An Italian renewable-energy company won the rights to develop offshore wind projects in nearly 80,000 acres of Atlantic waters off Maryland’s coast with an $8.7 million bid Tuesday.
The U.S. Bureau of Ocean Energy Management declared US Wind Inc. the provisional winner of a daylong auction for a pair of federal leases 10 nautical miles offshore, where federal officials say enough turbines could be placed to power 300,000 homes. US Wind is an offshoot of Renexia, the renewable-energy arm of Italian construction giant Toto S.p.A.
Construction remains years off and still faces significant financial and regulatory hurdles. Though there are dozens of offshore wind energy projects in Europe, none has started construction in the United States.
But federal officials said the auction showed that efforts by the Obama administration and Maryland to stimulate an offshore wind industry are bearing fruit. US Wind’s bid surpassed the high bids in two previous auctions to lease waters off Massachusetts and Virginia for wind projects.
Interior Secretary Sally Jewell issued a statement calling the outcome “a major achievement,” and Gov. Martin O’Malley said the auction moves Maryland’s efforts to develop clean energy “one step closer to reality.”
Aaron Smith, an analyst with the National Renewable Energy Laboratory in Golden, Colo., suggested that the ratepayer subsidies for offshore wind that O’Malley pushed through the General Assembly last year prompted the more intense bidding for leases along Maryland’s coast.
Under the legislation, the state is offering a subsidy of up to $1.7 billion for construction of a 200 megawatt project. If the project developer meets state conditions, residential customers would pay up to $1.50 a month and businesses up to 1.5 percent more on their power bills once turbines are built and running. Though the subsidy would underwrite only a fraction of the development the offshore leases could accommodate, it was a substantial inducement, supporters contend.
“This is the first auction where there’s been a revenue stream provided by the state for the winning bidders,” said Jim Lanard, founder and former president of the Offshore Wind Development Coalition, an industry group.
He praised O’Malley and Maryland lawmakers for pressing ahead with the subsidies, despite criticism and doubts.
“The rest of the country should take note as Maryland moves forward to secure a clean-energy future and the associated jobs, health and climate benefits that will come with it,” said Mike Tidwell, head of Chesapeake Climate Action Network, an environmental group that pressed for state offshore wind subsidies.
The bids for Maryland’s offshore wind leases did nothing to soften opponents’ views, however. Rep. Andy Harris, a Maryland Republican, said through a spokesman that offshore wind is one of the most expensive ways to generate electricity and “forcing families to pay more for energy is exactly the wrong policy.”
Though 16 companies had qualified to bid for Maryland’s offshore wind leases, only three participated. US Wind, Green Sail Energy LLC of New Jersey, and SCS Maryland Energy LLC, which is based in Severna Park.
The three companies competed in a bidding war for the two leases, and combined offers for both reached $10.6 million by late Tuesday afternoon. But under the auction rules, federal officials declared US Wind the winner – with a $2 million lower combined bid – after the company made the only offer in the 19th round of bidding.
Michael Miller, president and chief operating officer of SCS Maryland Energy, said he didn’t understand the outcome and hoped to be able to review the bidding, which federal officials said would be publicly disclosed within days.
“There’s a missing piece or two that I don’t have,” he said.
The auction won’t be final until the Justice Department and the Federal Trade Commission have reviewed it for compliance with antitrust laws. After that, the winning bidder will have 10 days to sign and return the leases, file required financial assurance documentation and pay the balance of the winning bid. The winner must also begin paying the federal government annual rent of $3 per acre, for a total of $239,121 on the two leases, according to bureau officials.
The winner has a year to submit a plan to federal officials for studying the lease areas, then 41/2 years to put together a detailed construction and operations plan. The leaseholder must also apply for Maryland’s offshore subsidy, under rules still being drawn up by the Maryland Public Service Commission.