in offshore wind through its affiliate Vineyard Offshore.

This includes Vineyard Wind 1, the US’ first commercial scale offshore wind project which is currently under construction, as well as two lease areas under development totaling approximately 5GW off the coast of Massachusetts and New York.

“The future of offshore wind is floating, and we are proud to have taken this first important step in building an attractive floating offshore pipeline off the US West Coast,” CIP Senior Partner Torsten Smed said.

Ocean Winds (OW) and Canada Pension Plan Investment Board (CPP Investments) teamed up on a newly formed offshore wind joint venture Golden State Wind on their winning bid. Golden State Wind’s winning bid, through affiliate Central California Offshore Wind, was $150.3 million, with OW and CPP Investments each maintaining a 50% investment in the project.

“OW currently has about 4GW of projects already under active development in the Northeastern US, and this is the perfect opportunity to further expand our portfolio and contribute to the Federal Government’s ambitious floating offshore wind targets,” Michael Brown, the chief executive of Ocean Winds North America, said. “We are pleased to partner with CPP Investments on this project and believe this will be the start of a strong relationship that may extend to future projects in other geographies.”

Due to the capital intensity of these offshore projects many of the same bidders for earlier offshore wind auctions reappeared in similar clubs as before. So far more than half of the US offshore projects under development are owned (or were once owned) through a joint venture arrangement.

Legal sources have said this structure is even more likely at the earliest stages. Traditional bank financing may be difficult to place as some early-stage projects may not yet have offtake arrangements, all the while financing is needed for BOEM lease payments (due around 45 days after an auction), design and permitting expenses, and more.