North Carolina offshore wind auction pits ambitious federal goals against wavering state policy
North Carolina is set to take a key step toward offshore wind power generation with an auction on May 11.
North Carolina could take a leadership role in renewable energy among southeastern states with a key federal offshore wind lease sale scheduled for May 11 and more on the horizon.
The Carolina Long Bay lease auction represents a critical milestone for a state that has yet to codify its commitment to offshore wind. Duke Energy Corp., the state’s largest electric utility, only recently pledged to pursue offshore wind in its home state as it expands its renewable energy portfolio across a six-state service territory.
The resulting uncertainty could make developers reluctant to offer the eye-popping bid prices that the New York Bight auction attracted in February, especially in light of rising turbine component costs and supply chain issues.
Unlike North Carolina, New York has a law in effect requiring the state to add 9,000 MW of offshore wind power by 2035. New Jersey law requires the state to add 3,500 MW of power offshore wind turbine by 2030.
North Carolina Governor Roy Cooper issued an executive order in 2021 calling for 2.8 GW of offshore wind capacity by 2030 and 8 GW by 2040, but the state legislature has not codified these objectives in a binding policy. Duke has filed integrated resource plans calling for up to 2,650 MW of offshore wind power, but needs regulatory approval to proceed. In meetings on its plan to reduce carbon emissions, Duke has presented plans for 800 MW of offshore wind by 2030 and another 800 MW by 2032, and more after 2040.
The Duke’s Options
“We anticipate that offshore wind will be an option for [regulators] to be considered in terms of our production portfolio to achieve [decarbonization] goals,” Regis Repko, senior vice president of generation and transmission strategy at Duke Energy, said in an interview. “The 2030 timeline is aggressive and optimistic given many unknowns we have today like the supply chain availability, labor, process clearances.”
The Carolinas are Duke Energy’s ideal choice for offshore wind among its territories, Repko said.
“The geography of the Carolinas and its proximity to the Gulf Stream is preparing for a very regular and stable wind resource,” Repko said.
In vertically integrated North Carolina, any offshore wind project would likely be owned by Duke or a third party selling power to Duke through a power purchase agreement or other arrangement.
Subsidiary Duke Energy Renewables Wind LLC is among 16 eligible bidders identified by the U.S. Bureau of Ocean Energy Management.
“If the offshore wind is approved by the commission, we will pursue ownership,” Repko said. “It could be someone else developing and building it and us buying it.”
Duke executive vice president and chief financial officer Steve Young said in a May 9 interview that Duke would bid on the May 11 auction, but did not specify the size of a potential project, and a spokesperson of Duke said he could not share any details. Young’s comments depart from management’s previous remarks on offshore wind, including his from a year ago when he said offshore wind “still needs a fair amount of work to perform here”. [in the Carolinas].”
North Carolina’s major energy legislation in 2021 set decarbonization goals, but directed state regulators to plan with utilities to meet those goals using the “least-cost route” and required Duke to own all generation that regulators choose to achieve these goals. Duke is working through the regulatory process for its carbon reduction plans within this framework.
But the legislation contains no specific exclusions or requirements for offshore wind, with “wind” only mentioned once in the 11-page law.
Offshore wind will likely face competition in North Carolina, where solar is king and other options such as onshore wind are geographically viable, said Lillian Federico, director of energy research at Regulatory Research Associates. , a group within S&P Global Market Intelligence. Duke will have to weigh the costs of offshore wind against potentially affordable alternatives if it expects to recoup its costs through tariff deals.
New York Bight’s high rental prices have raised concerns about the ability of developers to earn adequate returns on their projects, although recent RRA analysis found that the broader maturation of the offshore wind industry US could support price increases.
Repko said that given the uncertainties surrounding offshore wind, Duke believes production costs for such projects would be “in the realm” of small modular nuclear reactors, not including transmission costs.
But offshore wind costs have come down significantly in recent years, said Chris Carnevale, director of climate advocacy for the Southern Alliance for Clean Energy.
“The cost curve is really coming down, and offshore energy has quite a long lead time for project development,” Carnevale said.
Caroline Long Bay
The U.S. Department of the Interior announced March 25 that BOEM will hold a wind power auction for two lease areas off North Carolina on May 11, covering 110,091 acres in the Carolina Long Bay area. , about 20 miles from Bald Head Island. The department estimated that the areas could generate 1.3 GW, at a minimum, if developed.
The Carolina Long Bay Auction will allow offshore wind developers to bid on one or both lease areas in the Wilmington East Wind Energy Area, each with an area, distance to shore and resource potential similar wind turbines.
Eligible bidders, according to BOEM’s final notice of sale issued March 28, include 547 Energy LLC; Arevia Power LLC; Avangrid Renewables LLC; BP US Offshore Wind Energy, a partnership between BP PLC and Equinor; Invenergy Long Bay Offshore LLC; Carolina Offshore Wind LLC; Duke Energy Renewables Wind LLC; EDF Renewables Development Inc.; JERA Renewables NA LLC; Masdar Offshore Wind Americas LLC; MRP offshore wind farm; Orsted North America Inc.; OW North America Ventures LLC; RWE Offshore Wind Holdings LLC, a subsidiary of RWE Renewables Americas LLC; Shell New Energies US LLC; and TotalEnergy Renewables USA LLC.
The auction gives a successful bidder the right to potentially develop an offshore wind project. Following a U.S. Department of Justice review of the auction and finalization of offshore lease agreements, the successful bidder must file plans for surveying the lease area(s) and production building. These plans must be reviewed to ensure environmental and technical sufficiency and compliance, and if approved, the bidder is able to survey the rental area and begin construction. Any winning bidder will also likely wwork with Duke Energy and subject to additional regulatory approvals and interconnection agreements.
On April 27, the Biden administration announced two more sites off the North Carolina coast totaling about 1.2 million acres. The auctions for these sites, which do not yet have dates, are part of the administration’s goal of 30,000 MW of offshore wind generation by 2030.
Previously, BOEM awarded the first lease off the coast of North Carolina to Avangrid Renewables to develop the 2,500 MW Kitty Hawk offshore wind farm project. The first 800 MW phase of the project is expected to be commissioned in 2026 and the second 1,700 MW phase in 2030.
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