News & Observer by Adam Wagner 

Industry officials are warning that a provision in the Inflation Reduction Act could lead to an extended period between offshore wind-power leases off North Carolina’s coast, potentially threatening the developing industry.

The law championed by the Biden administration and passed by Congress last year contains a clause linking Bureau of Ocean Energy Management leases for wind and fossil fuels. It says a wind lease must occur within a year of an oil and gas lease.

Right now, there is an oil and gas lease sale set for Sept. 27, the last one on the schedule for the foreseeable future. That means BOEM has a September 2024 deadline for conducting environmental reviews, finalizing lease areas and actually holding lease sales for wind development off the portion of the East Coast from North Carolina to Delaware.

For North Carolina, that also places increased significance on BOEM’s recent decision to not move forward with a pair of offshore wind leases that were under consideration. BOEM would need to vet another area for oil and natural gas production and lease it before moving ahead with another lease off of North Carolina.

“There is a real threat of an offshore wind leasing cliff that could occur before BOEM finishes its work, holds additional lease sales and awards the leases.,” Erik Milito, president of the National Ocean Industries Association, wrote in a statement. U.S. Rep. Deborah Ross, a Raleigh Democrat, introduced a bill last month that would repeal the mandate, arguing that fossil fuel exploration should not be linked with renewable energy like wind power.

The Nonrestrictive Offshore Wind Act is co-sponsored by 25 Democrats, including Ross and Rep. Valerie Foushee. The bill has been referred to the House Committee on Natural Resources. “We need to remove barriers to this growing industry that will create thousands of jobs and accelerate our path to a clean energy future,” Ross told The News & Observer in a statement.

Ross also wrote that North Carolina is “perfectly positioned” to be a leader in offshore wind and said she will work with BOEM to help the industry advance in North Carolina.

Spokespeople for Reps. Greg Murphy and David Rouzer, who represent North Carolina’s coastal districts, did not reply to requests for comment from The N&O.

A 2021 report prepared for the N.C. Department of Commerce found offshore wind presents a $140 billion opportunity for the United States by 2035 and that the state’s existing manufacturing leaves it poised to help supply key components up and down the East Coast. Without new leases on the horizon, Milito warned, wind supply chain companies may hesitate to invest in places like North Carolina.

“The absence of fresh leases for these sought-after areas poses a considerable risk, potentially impeding the growth of the regional supply chain. ... Convincing companies to invest in a new industry becomes challenging when a stable, long-term pipeline of new projects is not guaranteed,” Milito wrote.

Sam Salustro, the Business Network for Offshore Wind’s vice president of strategic communications, offered a similar warning. North Carolina could be a leader in offshore wind manufacturing, Salustro wrote in a statement to The N&O, but it needs a “visible, long-term pipeline of projects” to meet that potential.

“The oil & gas auction mandate contained in the IRA adds unnecessary complication to this needed development of the U.S. offshore wind market,” Salustro wrote.

EXISTING LEASES

BOEM previously leased a 191-square mile area off of Kitty Hawk, as well as two areas spread across a 172-square-mile area near Bald Head Island.

Duke Energy Renewables Wind and TotalEnergies paid a combined $315 million for the southeastern North Carolina areas last year, dwarfing the $9 million Avangrid paid for the Kitty Hawk area in 2017. Development of those areas will continue, independent of whether BOEM auctions off different places off the Carolina coast.

Moving those projects forward is crucial to making North Carolina’s case to supply chain providers and manufacturers, said Karly Lohan, the Southeastern Wind Coalition’s North Carolina program and outreach manager.

“Even before we have the conversation about not having a certainty of leasing pipeline in North Carolina, it’s hard to make that case to supply chain companies or (original equipment manufacturers) because we have three projects that we can’t get off the ground,” Lohan said.

Avangrid expects to submit a draft environmental impact statement in early 2024 while Duke and Total are working on site assessment plans they expect to submit this summer, Jennifer Mundt, the N.C. Department of Commerce’s assistant secretary of clean energy economic development, told a wind energy task force last week.

Mundt also addressed BOEM’s decision to not lease the two potential new areas off northeastern North Carolina, saying, “We are optimistic and hopeful that BOEM will continue to consider those and hopefully include some portion of those areas in a future auction for leasing.”

In its first Carbon Plan, the N.C. Utilities Commission found that offshore wind produces the most energy on winter mornings, when other renewable resources are the least effective. It also directed Duke to consider the cost of purchasing and transporting power generated from each of North Carolina’s three offshore wind leases.

Duke estimated that the cost of leasing, developing transmission to and preparing the site its subsidiary previously leased would be about $317.4 million. The utility is expected to report the costs of developing each of the three existing wind energy areas in its upcoming carbon plan filing.

SUPPORTING A REGIONAL SUPPLY CHAIN?

Without requirements that utilities in North Carolina purchase offshore wind, the state’s role in the supply chain could look different than originally anticipated, Lohan said.

Instead of companies manufacturing the massive blades, turbines or control centers, North Carolina’s role could involve companies specializing in two or three smaller components that can be shipped to places like Virginia or the Gulf Coast where projects are moving forward. “Whether or not we see wind energy come to fruition off North Carolina’s coast, there is still a regional supply chain to be supported,” Lohan said.

North Carolina is well positioned to supply wind-energy projects in nearby states as well as those off its own shores, Jordan Monaghan, a spokesman for Gov. Roy Cooper, said in a statement.

Still, Cooper would like more leases off North Carolina. After BOEM’s recent decision, Cooper said in a statement that he is prepared to work with the federal agency to find a compromise that would result in new lease areas.

“Additional wind energy areas off our coast would only increase the opportunity for our state, and we should work in a bipartisan fashion to secure as much economic development as possible,” Monaghan wrote.