This article summarizes the latest developments in the U.S. offshore wind market and then reviews some of the troubling waters ahead.
On February 25, 2022, the Bureau of Ocean Energy Management (“BOEM”) announced the results of its mega offshore wind sale of six leases totaling over 488,000 acres in the New York Bight—the first sale in the Biden-Harris administration, which is committed to 30GW of offshore wind by 2030. The results from the auction lasting over three days were over four billion dollars. The provisional winners are:
- OCS-A-0537 – Ocean Winds East, LLC – $765M;
- OCS-A-0538 – Attentive Energy, LLC – $795M;
- OCS-A-0539 – Bight Wind Holdings, LLC – $1.1B;
- OCS-A-0541 – Atlantic Shores Offshore Wind Bight, LLC – $780M;
- OCS-A-0542 – Invenergy Wind Offshore LLC – $645M; and
- OCS-A-0544 – Mid-Atlantic Offshore Wind LLC – $285M.
This sale represents the very serious interest that developers—and states—are taking in offshore wind, gambling that the permitting process will go smoothly.
Other BOEM Activities
Prior to this sale, BOEM had awarded a total of 18 leases for offshore wind off the Atlantic Seaboard of the United States. Most of the leases have gone to European developers with experience in offshore wind, e.g., Ørsted, Avangrid Renewables, Copenhagen Infrastructure Partners, Equinor, EDF, Shell, and BP. And more leases are in the offing. Secretary of the Interior Deb Haaland announced in October 2021 that her department, the DOI, would issue seven new offshore wind leases by 2025 in the Gulf of Maine, New York Bight, Central Atlantic, and the Gulf of Mexico, plus offshore the Carolinas, California, and Oregon, in order to meet the president’s goal. (See Secretary Haaland Outlines Ambitious Offshore Wind Leasing Strategy.)The DOI also plans to review at least 16 construction and operation plans (“COPs”) by 2025.
Leasing is the first step in the lengthy permitting and review process that BOEM undertakes, from identifying Wind Energy Areas on the outer continental shelf (“OCS”) to site assessments and through the extensive environmental review process under the National Environmental Policy Act (“NEPA”).
Off the coast of California, BOEM has designated two new wind energy areas, and public meetings have begun. (See California Activities.) In January 2022, BOEM also announced that it has begun a draft Environmental Assessment (“EA”) to consider potential offshore wind leasing in the Gulf of Mexico. (See Gulf of Mexico Activities.) The draft EA will be completed this summer. For the Mid-Atlantic Region, BOEM has created a new Central-Atlantic Intergovernmental Renewable Energy Task Force from offshore Delaware to Cape Hatteras, North Carolina. (See Central Atlantic Activities.)
Construction has begun off Long Island for the South Fork wind project—one of the largest offshore wind projects in the United States—being developed by Ørsted. Last year, BOEM approved the COP for the Vineyard Wind Project, which consists of 62 wind turbines south of Martha’s Vineyard; work on the cable laying has already begun. BOEM is also reviewing the COP for the 176-turbine Coastal Virginia Offshore Wind (“CVOW”) project off the coast of Virginia. The review and approval of the CVOW project is pending with the State Corporation Commission, since the lessee is a regulated utility under state law.
Recent State Activities
States are making extensive financial commitments to port projects that will support offshore wind. For example, New York Governor Kathy Hochul announced $500 million for offshore wind development and said the state would launch its next offshore wind energy procurement this year. (See New York Bight.) New York City Mayor Eric Adams committed to turning the South Brooklyn Marine Terminal into a new wind energy hub. (See Mayor Adams Announces Agreement to Transform South Brooklyn Marine Terminal.)
In New Jersey, the Board of Public Utilities is working to support Governor Phil Murphy’s clean energy goals of 7,500 MW of offshore wind energy by 2035 and has already awarded two major wind projects: one to EDF/Shell’s Atlantic Shores Offshore Wind and the other to Ørsted’s Ocean Wind II project, bringing the state’s total planned capacity to over 3,700 MW of offshore wind. (See Offshore Wind.) New Jersey is also working with PJM to integrate offshore wind into the Mid-Atlantic grid, but issues remain (see below).
In March 2021, Massachusetts Governor Charlie Baker signed comprehensive climate change legislation that increased the administration’s authorization to solicit an additional 2400 MW of offshore wind, bringing the state’s total commitment to 5600 MW. (See Baker-Polito Administration Announces Historic Selection of Offshore Wind Projects to Bring Clean, Affordable Power to the Commonwealth.) And in February 2022, Spanish developer Iberdrola announced its commitment to invest more than $10 billion in the development of three offshore wind complexes in the state.
