As the first U.S. offshore wind farm prepares to come online, the U.S. Energy Information Administration has released statistics showing the continued expansion of offshore wind leasing.
The National Renewable Energy Laboratory estimates that the United States has 4,200 gigawatts of potential offshore wind energy, with the majority of that potential in federal waters. Although local state agencies typically handle wind development in state waters, the Bureau of Ocean Energy Management (BOEM) manages all wind development in federal waters.
BOEM held the first competitive federal offshore commercial wind lease sale in 2013 and auctioned off nearly 165,000 acres for wind energy development off the coasts of Massachusetts and of Rhode Island. Deepwater Wind's Block Island development off Rhode Island, expected to come online before the end the year, is the product of leases awarded in that first sale.
Since then, BOEM has held four additional auctions for wind development in the Atlantic region. To date, it has issued 11 commercial leases in federal waters, nine of which were purchased through the competitive bid process. BOEM issued the other two leases before the first competitive lease sale.
Cumulatively, since 2013 more than one million acres of land in federal waters have been leased for wind development and have generated more than $16 million in revenue from the lease sales for the federal government, according to the EIA.
During the same period, the federal government collected more than $24 billion in revenue from offshore energy extraction activities, predominantly from oil and natural gas. This revenue includes rent, royalties per energy unit, and other fees. Because offshore wind is still in the development phase, companies are not currently paying royalties on production or other fees, but BOEM will collect future revenue from operating fees and additional lease sales. Production fees will be based on the capacity of the wind farm, its capacity factor, the average wholesale electric power price, and an operating fee rate that BOEM determines.
BOEM’s next wind area lease sale is scheduled to be held Dec. 15. The sale will offer nearly 80,000 acres offshore New York, and 14 companies have qualified to participate. Since the first lease sale in 2013, the number of companies qualifying to participate has steadily increased, from eight in 2013 to 14 in the latest offering. While there is no guarantee that a company holding a lease will choose to develop a wind farm, the purchase of a lease is a significant indicator of interest.
Wind speeds offshore tend to be higher and less variable compared to onshore. Additionally, offshore wind has the potential to provide power in coastal areas where demand is high and land-based renewable energy resources are limited. However, offshore wind currently has much higher costs than onshore wind, solar, or nonrenewable electricity generation options to serve loads on the U.S. mainland.