Norway Launches Its First Offshore Wind Auction
Norway Launches Its First Offshore Wind Auction | OilPrice.com
Norway launched early on Monday local time its debut offshore wind auction, targeting up to 1.5 gigawatts (GW) of power capacity in the North Sea south of its coasts.
“I hope for a good auction with several strong players who want to develop offshore wind at Soerlige Nordsjoe II,” Astrid Bergmål, State Secretary in the Norwegian Energy Ministry, told Reuters ahead of the auction start on Monday.
Norway, whose first area up for grabs for offshore wind development, Soerlige Nordsjoe II, is close to Denmark, proceeded with its first such auction despite the challenges the industry has faced over the past year, due to soaring costs and higher interest rates.
Last month, the Norwegian Energy Ministry said that five applicants had been approved to take part in the bidding—a consortium of Aker Offshore Wind, BP and Statkraft, one composed of Equinor and RWE, Norseman Wind of Germany’s EnBW, a consortium of Shell, Lyse and Eviny, and another group, Ventyr, which consists of Parkwind and Ingka.
Early this month, EnBW pulled out of the auction, citing limited state support and requirement for successful bidders to build and own the transmission connectors, Renews reported.
The offshore wind industry has seen several major setbacks since last summer—auctions in the U.S. and the UK were a flop and a large UK project was canceled due to surging costs and challenging market conditions pressuring new developments. Meanwhile, developers in the U.S. are seeking looser requirements for tax credits to make projects economically feasible and some are abandoning offshore wind projects on the U.S. East Coast.
Last month, Orsted, Siemens Energy, and Vestas – the three biggest wind power developers and turbine makers in the world – warned that last year’s challenges in the industry would continue this year and suspended dividends as they look to return to profitability and reduce costs.
The wind industry, especially offshore wind, was plagued in 2023 by cost increases, rising interest rates, quality issues with turbines, and delays and cancelation of projects. The new year will not fix all those challenges immediately, the three companies say, still expecting losses and uncertainty in 2024.
By Charles Kennedy for Oilprice.com
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Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.