The first auction for leases to build massive wind farms off California’s coast netted bids reaching $402.1 million today, signaling the beginning of a competitive market for a new industry producing carbon-free electricity.
The auction — the first on the West Coast — includes five sites about 20 miles off Morro Bay and Humboldt County, totaling 583 square miles of deep ocean waters. The leases from the federal government are the first step in a years-long regulatory process that could culminate in the nation’s first commercial-scale floating wind turbines off California’s coast.
After 20 rounds of bidding, today’s top bid stood at $100.3 million for a 125-square-mile area off Morro Bay, while the lowest leading bid so far is $62.7 million for a 98-square-mile area off the coast of Humboldt County.
Bidding will resume on Wednesday at 7 a.m and winners will be released that afternoon.
So far, the total bids are considerably smaller than the record-breaking $4.37 billion paid for six offshore wind leases off New York and New Jersey’s coasts in February. That was the largest amount ever paid for U.S. offshore energy leases — including for oil and gas. The funds are paid into the U.S. Treasury’s General Fund.
The results of the auction offer the first key signs for gauging how strong the market is for producing offshore wind energy off California. Forty-three companies, including industry leaders like the Danish company Ørsted, are eligible to bid on the leases offered by the U.S. Bureau of Ocean Energy Management, which oversees offshore energy and mineral projects.
The offshore waters included in the auction have the potential to host several hundred turbines that produce more than 4.5 gigawatts to power about 1.5 million homes.
Offshore wind projects are considered critical to meeting California’s goals to provide a new source of electricity, end reliance on fossil fuels and battle climate change.
“Today’s auction is great news for California’s offshore wind industry, workers, and electricity ratepayers,” said Adam Stern, executive director of Offshore Wind California, a trade group for industry developers and technology companies. “It’s the most consequential milestone yet for the Golden State’s efforts to make offshore wind a key part of its diverse clean energy future.”
Offshore wind turbines work similarly to land-based ones. Wind makes the turbine's blades spin around a rotor, which then turns a generator to produce electricity. The turbines send energy through cables under the seabed to an onshore substation, where the energy is converted to a higher voltage before being fed into the grid that provides electricity.
California’s offshore wind farms would be the first in the country constructed with floating platforms at a large scale. Europe has long been a leader in developing offshore wind technologies, including a few existing floating offshore wind farms.
The first offshore wind turbines in the U.S. are rooted to the sea floor in relatively shallow waters on fixed structures, which are unsuitable for deep waters. California’s floating turbines, however, will be located about 20 miles offshore and will need to be anchored by cables that reach to the ocean floor at depths of several thousand feet.
To date, the federal government has held ten competitive lease sales and issued 27 commercial wind leases in the Atlantic Ocean, spanning from Massachusetts to North Carolina, according to the U.S. Bureau of Ocean Energy Management.
The two offshore wind farms operating in U.S. waters are capable of generating a combined 42 megawatts of electricity. The country’s first offshore wind project, off the coast of Rhode Island, launched in 2016 with five turbines, followed by a project in Virginia with two turbines. More projects are on the way, including off the coasts of Massachussetts, New York and New Jersey.
Building and operating the nation’s new offshore wind industry will be worth $109 billion to supply chain businesses over the next 10 years, according to one report.
Costs for launching offshore wind projects have decreased by as much as 60% since 2010, according to a July report from the International Renewable Energy Agency. The cost of producing the energy in the U.S. averages about $84 per megawatt-hour, more than most other types of energy, according to the U.S. Department of Energy.