US opens first bid for offshore wind energy

America's first offshore wind lease sale will take place in July, the Interior Department announced Tuesday. It's good news for the US wind industry, which is hoping to expand beyond land-based production.

The race to harness the power of North Atlantic winds is on.

On Tuesday the Interior Department unveiled plans for the nation's first auction of offshore wind leases. It's more good news for the US wind industry, which installed a record amount of capacity in 2012, and received a one-year extension on the federal tax credits driving much of the industry's growth. 

The opening of federal waters to competitively bid wind projects is an important step in diversifying the industry beyond onshore projects. Offshore production is particularly attractive because winds tend to blow harder and more consistently off the coasts. Offshore turbines also tend to be closer to cities and other high-demand areas, which cuts down on transmission costs.

Deepwater Wind, a Rhode Island-based offshore wind developer, is among at least nine energy companies aiming to set up shop in the prime real estate off the coast of Rhode Island and Massachusetts. The two areas, comprising 164,750 acres or just slightly larger than the city of Chicago, are the first to be competitively bid under the government's program. They have an expected output capacity of 3,395 megawatts,  enough to power 1 million homes, according to the Interior Department.

“Today we are moving closer to tapping into the enormous potential offered by offshore wind to create jobs, increase our sustainability, and strengthen our nation’s competitiveness in this new energy frontier." Sally Jewell said in a statement Tuesday, almost two months after being sworn in as the 51st Secretary of the Interior. "As we experience record domestic oil and gas development, we are also working to ensure that America leads the world in developing the energy of the future.”

The US added 12,620 megawatts of wind capacity in 2012, the industry's best year of growth yet. Wind is the country's second largest contributor of renewable power, accounting for about 28 percent of electricity generation from renewable sources. Only hydroelectric power outranks it. Renewables as a whole make up a small portion (12 percent) of the nation's entire electricity mix.  

But building offshore turbines brings with it greater challenges than building onshore ones.

Higher costs, harsh waters, concern for local ecosystems, and the desire to preserve scenic ocean views have kept the US offshore industry in relative infancy compared with onshore. The US does not currently produce offshore wind power and only a handful of projects are in the works. These received federal permits before the competitive bidding process was developed.. 

The Interior's plan for a lease auction is a welcome but small step in the right direction, said Nancy Sopko an ocean advocate at Oceana, an ocean conservation organization that supports offshore wind. 

"We need an existing offshore wind industry," Ms. Sopko said in a telephone interview. "Not one turbine is up in the water in the US yet and that’s an important barrier to work through."

Still, the wind industry's will rise or fall on whether federal tax credits are renewed. Much of last year's production boom came in December as companies scrambled to install projects before the original sunset dates for the tax credits. Congress issued a year-long extension on Jan. 1, but construction has been slow in the first quarter. 

Companies have a difficult time attracting investors because of an uncertainty both about the production tax credit (and a related investment tax credit).

"It is important that Congress did extend it, and we are seeing investment, but it is still not optimized economic development in the US," Todd Foley, senior vice president of policy and government relations at the nonprofit American Council on Renewable Energy, said in a telephone interview. "It would be better if the industry had a long-term view on the policy"