Feds move on California’s unique offshore opportunity
According to California’s SB 100 Joint Agency Report [↑], at least 10 GW of offshore wind capacity will be needed to meet California’s 100% by 2045 clean energy target. Due to the deep waters off the California coast, floating offshore wind platforms – anchored to the seabed – will be required.
Recently, the US Department of the Interior’s (DOI) Bureau of Ocean Energy Management (BOEM), working jointly with the Department of Defense and the State of California, announced that the Humboldt Call Area would move forward as a Wind Energy Area (WEA) and the Morro Bay Call Area would be slightly revised from the version originally published in 2018.
Morro Bay 399 is a 399-square-mile area located off California’s central coast region northwest of Morro Bay that expands upon the existing Morro Bay Call Area plus additional acreage that was not considered in the 2018 Call for Information and Nominations. According to BOEM, the area has the potential to generate 3 GW of floating offshore wind capacity. Humboldt, located to the north, has the potential to generate 1.6 GW of floating offshore wind capacity.
Exhibit: California’s Potential WEAs
Source: RCG’s Global Renewable Infrastructure Projects (GRIP) database
Because Morro Bay 399 and Humbolt are at different stages of the BOEM process, BOEM will manage the process on parallel tracks running simultaneously for both.
To begin the process, BOEM will soon publish a new Call for Information and Nominations on the revised Morro Bay area in the Federal Register and announce the WEA for Humboldt.
Once BOEM completes remainder of the required processes for both Humbolt and Morro Bay 399, BOEM will publish a Proposed Sale Notice for both Wind Energy Areas.
Ultimately, the process will culminate in a lease sale – which BOEM projects for mid-2022.
A great opportunity…with work ahead
But before California can realize its offshore wind potential, the industry must consider environmental impacts to whales and migratory birds, transmission upgrades needed to facilitate offshore wind and the development of a supply chain and the necessary port infrastructure.
Nonetheless, proponents are encouraged by California’s vast offshore wind resource. According to RCG’s Global Renewable Infrastructure Projects (GRIP) database, California possesses abundant offshore wind resources especially off the northern coast where wind speeds can exceed 10 m/s.
Emily Kuhn, Associate Director in RCG’s New York office, notes that floating offshore wind just may be the key that unlocks a myriad of economic benefits for the state, namely job creation, through a California-centric offshore wind supply chain and dedicated offshore wind ports along the coast supporting the construction and operation of floating wind. The state is mindful of its offshore wind opportunity and has allocated funding as part of Governor Newsom’s California Comeback Plan. For example, the plan earmarks $20 million to support California’s offshore wind capacity, including $11 million for the Port of Humboldt to apply for federal funding for upgrades that will enable it for offshore wind development and $2.1 million for environmental studies on offshore wind impacts.
Dan Kyle-Spearman, RCG’s floating offshore wind lead, sees plenty of potential to drive economic benefits and job creation across the state through the local supply chain. He says California can realize its potential by utilizing their knowledge and experience in renewables development, and applying lessons learned from Europe and other markets:
1.) Set targets
Targets help provide certainty for developers and the supply chain to invest and begin the cost-reduction journey. He cites the UK government’s target of 1 GW of floating offshore wind by 2030. The UK’s revenue support mechanism allowed regulators to allocate funding for emerging technologies, such as floating wind. Although energy prices for these emerging technologies will be initially higher, Kyle-Spearman says costs lower over time as multiple bids spur more competition which sets in motion reduced costs for future projects. The UK government see this as a necessary step to ensure pre-commercial deployment and cost reduction in the sector through the coming decade. Setting offshore wind targets is critical, Kyle-Spearman says because it mobilizes supply chain, grid and investments in infrastructure – “everything that needs to come into place for development.”
2.) Build upon the success of other projects
Based on the success of projects in Europe, floating offshore wind technology is proven and California has an opportunity to become a market leader. Therefore, there is no need to install demonstration or small-scale projects. Likewise, there is no reason to delay the planning and implementation for offshore wind as the technology has already matured to the point of commercialization. Proven technology allows for projects to scale, economies of scale to be realized and increases investor confidence.
3.) Go big
Commercial projects create a pipeline and drive down costs in a way that pilot projects simply cannot match, says Kyle-Spearman. For example, France’s three upcoming 250 MW auction rounds not only provide a revenue support mechanism for the technology but also gives visibility for future market demand and the supply chain – both levers to enable cost reduction.
The maximum (ceiling) strike prices for these auctions are 120 EUR/MWh ($143/MWh) for the 2021 auction and 110 EUR/MWh ($129/MWh) for the 2022 auctions. Kyle-Spearman expects that these projects will achieve significantly under 100 EUR/MWh ($120/MWh) in the competitive auction to win the development rights. “This would halve the price compared to pilot projects – demonstrating the benefit of moving to large scale projects and moving away from demonstration and pilot ones.”
Contact the RCG team for advisory services related to California offshore wind.