California law launches West Coast offshore wind market
Offshore

California law launches West Coast offshore wind market

Gov. Gavin Newsom signed AB 1373 into law, a clean energy bill authorizing the Department of Water Resources to serve as a new central procurement entity for large-scale, long-lead-time renewable energy resources including offshore wind, along with provisions promoting energy reliability and California’s transition to 100% clean energy.

“Procuring at scale is one of the key next steps California needs to ensure a clear path to market and bring offshore wind online,” said Adam Stern, executive director, Offshore Wind California. “Now we must move forward to invest in port upgrades and transmission, set a clear permitting roadmap, build a robust supply chain and workforce training, engage key stakeholders, and identify suitable sea space to achieve the state’s goal of 25 gigawatts (GW) from floating offshore wind by 2045. We look forward to seeing the California Energy Commission’s AB 525 strategic plan for offshore wind this fall.”

In 2022, the California State Assembly directed the California Energy Commission (CEC) to evaluate the maximum capacity of offshore wind development and establish planning goals for 2030 and 2045. The CEC concluded that California could feasibly and responsibly develop as much as 3 GW of offshore wind by 2030, 10-15 GW by 2045, and 20 GW by 2050. Later that year, Newsom called on energy regulators to increase the state’s offshore wind target to at least 20 GW by 2045, and the CEC set its sights on a new 5 GW goal for 2030.

California’s first offshore wind auction took place in December 2022, where $757 million was raised by two developers for five areas— two in the Humboldt Wind Energy Area of Northern California and three in Morro Bay in Southern California.

Copenhagen Infrastructure Partners, through the subsidiary California North Floating LLC, secured the rights to develop 69,031 acres for an auction high $173.8 million. RWE had the next highest winning bid at $157.7 million for 63,338 acres. Equinor, Invenergy, and a joint venture between ENGIE and EDP won the rights to develop areas in Morro Bay for $130 million, $145.3 million, and $150.3 million, respectively.

The total development area offered in the auction covers 373,268 acres with the potential to produce over 4.6 GW of offshore wind energy and power 1.5 million homes, BOEM said.

In September 2023, the California Legislature voted to give Newsom’s administration permission to buy massive amounts of electricity, a move aimed at avoiding blackouts by shoring up the state’s power supply while jumpstarting the West Coast’s fledgling offshore wind industry.

The offshore wind industry has been grappling with uncertainties recently, with multiple power purchase agreements (PPAs) coming to an end, and developers and utilities backing out of projects.

Rhode Island Energy recently pulled out of its PPA with Ørsted and Eversource for the Revolution Wind 2 offshore project, citing higher interest rates, increased expenses, and questionable federal tax credits, concluding that the project had become uneconomical. Avangrid requested to terminate the PPA signed with Eversource Energy, National Grid, and Uniti for the Commonwealth Wind offshore farm last year, and Shell and Ocean Winds North America have decided to attempt to terminate the PPA for the SouthCoast Wind offshore wind project.