PROVIDENCE, R.I. – Two more developers are jumping in the water to build offshore wind farms beyond southern New England.
OffshoreMW, the U.S. arm of a German company, and RES Americas, a subsidiary of a British conglomerate, were the top bidders in a federal auction on Thursday for two leases in Atlantic Ocean waters a dozen miles south of Martha’s Vineyard and Nantucket that have the potential to support the production of 2 gigawatts of wind power – enough for 700,000 homes and equal to the combined output of 300 or so of the latest-generation turbines.
The area is out of sight from shore and butts up against the swath of federal waters in Rhode Island Sound where Providence-based Deepwater Wind won development rights for a wind farm of up to 200 turbines. The site of Deepwater’s test project – a five-turbine array near Block Island that aims to be the first offshore wind farm in the nation – is northwest of the waters that were on the auction block Thursday.
OffshoreMW, of Princeton, N.J., and RES Americas, of Broomfield, Colo., were the only companies that bid for leasing rights in the 742,000 acres that make up what’s known as the Massachusetts Wind Energy Area.
Although 12 companies, including Deepwater, qualified for the auction held by the federal Bureau of Ocean Energy Management, the competition – and the winning bids – turned out to be modest because the waters in the area are deep and far from the nearest land and, thus, difficult to develop. While two of the four leases on the auction block sold, two others went unclaimed.
Abigail Ross Hopper, director of BOEM, said the area presents different challenges than those in the three other areas of federal waters on the East Coast that had previously been auctioned off, in Maryland, Virginia and Rhode Island Sound.
“We knew that developing an offshore wind facility in this area would be more expensive,” Hopper said in a news conference. “I’m encouraged that two very experienced developers chose to bid.”
Hopper discounted any negative effect on the auction by the news this month that a pair of Massachusetts utilities had pulled out of power purchase contracts with Energy Management, the Boston company behind the long-delayed Cape Wind project proposed for Nantucket Sound. She said that it was more likely that the physical challenges in the waters were the issue. The starting bids for the leases were intentionally set low because of those concerns, she said.
State programs that support offshore wind development have also played a part in stimulating interest elsewhere, she said. Laws that require utilities to purchase offshore wind power can guarantee revenue and offer certainty to developers. Legislation along those lines in Massachusetts is not in place, but it has been proposed.
“A combination of the water depths and the states’ actions dictate what the prices will be,” Hopper said.
The Massachusetts area is the largest that has gone up for auction. It was divided into four leasing blocks, running north to south. Only the leases in the two northernmost blocks that are closest to the Massachusetts and Rhode Island coasts were sold.
RES Americas won Lease 500, the farthest to the north, with a bid of $281,285. The 187,523-acre section has water depths that range from 118 feet to 200 feet.
“RES America Developments Inc. is pleased to have secured an offshore lease during today’s auction,” CEO Glen Davis said in a statement. “Offshore wind will help advance low carbon electricity generation goals and will create significant new investment and long-term employment opportunities for this region.”
OffshoreMW won Lease 501, just to the south of 500, with a bid of $166,886. Water depths in the 166,866-acre section range from 123 feet to 207 feet.
The company qualified for a 10 percent credit in its bid because of a “community benefit agreement” with Vineyard Power Cooperative, a nonprofit that is developing renewable energy on Martha’s Vineyard. The agreement relates to siting, outreach and, possibly, financing, said Erich Stephens, vice president of OffshoreMW.
He said that a boost to the project was the recent introduction of a bill in the Massachusetts legislature that mandates utilities to solicit bids for offshore wind power.
“We need to have a customer,” Stephens said. “We need to know that if we go through the expense of building an offshore wind farm that we have someone to sell power to.”
Both companies have experience developing offshore projects in Europe. OffshoreMW’s sister company, WindMW, built a 288-megawatt wind farm off Germany last year. RES Americas’ parent company has been involved in projects in the United Kingdom.
The winning bids Thursday were far below those in the three auctions that took place in 2013 and 2014. In the first auction in July 2013, Deepwater paid $3.8 million for rights in the 164,750-acre zone in Rhode Island Sound that can support 1 gigawatt of development. Two other companies participated in that auction, which went to 11 rounds.
That was followed in September 2013 when Dominion, a national utility, paid $1.6 million to develop 112,799 acres that can support 2 gigawatts of wind power. And last August, U.S. Wind, an arm of an Italian corporation, paid $8.7 million for rights to 80,000 acres off Maryland that can support 1.45 gigawatts of capacity.
Energy Management qualified to participate in the Massachusetts auction but did not bid. Its 130-turbine Cape Wind proposal fell into troubled waters after its power contracts were canceled because the company had failed to meet a deadline to secure financing.
Deepwater also did not take part in the auction. A spokeswoman for the company said that’s because it’s focused first on its Block Island project and then the 1,000-megawatt array proposed in federal waters.
“We won the nation’s first competitive offshore wind lease,” CEO Jeffrey Grybowski said in a statement. “Our site is the best in the U.S. It has the best combination of strong winds, buildable water depths, and best proximity to multiple energy markets.”