Iberdrola wins 1.2GW North Carolina offshore wind zone

Iberdrola-backed Avangrid Renewables submitted a winning $9.06m bid to gain commercial development rights to a potential 1.2GW offshore wind zone facing North Carolina, marking its entrance into an emerging US sector already dominated by European companies.

After 17 rounds, Avangrid made its winning bid, the second highest of the nation’s seven competitive offshore wind lease sales held since July 2013, behind only the $42.5m paid by Statoil last December for a zone south of Long Island.

An Iberdrola spokesperson told Recharge: "It’s without any doubt a very important milestone for Iberdrola’s offshore business since the US coastal conditions are suitable for this technology both in terms of wind resource as well as water depths."

Iberdrola brings more Euro know-how to US offshore

Avangrid's North Carolina win means another European heavyweight joins Dong Energy in the US offshore wind sector. 

Its Spanish parent group Iberdrola has been one of the most enthusiastic investors in offshore wind during a carefully-planned learning curve that will soon see it begin one of Europe's biggest projects.

Iberdrola's journey started with the 389MW West of Duddon Sands off northwest England, developed in conjunction with Dong and switched on in 2014.

The Spanish group is currently well into building its first solo project, the 350MW Wikinger in the Baltic Sea.

And those projects are precursors to what will be one of the industry's flagships of its short history, the $3.5bn, 714MW East Anglia 1 off eastern England that is due to be operating by 2020. 

Iberdrola will also co-develop part of the first wave of French offshore wind farms.

Straight-talking CEO Ignacio Galán recently warned new entrants they could not buy the experience the likes of Iberdrola and Dong have acquired in the sector.

“It’s not so easy to create the capability," he said. "It took us years, it’s not something that you can ready-make for tomorrow.”

Andrew Lee

Units of Statoil and Germany’s wpd, and little-known Wind Future, also participated in the auction held by the US Department of the Interior (DOI) on Thursday. 

A number of developers took steps to qualify for the auction but either dropped out of the running earlier or ultimately chose not to submit bids, including Canada’s Enbridge, PNE Wind, Apex Clean Energy, Canada’s Northland Power and Shell WindEnergy, a unit of Royal Dutch Shell.

It was the first such offshore wind auction in the US since President Donald Trump took office.

The size of Avangrid’s winning bid and number of auction rounds suggests investors see promise for the offshore wind sector under the Trump administration, optimism that was reflected in a statement from new Interior Secretary Ryan Zinke.

"The success of this lease sale reflects the continued interest of coastal communities to develop their offshore energy resources," Zinke said.

"Renewable energy, like offshore wind, is one tool in the all of the above energy toolbox that will help power America with domestic energy, securing energy independence and bolstering the economy. This is a big win for collaborative efforts with state, local, and private sector partners."

Dan Shreve, a partner at MAKE Consulting added: "The successful bid for the Kitty Hawk wind lease by Avangrid provides further evidence that the US offshore wind sector has turned a corner, and despite the rhetoric of the Trump administration, utilities and IPPs are pushing forward a robust renewable energy agenda. 

"The engagement of experienced, well financed, offshore wind developers from the EU speaks volumes, as does the strong pricing of the lease, indicating strong competition in the market.

"Avangrid is seeking to build upon its existing regional track record, following the recent completion of its 208MW Amazon East project. Its local engagement with regional lawmakers, proven offshore track record and supplier relationships greatly increases the likelihood of project success," Shreve added.

Katharine Kollins, president of regional lobbying group the Southeastern Wind Coalition, said: “This auction saw several bidders late into the auction’s rounds, demonstrating the industry’s intense interest in this area. 

“Not only does this lease demonstrate the financial commitment from the industry to developing an offshore wind farm off North Carolina’s coast, it also insures North Carolina’s economy will benefit from the hundreds of millions of dollars in private investment the wind farm will ultimately generate.”

Price factors

The 495.3 sq km Kitty Hawk zone is one of the smaller tracts auctioned thus far, but could potentially hold 1.2GW of capacity given the quality of the wind resource. That said the economic case for developing the North Carolina zone are less compelling than for those off the northeastern states, where energy costs are twice as high.

Kitty Hawk, is sited 38.6km at its closest point to shore, compared to 22km for Statoil’s in New York. That will increase development costs even if using conventional turbine platform technology.

Then there's the cost of power in the region. The average price of electricity for all end users in North Carolina was $0.094/kWh last December, the latest month for which data is available from the federal government, versus $0.158/kWh for six states in New England – by far the highest price of any region in the continental US.

The disparity is even greater for energy-hungry industrial customers with those in North Carolina paying an average $0.06/kWh for power last December versus $0.122/kWh in New England states – Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

US to auction new offshore zones south of Massachusetts

Read more

With power so costly, it is not surprising that Maine, Massachusetts and Rhode Island have led offshore wind development efforts by states. They also have little indigenous energy resources, having to rely on expensive imports.

North Carolina, in contrast, has easy access to inexpensive coal, hydro and natural gas, plus five large nuclear power reactors with an average 92.4% capacity factor, and a rapidly growing and increasingly cost-competitive solar industry.

While utilities have closed some coal plants in recent years and have targeted others for retirement, newer ones will remain online well into next decade. Depending on cost and other factors, utilities could also switch older plants to natural gas, rather than opt for more expensive albeit cleaner offshore wind power.

Offshore wind in North Carolina will also have to compete with onshore wind, which is less expensive and has reasonably good potential for growth in areas where turbines on land can capture stronger breezes from the sea. Avangrid recently began operation of the state’s first onshore wind facility – the 208MW Amazon Wind Farm US East.

While North Carolina has the only renewables mandate in the southeast, policymakers there have preferred development of solar, which now supplies about 7% of the state’s power.

Read Next

IN DEPTH: Iberdrola raises sails in offshore wind drive

Iberdrola, owner of the world’s largest pipeline of offshore wind projects, knows the coming years will be make or break for many developers.

02 Sep 2015