Only two of four wind energy lease areas in federal waters south of Martha’s Vineyard received bids in an auction today and the sale prices were millions of dollars lower than previous auctions for leases of smaller sizes off other coastal states, according to statements by federal energy officials.
Leaders of the Bureau of Ocean Energy Management (BOEM) expressed a sunny outlook, though, in a conference call to media following the sales.
BOEM put four lease areas up for auction this morning. The areas are collectively known as the Massachusetts Wind Energy Area and cover more than 742,000 acres in federal waters about 12 miles south of Martha’s Vineyard.
BOEM Deputy Director Walter Cruickshank said the 187,523-acre lease area closest to shore sold for $281,285 to Renewable Energy Systems (RES) Americas, and the adjacent 166,886-acre lease area sold for $166,886 to Offshore MW. The other two lease areas, farther from shore, were not bid on, he said.
U.S. Wind paid $8.7 million in August for leases on two areas totaling 79,707 acres off the Maryland coast, according to BOEM data. In September 2013, Dominion Resources paid $1.6 million for a lease on 112,799 acres off the coast of Virginia.
Deepwater Wind paid $3.8 million for two lease areas totaling 164,749 acres in the Rhode Island/Massachusetts Wind Area – adjacent to, and closer to shore than, the areas auctioned today – in BOEM’s first competitive auction of offshore wind development leases, in July 2013.
BOEM Director Abby Ross Hopper said the bureau was “happy with the results of (today’s) auction” and set the minimum bids lower than in previous auctions because of water depth and other factors.
“The Massachusetts Wind Energy Area is located in deeper water than some of our other wind energy areas in other states,” Hopper said. “We knew that developing…in this area was going to be more expensive.”
Hopper said another factor was that, unlike Massachusetts, other states had offered offshore wind credits and other financial incentives to renewable energy developers.
“That obviously has value,” Hopper said, adding that legislation has been introduced in Massachusetts to add incentives for offshore wind, but has not yet been approved.
Cheap oil and gas prices this month also may have deflated interest in wind power ahead of today’s auction. Additionally, the regional wind industry recently took a separate hit to the jaw, when utility giants NStar and Northeast Utilities announced the termination of their contracts to buy wind power generated by Cape Wind in Nantucket Sound, saying Cape Wind failed to meet critical financing milestones.
Hopper denied a connection between Cape Wind and the lack of bids on two lease areas today.
“I think the recent activity at Cape Wind shouldn’t be read as any sort of indicator of what happened in today’s auction,” she said. “I am very encouraged by the fact that two experienced wind developers have won provisional leases in the state of Massachusetts.”
The provisional leases bought today represent less than half of the 742,000 acres that were up for auction.
Cruickshank said the two areas that did not receive bids “are still part of the Massachusetts Wind Energy Area” and the bureau will discuss future options for their use with state agencies.
He said RES Americas and Offshore MW were the only companies that placed bids in today’s auction.
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