On the other hand, we understand that newly elected Virginia Governor Glenn Youngkin would prefer to repeal the Virginia Clean Economy Act, which set a specific goal of 5200 MW of offshore wind to be in the public interest. So far, the Democratic-controlled Senate has blocked this, according to Virginia news reports.
States are also providing incentives for local suppliers and manufacturers. For example, Siemens Gamesa has committed to constructing a blade turbine finishing facility in the Port of Hampton Roads, VA. (See Global Leadership Grows: Siemens Gamesa Solidifies Offshore Presence in U.S. with Virginia Blade Facility.)
Use Conflicts and Potential Delays
While these aforementioned steps are very positive and will help the Biden administration meet its stated goal, there are strong opposing winds blowing from the commercial fishing community and adjacent property owners. For example, the Responsible Offshore Development Alliance (“RODA”), which represents commercial fishermen, filed a complaint on January 31, 2022, in the U.S. District Court for the District of Columbia, challenging BOEM’s approval of the Vineyard Wind project on the basis of alleged violations of multiple environmental laws, including NEPA, the Marine Mammal Protection Act (“MMPA”), the Endangered Species Act, and the Clean Water Act. RODA has been opposed to the siting of the Vineyard Wind project almost from the outset, on the basis that the distance between the platforms will interfere with their commercial fishing grounds. The distance was set by BOEM on the basis of the Coast Guard’s recommendations at 1 n.m. between platforms. But even the final BOEM Environmental Impact Statement (or EIS) admits to interference with fishing operations. The case could be heard later this year.
BOEM is well aware of the problems posed by fishing conflicts and is developing a series of guidelines for developers to try and ameliorate these issues. (See Fishing Industry Communication and Engagement.)
Residents of Nantucket have also sued BOEM over the Vineyard Wind project again, on the basis of the MMPA and its protection of the Atlantic Right Whale. This lawsuit evokes the strong opposition by neighbors to the earlier Cape Wind project, which was delayed for years by the “Not in My Backyard” (“NIMBY”) syndrome and other factors as well. In the meantime, BOEM is trying to address the right whale problem as well as the fishing issues, noted above.
Lack of Turbine Installation and Other Construction Vessels
As ABS has documented, there is a paucity of large construction and installation vessels to support the nascent offshore wind industry in the United States. (See ABS Report Highlights U.S. Offshore Wind Vessel Design, Safety Regulations.) To date, only one turbine installation vessel (“TIV”) is being built in the United States, and this is the TIV that Dominion Energy Virginia and a consortium is having built in the Keppel AmFELS Yard in Brownsville, Texas. At the same time, there is an increase in Jones Act support vessels being built. For instance, Blount Boats is building four crew transfer vessels for American Offshore Services over the next two years. (See American Offshore Services to build four CTVs at Blount.) In the meantime, the United States will need to use foreign-flag TIVs and other vessels in order to meet the demands of both the growing offshore wind industry and Biden administration goals. Efforts by some in Congress to force crewing changes on the foreign-flag vessels that are badly needed to support growth in the U.S. offshore wind industry should be watched closely.
Permitting and NEPA Delays
It takes at least two years from the leasing stage to the final approval stage for major offshore wind projects. BOEM has tried to expedite this process by using the FAST-41 permitting process. Under FAST-41, a lead agency is designated to coordinate the permitting and NEPA process for major infrastructure projects. (See Title 41 of the Fixing America’s Surface Transportation Act (FAST-41).) With recent court developments challenging the Biden administration’s use of climate change factors in its rulemakings and NEPA analyses, uncertainty continues to hang over the permitting processes. What looked to be a form of expedited permitting could in fact result in further permitting delays.
Extension of Tax Credits Uncertain
The Biden administration proposed that its Build Back Better Plan include a number of clean energy tax credits, notably an extension of the Production Tax Credit and the Investment Tax Credit used by wind developers. While the House passed this plan, the Senate has so far refused to take it up. This adds to the uncertainty of the financial viability of new and proposed OSW projects.
Can the Grid Handle This Expansion of Renewable Energy?
According to a recent report in Reuters, PJM, which serves the Mid-Atlantic Region, is closing off any new projects for the Mid-Atlantic grid for the next two years. (See Reforms in Largest U.S. Grid Set to Send Solar, Wind Builders Elsewhere.) This will certainly stymie getting this source of clean energy to consumers all up and down this region.
The recent New York Bight Lease Sale is producing enormous financial results to the U.S. Treasury, which bodes well for the future of offshore wind in the United States and leads the Biden administration closer to its 30GWgoal. If the administration and developers can facilitate an amicable resolution of the pending fishing and other use conflicts, continue to use a combination of Jones Act and foreign-flag vessels, and expedite the permitting process without undermining NEPA and other environmental laws—a tough challenge, no doubt—they will be on their way to meeting the Biden administration’s goal of bringing clean energy to U.S. consumers.