The desire to enter the ground floor of offshore wind development in the United States is at an all-time high. Following President Biden’s announcement of a target to produce 30 gigawatts of offshore wind power by 2030 and an incentive tax credit for offshore wind farms beginning construction by 2025, the demand for government leases of offshore space to develop wind energy is now skyrocketing. and created an emerging new green energy sector. Following the announcement, auction bids for those leases rose exponentially, reflecting a rush for new investment by wind developers, many of them European.
In February 2022, the Bureau of Ocean Energy Management held an auction for New York Bay leases for offshore wind energy development, which ultimately totaled winning bids of $4.37 billion, nine times the amount paid at the last offshore wind auction. energy leases just four years ago. The very competitive auction prices have since proven to be not limited to New York Bay. The demand has since continued until May 2022, when TotalEnergies and Duke Energy won an auction of 110,091 acres in Carolina Long Bay for a combined lease price of $315 million.
Analysts agree that it doesn’t look like the demand for government leases for wind power development in the United States will decline any time soon. Although there may be a limited amount of space and leases available for traditional turbines, the development of floating turbines creates an exciting new opportunity to increase development capacity in areas further offshore that were not previously considered useful for production. Given the potential for higher winds in areas farther from the coast, the advancement of floating turbines is likely to help meet demand from developers looking to enter this new developing market.
This sudden increase in demand for offshore wind power development leases is expected to have not only economic benefit, but also environmental benefit. It is expected that the effort to meet offshore wind development targets will create a large number of jobs, which should continue to encourage development and push up the price of leases, while eliminating many of the environmental concerns associated with the offshore drilling.
However, the increase in demand for leases is not without its share of obstacles and criticism. The increase in the cost of leases for developers should be largely passed on to consumers. As a result, some states may decide to limit developers’ ability to do so, which may cause developers to think twice about the long-term profitability of increasing their offerings. Some critics also cite some environmental concerns with the development of offshore wind energy in that it could disturb the ocean. Nonetheless, competition for leases and the inflated cost of entering the offshore wind power market indicate that bidders anticipate strong economics for these projects.
© 2022 Foley & Lardner LLPNational Law Review, Volume XII, Number 157