Day-one bids in the historic first US floating wind auction off California fell far short of those seen in previous rounds this year.
“The bidding appears to be well below the expectations,” Philip Totaro, CEO of renewable energy analytics firm IntelStor told Recharge.
At the end of the first day of bidding, only one lease (with the number 0564) in the Morro Bay wind energy area (WEA) had broken $100m – reaching a high for the auction at $1,247/acre, well below day-one pricing seen in previous auctions.
The New York Bight had already breached $3,250/acre by the end of its first day in a record-smashing auction that three days of intense bidding later would see at least one lease set a new bar at $10,000/acre. Carolina Long Bay’s auction closed at the end of its first day to reach an average of $2,900/acre.
Seven would-be developers of the 43 that qualified took part in Tuesday's first day and the process will continue later today (Wednesday).
Totaro attributed the lagging prices and low participation to California’s challenging depths, which descend as far as 1,000 metres.“Technical risks for deep-water floating are higher, so this necessarily makes overall commercial risk higher,” he said.
Samantha Woodworth, senior wind energy analyst for research consultancy Wood Mackenzie, said: “Uncertainty is definitely a factor.”
“Floating wind is so much harder and more expensive [than fixed bottom], and developers are looking to save money in any way they can, so keeping bids down is one tactic to help with that,” she told Recharge.
Woodworth also highlighted “ongoing economic issues, high inflation, and the Massachusetts Department of Public Utilities’ decision to block contract renegotiation on those grounds” as contributing factors.
However, Totaro said, “the larger, and more substantive issue, seems to be around power offtake.”,
While California has policies in place for renewable generation and has set ambitious offshore wind targets, “there has been a lack of indication from the California independent systems operator (Caiso) [the operator of the state grid] as to how the offtake will be handled both technically and commercially”.
California lacks a central authority along the lines of the New Jersey Board of Public Utilities or the New York State Energy Research & Development Authority capable of organising procurement of vast volumes of offshore wind energy production.
The state will depend instead on utilities or California community aggregators (CCA), socially driven power consortia, to purchase production from floating wind power developers.
The state’s largest utility, PG&E, has never entered into a long-term gigawatt-scale wind contract, however, and floating wind leaders doubt CCAs can manage such procurement either.
The low prices likely reflect other bottlenecks facing floating wind development in the state, including an almost complete lack of port availability near Morro Bay, as well as Humboldt’s inadequate transmission capacity and distance from load centres of central and southern California.
The US government and the state of California aims to spur at least 4.6GW – and likely far more – of new offshore wind capacity and a multibillion dollar investment wave, playing a huge role in the state’s massive climate and renewable energy ambitions that include a near term target of 2-5GW by 2030 and 25GW by 2045.
