Bloomberg | Jennifer Dlouhy | December 14, 2018
Three companies bid a record-shattering $405 million to nab U.S. rights to build offshore wind farms near Massachusetts on Friday, a testament to the surging appeal of renewable power and investors’ growing confidence in demand for it.
Equinor Wind US LLC, Mayflower Wind Energy LLC and Vineyard Wind LLC each pledged $135 million to secure individual leases from the U.S. government, drawn by state commitments to buy offshore wind power.
The auction raked in more than nine times the previous high-water mark: a 2016 sale of an offshore wind lease near New York for $42.47 million. Each of the winning bids also approached the highest sum paid for oil drilling rights in the Gulf of Mexico since the start of area-wide leasing in 1983: $157 million that Equinor ASA spent nabbing a single 5,760-acre tract in 2012.
This time, the companies were jockeying over three wind leases spanning nearly 390,000 acres (157,800 hectares) south of the resort islands of Martha’s Vineyard and Nantucket. The location gives wind developers a chance to serve power-hungry cities along the U.S. East Coast and help satisfy state pledges to buy renewable energy.
“These $100 million-plus bids reflect the strength of state commitments to offshore wind,” Cheryl Wilson, an analyst at Bloomberg Intelligence. “They’re creating momentum for an offshore industry in the Northeast.”
Revenue from the wind auction flows to U.S. government coffers. There are parallels to offshore oil leasing, with energy companies bidding on drilling rights and paying royalties on eventual crude and natural gas production. But the wind leases sold Friday are at least 22 times the size of a typical U.S. offshore oil block, at 128,811, 127,388 and 132,370 acres.
The sale spanned two days and unfolded over 32 rounds, with companies submitting anonymous electronic bids that grew rapidly from $254,776. Eleven companies were actively bidding at the beginning of the auction on Thursday morning, nearly twice the most-recent record for participation, in 2016, when six developers jockeyed for the New York offering. But by Friday morning, just four remained.
Some 19 companies had gotten pre-qualified to participate in the auction, more than in any of the previous seven competitive sales of wind leases in U.S. waters. The prospective bidders included units of established offshore wind developers and renewable power companies that have primarily focused on land as well as oil companies such as Equinor and Royal Dutch Shell Plc. Mayflower is an affiliate of Shell.
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