Floating wind auction in California reveals ~40% differential in high bid/acre between Humboldt and Morro Bay areas

published on 08 December 2022
Renewable Energy M&A. Renewable Energy Projects. California. Offshore wind M&A analysis. United States of America. December 2022. -g6pp0

The US Bureau of Ocean Energy Management (BOEM) tendered two sites in the Humboldt Bay area - located off California’s North Coast - at an average high bid/acre of ~$2,500. Meanwhile, the areas awarded in Morro Bay - closer to California’s southern border - received an average high bid/acre of $1,760. According to Enerdatics’ research, the Humboldt Bay sites commanded the 40% premium primarily due to lower levelized cost of energy (LCOE), owing to shallower average water depths and higher wind speeds. This results in a 20% markup in the estimated LCOE for floating wind developments in the Morrow Bay areas, at a cost of $102/MWh. Meanwhile, the proposed projects in Humboldt Bay are estimated to be developed at an average LCOE of $82/MWh.

For projects in water depths of 500-1,300 meters, the higher LCOE-levels are attributed to the added mooring, anchoring, and cables needed for deep water sites. However, dedicated concepts for suspended dynamic cables and mooring are expected to be developed and deployed at commercial scale, to render deep-water developments more cost competitive with shallow-water ones.

The lease sale, marking the first floating wind auction off the United States’ west coast, received $757mn in high bids for nearly 4.6 GW of floating wind capacity, which is expected to be operational by 2030. RWE and Copenhagen Infrastructure Partners secured one site each in the Humboldt Bay area, while Equinor, OW Ocean Winds (a 50:50 JV between EDP Renewables and ENGIE), and Invenergy were awarded a site each in the Morro bay area. The BOEM’s list of 43 bidders approved for the round included several large-scale offshore wind developers such as oil majors Shell, bp, and TotalEnergies, European utilities Ørsted, Iberdrola, EDF, and SSE Renewables, along with veteran independent power producers (IPPs) JERA, Northland Power Inc. Power and Mainstream Renewable Power. 

While the Biden-Haris administration has hailed the auction as a landmark event in the US’ offshore renewable space, analysts have highlighted the lower bid amounts and auction scale compared to the New York Bight offshore wind auction, which closed in Feb’22. The round fetched $4.37bn in high bids and awarded a total capacity of 5.6 GW, at an average bid/acre of $9,000. The difference in size and scale is attributed to several technical and regulatory factors, such as the uncertainty associated with floating wind developments and the lack of established power procurement options in the state for offshore wind developments.

The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation. 

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As a follow-up to the results of California’s maiden floating offshore wind tender, The Enerdatics research team has published a brief analysis of the drivers behind the differential in average high bids ($M)/acre for both Humboldt Bay and Morro Bay leases.

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