Massachusetts, USA -- The U.S. Bureau of Ocean Energy Management held its fourth offshore wind lease auction yesterday, but unlike the action seen in auctions past, the event was much more subdued. The auction consisted of a massive parcel of land — 742,000 acres, divided into four parcels — off the coast of Massachusetts near the island of Martha’s Vineyard.
Only two of the registered ten bidders showed up. RES America Inc. purchased a 187,523-acre parcel for $281,285, while Offshore MW LLC purchased 166,886 acres for a mere $166,886, the remaining two parcels were left without bidders.
The purchase price here is a massive drop from previous auctions, which have been held within the past two years. Deepwater Wind won the first auction in 2013, where it bought 164,000 acres for $3.8 million, and in August 2014, US Wind purchased an 80,000-acre parcel for $8.7 million. So, US Wind paid more than $100 per acre, while RES America and Offshore MW paid less than $2.00.
This new hesitation may be due in part to the new-found struggles of the Cape Wind project, which was set to become the first U.S. offshore wind project this year before contract struggles announced in early January.
After nearly 15 years of planning, two utilities dropped their power purchase agreement (PPA) contracts with the project, citing missed finance and construction deadlines. Just last week, the Boston Globe reported that Cape Wind dropped contracts that were meant to provide assembly areas for workers and turbine components. Cape Wind officials say that these missed deadlines stem from years of heavy legal burdens brought on by protest groups, particularly the Alliance for Nantucket Sound, which is supported by the vocal Bill Koch.
However, BOEM Director Abigail Ross said that Cape Wind should have not had any influence on the auction. “We knew that developing an offshore wind facility in these areas is going to be more expensive…As a result, we set the minimum price for the bids lower than for the other states. We’re happy with the results of this auction,” said Ross. “The recent activity at Cape Wind shouldn’t be read as any indicator of what happened at [the] auction.”
Despite the dropped contracts, Cape Wind is still fighting to keep its project alive. However, many other companies are sticking to the onshore market, which added more than 4.7 gigawatts of capacity in 2014 alone, and is expected to have a strong 2015 due to an “under construction” provision in the production tax credit (PTC). However, continued success may ride on Congress extending tax credits, which is very uncertain.
The future of U.S. offshore wind also remains uncertain, with many other projects facing legal battles, like the Fishermen’s Energy project off the coast of Atlantic City, New Jersey. While it has U.S. Department of Energy support, it is still fighting legal battles with the state’s Board of Public Utilities (BPU). However, Deepwater Wind, located off the coast of Rhode Island, a project that was racing with Cape Wind for the honor of becoming the first U.S. offshore wind project, is still going strong. It is expected that construction will begin on that project this summer.
Lead image: Bidding via Shutterstock