Morro Bay offshore wind leases will be up for bid soon — and they start at $8 million each 

Exactly how will wind energy areas off the coasts of San Luis Obispo County and Humboldt County be leased to commercial developers?

The U.S. Department of the Interior announced its proposed parameters for floating offshore wind farm leases in those areas on Thursday.

The proposed sale notice explains that the U.S. Bureau of Ocean Energy Management (BOEM) expects to offer three leases in the Morro Bay wind energy area, a 376-square-mile section of the Pacific Ocean located northwest of Morro Bay and west of San Simeon and Cambria.

Each of the leases will encompass a little more than 80,000 acres, according to the proposed sale notice.

The 206-square-mile Humboldt wind energy area will be split into two leases of about 63,000 and 69,000 acres, the proposed sale notice says. That wind energy area is located off the coast of Humboldt Bay near Eureka and Arcata.

“The demand and momentum around our work to build a clean energy future is undeniable. The Biden-Harris administration is moving forward at the pace and scale required to help achieve the president’s goals to make offshore wind energy a reality for the United States,” U.S. Secretary of the Interior Deb Haaland said in a prepared statement. “Today, we are taking another step toward unlocking the immense potential of offshore wind energy offshore our nation’s West Coast to help combat the effects of climate change while creating good-paying jobs.”

Should both of the wind energy areas be fully developed, 4.5 gigawatts of electricity could be produced at peak production – about 3 gigawatts from the Morro Bay area and 1.5 gigawatts from the Humboldt area.

A lease sale auction for both of the wind energy areas is expected to happen this fall.

“Today’s action represents tangible progress towards achieving the administration’s vision for a clean energy future offshore California, while creating a domestic supply chain and good-paying union jobs,” BOEM Director Amanda Lefton said in a prepared statement Thursday. “BOEM is committed to robust stakeholder engagement and ensuring any offshore wind leasing is done in a manner that avoids or minimizes potential impacts to the ocean and ocean users.”

Lefton added that the proposed sale notice “provides another opportunity for local communities, tribes, ocean users, developers and others to weigh in on potential wind energy activities offshore California.”

U.S. Rep. Salud Carbajal (D-Santa Barbara) applauded the announcement of the proposed lease and noted that it comes after years of collaboration with local, state and federal entities.

“Offshore wind holds incredible promise as a means to tackle climate change, and will serve our environmental, clean energy, national security, and economic prosperity goals for generations to come,” the Central Coast congressman said in a prepared statement. “The proposed sale in Morro Bay will help secure the Central Coast’s dominance as a renewable energy powerhouse, which will attract new businesses and good paying, future-oriented jobs in a burgeoning sector of the economy.”

Developers could pay less to lease ocean space for wind energy

According to the proposed sale notice, potential developers will be granted “bidder credits” that will result in paying a lower fee to lease ocean space for the massive floating wind turbines.

For example, a developer can receive up to 20% off their winning bid in exchange for its substantiated financial commitment to supporting workforce training programs or supply chain initiatives for the offshore wind energy development, the proposed sale notice says.

Developers can also receive a 2.5% bidding credit if they show they’ve established a “community benefit agreement” with those who use the ocean space expected to hold the offshore wind energy development, according to the proposed sale notice.

This includes the local fishing industry, which has voiced clear concerns over how the proposed offshore wind energy development may hurt business.

Those agreements should specify any compensation the offshore wind energy developer may provide to the impacted businesses and indicate how it intends to resolve or mitigate any impacts.

The proposed sale notice says that lessees of the wind energy areas must engage with Native American tribes, underserved communities, ocean users and local agencies.

The Morro Bay wind energy area is directly adjacent to the proposed Chumash Heritage National Marine Sanctuary, and the proposed sale notice indicates that “implications for development” will likely arise as a result.

Energy companies to place their bids

A total of 23 commercial developers are qualified to participate in the lease sale. These include Castle Wind LLC, Avangrid Renewables, Equinor Wind US LLC, Orsted North America and Shell New Energies US LLC.

Other entities who wish to participate in the proposed lease sale may still indicate their interest within the next 60 days.

Each entity may only bid for one lease per wind energy area, according to the proposed sale notice.

BOEM will have measures in place to ensure a company cannot bid against any of its subsidiaries or affiliates to avoid a monopoly in the bidding arena.

The qualified bidders much each pay a bid deposit of $5 million to bid for one lease area, or $10 million for two, according to the proposed sale notice.

BOEM has proposed a minimum bid of $100 per acre for the leases, the proposed sale notice says. For the smallest Morro Bay wind energy area lease, the starting bid is slightly more than $8 million.

The proposed sale notice will publish in the Federal Register on May 31, which then kickstarts a 60-day public comment period.

BOEM is seeking feedback on the size and number of the proposed lease areas, the bidding credits, how the turbines should be laid out, the underserved community engagement requirements and more.

After the public comment period is complete, BOEM will take into account the feedback and then publish a final sale notice for the lease areas.

BOEM is still conducting an environmental assessment analyzing the potential impacts site surveys may have on the Morro Bay wind energy area. That must be completed before the final sale notice is published.

To date, BOEM has held 10 competitive lease sales and has issued 25 active commercial offshore wind leases in the Atlantic Ocean from Massachusetts to North Carolina. The California lease sale will be the first in the Pacific region.