Wind developers bid $93M for mid-Atlantic — blowing off Trump 2.0 threat

The Biden administration notched a much-needed win on Wednesday in its bid to bolster the offshore wind power industry, despite the industry’s recent setbacks and the threat of former President Donald Trump’s return.

An Interior Department auction to lease federal waters for wind projects off the coasts of Delaware, Maryland and Virginia drew nearly $93 million in bids — an amount that appeared to quell nerves about the industry’s ability to withstand its political and economic headwinds.

The U.S. offshore wind industry plays a central role in President Joe Biden’s targets to cut carbon emissions from the power sector and stave off the worst effects of climate change. But the nascent industry has been plagued by rising costs, supply chain constraints, worrisome accidents and the risk that Trump, who has spent years attacking wind power, could undermine its progress.

“Despite the electoral uncertainty in the future, these are strong signals of confidence and continued interest in this market,” said Sam Salustro, senior vice president of policy for the Oceantic Network, an offshore wind industry group.

The $93 million is far less than the massive $4.4 billion that the Interior Department’s Bureau of Ocean Energy Management had received in a 2022 auction for the prime lease locations near New York and New Jersey. But that price hasn’t paid off for some of the developers, whose tentative agreements with New York were scrapped earlier this year . Others have secured contracts with New Jersey and are moving ahead.

But it was far more successful than auctions in the Gulf of Mexico. BOEM last month canceled a sale there due to lack of interest, and an auction in 2023 drew less than $6 million for a portion of the leases on offer.

The Biden administration set a goal to deploy 30 gigawatts of offshore wind energy capacity by 2030 — a target it is widely expected to miss . But the administration has remained bullish, approving nine commercial scale offshore wind projects under Biden and announcing plans to hold up to 12 offshore wind lease sales over the next five years.

The lease areas in Wednesday’s auction could generate as much as 6.3 gigawatts of power — or enough for up to 2.2 million homes.

While Vice President Kamala Harris is expected to carry Biden’s mantle on offshore wind, Trump has been vocally hostile to it , prompting concern that he could derail Democrats’ plans.

Trump has already pledged to sign an executive order “on Day One” targeting the offshore wind industry if he is elected to a second term.

Trump’s disdain for wind power stretches back to his fight against an offshore development in Scotland that he contended in legal challenges would spoil the views from a golf course he owns nearby. The U.K. Supreme Court rejected his claims in 2015, but the GOP presidential nominee has kept up his attacks on wind power, falsely claiming wind turbines don’t work, destroy property values, cause cancer and kill whales.

Even without Trump’s opposition, the offshore wind sector in the United States has struggled to get its footing, with developers canceling major planned wind farms off the coasts of New Jersey last year . The pandemic squeezed supply chains, driving up prices, and inflation made the contracts that wind developers signed to deliver electricity untenable.

Last month, a wind turbine at the massive Vineyard Wind development off Massachusetts saw a blade snap, sending shards into the waters and prompting the brief closure of beaches of Nantucket Island. The event has emerged as fodder for offshore wind opponents and left the local community with major questions.

Biden’s 2022 climate law, the Inflation Reduction Act , delivered new federal support to help the industry, but experts said Wednesday’s robust auction results owed just as much thanks to the states where the new developments would be sited.

Tim Fox, vice president at advisory firm ClearView Energy Partners, said Wednesday’s auction results “reinforce” the importance of state-led offshore wind actions and could suggest private developers may be looking further down the road than the next four years.

“This bidding could suggest that some project developers view the potential risks associated with a return on the Trump administration as overdone,” Fox said before Wednesday’s results — adding that it could also reflect the recent momentum of Harris’ presidential campaign.

The Central Atlantic lease sale comprised two areas of roughly 277,000 acres off the coasts of Delaware, Maryland and Virginia. It resulted in two provisional winners and $92.65 million in winning bids.

That drew a welcome response from the White House.

“Today’s lease sale reflects the forward momentum we are seeing to power millions of American homes with clean energy and create good-paying, climate jobs,” Ali Zaidi, Biden’s top climate adviser, said in a statement.

Equinor Wind US, a unit of Norway’s state-owned energy company, provisionally won acreage about 26 nautical miles from Delaware Bay with a bid of roughly $75 million, and a unit of Dominion Energy provisionally won acreage 35 nautical miles from the entrance of Chesapeake Bay with a winning bid just under $17.7 million.

Pål Eitrheim, executive vice president of Equinor Renewables, said the announcement “underscores” Equinor’s commitment to delivering value through renewable energy projects. “This is a long-term option with first power post 2035,” Eitrheim said in a statement.

Seventeen companies had initially qualified to participate in the sale and six companies ultimately participated in the auction.

Those bids are also buoyed by state-level targets. Maryland is targeting 8.5 gigawatts of power by 2031 and Virginia set a 5.2-gigawatt target by the mid 2030s. Delaware’s legislature passed a bill awaiting the governor’s signature that would enable an offshore wind solicitation to procure up to 1.2 gigawatts.

The auction — the first for the region in a decade — “continues movement in the right direction” for U.S. offshore wind deployment and in the mid-Atlantic, said Sarah Giltz, the director of offshore wind for the labor-environmental advocacy group called the BlueGreen Alliance,  in a statement Wednesday.

One of the areas auctioned Wednesday, offshore Delaware and Maryland, consists of roughly 101,400 acres, while the area off Virginia consists of 176,500 acres.

The results Wednesday equate to roughly $100 per acre off the coast of Virginia, while the other area earned roughly $740 per acre. That falls short of the high-level bids seen in earlier auctions under Biden — although the economics and market dynamics of the industry have changed significantly since then.

“The lead-up to those other leases was a time of really unfettered optimism,” said Salustro. Since then, he noted, there’s been market corrections both locally and globally, making it largely “unfair” to compare earlier prices with pricing today.

A lease sale for the New York waters in 2022 — the first under Biden — raked in a record $4.4 billion , while a West Coast sale saw $757 million and sites off the Carolinas, which are near Wednesday’s areas, garnered more than $300 million .

Still, the bidding levels Wednesday exceeded last year’s first-ever Gulf of Mexico offshore wind lease sale, which received lackluster interest , with one lease area of the three that were offered receiving a winning bid of $5.6 million.

“I would argue there’s still momentum for the industry,” ClearView’s Fox said. “It’s just more cautious after the material setbacks witnessed in recent years and the continuation of the macro-economic pressures.”

Erik Milito, the president of the National Ocean Industries Association, which represents both the offshore oil and gas and wind industries, said the lease area in Maryland and Delaware “saw a substantial increase in bid amounts, multiplying several times over compared to a decade ago ,” while the lease area offshore Virginia fetched significantly higher prices than similar leases .

“However, Washington needs to do more to maintain this momentum,” he said in an emailed response. He noted that this is the first year without a federal offshore oil and gas lease sale since 1958 and that after December, the Interior Department cannot hold any more offshore wind lease sales until another offshore oil and gas sale is held — thanks to a provision in Democrats’ climate law

“The current leasing reality is begging for a Congressional fix to provide much-needed regulatory certainty and normalcy for both offshore oil and gas and wind lease sales,” he said.

Marie French contributed to this report.