Record US offshore wind bidding for New York Bight leases reflects the high strategic value of development seabed off two key US states and is proportionate in the context of the global market, said the US head of the sector for TotalEnergies.
The French oil & gas supermajor on Friday secured rights to develop more than 3GW after bidding $795m for the 341 sq km lease area OCS-A 0538, part of the $4.4bn bid in total across six leases.
David Foulon said the bidding needs to be seen against the background of a fast-growing international offshore wind sector rather than compared with early US leasing rounds, which now look incredibly cheap.
“Yes, if you take the reference of 2018 [in] Massachusetts it’s a lot. No, if you take Round 4 [leasing in the UK last year],” Foulon told Recharge in an interview.
“There is an overall view of what offshore wind acreage is worth today, which is frankly largely an international market.
“Today in 2022 that’s what it’s worth. We are confident that it is compatible with lower power prices for the customer.”
According to Foulon, the New York Bight represents “exceptional quality of acreage” and “strategic value” in a region where demand for clean power is only going one way from the states of New York and New Jersey, which are both already leaders in US offshore wind procurement.
It’s the start of a much larger plan – it’s only the beginning.
“It’s the start of a much larger plan – it’s only the beginning of it. We’re confident the needs are only going to increase above what has already been committed.”
TotalEnergies is aiming to take a final investment decision (FID) on the project in 2026 with operations from 2028. Asked about the construction cost of the project, Foulon said: “If you look at Europe, we believe by the time we build the additional cost of building in NY Bight vs Europe will be limited.”
'Wrinkles solved, new ones ahead'
As TotalEnergies prepares to plan its project, what about the two big potential challenges facing all developers in the US? First, the potential for the type of regulatory delays that set back early movers such as Vineyard Wind, and secondly the readiness of a US supply chain that is still in the fledgling stage.
“We think the wrinkles that were solved with Vineyard Wind have been solved. We think new wrinkles are going to come and we’ll address them in time,” Foulon said.
“There’s clearly a consensus between New York state, New Jersey and the developers to make this sort of FID a reality.”
As for the supply chain, Foulon said: “We have a clear mandate from the federal government. The mandate is that as you develop the industry, it needs to be a US-based industry. We take that very seriously.”
TotalEnergies has planned for several scenarios of supply chain readiness in its New York Bight bidding, added the executive.
Availability of vessels – and in particular the possible impact of the US Jones Act, which places restrictions on operation in US waters – has been flagged as a growing concern to some in the sector who worry that too few compliant ships will be in service.
Foulon said TotalEnergies sees “one sticking point specifically on installation vessels for foundations.
“These are the ones we see may not be available. It’s a decision for that industry as to when it makes sense [to build]. If it does not make sense, we have a feeder barge plan.
“We have a plan A, which is costly, and an upside plan if the right vessels are being built in the US,” Foulon said, confirming that the OCS-A 0538 lease zone won by TotalEnergies is suitable for monopile foundations.
Rapid US entry
The New York Bight win leaves TotalEnergies as a major player in the fast-growing US offshore wind market less than six months after it first announced it would enter the sector there.
TotalEnergies won the NY Bight contest in conjunction with German utility EnBW – which days after the success announced it would exit the US market to focus on Europe. With most other offshore wind forays by the French group involving partnerships, Foulon said it was too early to say what will happen off New York.
“Yes, TotalEnergies’ usual approach is a partnership-based approach – we choose our partners very carefully.
“EnBW made a strategic decision... which we understand and abide by.
“That’s where we stand today. On a project-by-project basis we’ll see what the future holds.”
Foulon also praised how the largest offshore wind auction so conducted in the US worked from a practical point of view.
“From an interaction and process perspective it went very smoothly.
“[As a developer] the number one fear is a very basic one – not being able to bid or not having a bid registered. It was very well organised.”