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What’s Next For Wilmington East’s $315M Windfall?

By Johanna F. Still, posted May 20, 2022
Development of offshore wind turbines, like the ones seen above in the Netherlands, moved a step closer for coastal Southeastern North Carolina after the federal government auctioned leases for the area this month. (Photo by Charlie Chesvick)
A lofty effort that might have seemed intangible just got some real dollars attached to it: This month, the Wilmington East Wind Energy Area attracted leasing bids from two companies, totaling $315 million.
 
The Bureau of Ocean Energy Management’s (BOEM) May 11 offshore wind auction drew a sizable (but not earth-shattering) showing for the nearly 110,000 acres in the Carolina Long Bay area, further solidifying Wilmington’s leases as serious contenders in the emerging renewables market.
 
Offshore wind, which can generate electricity, represents an untapped economic frontier for the region that has bipartisan support.
 
TotalEnergies Renewables USA and Duke Energy Renewables Wind were the provisional winners, bidding $160 million and $155 million, respectively, for the adjacent western and eastern blockslocated 20 miles off the coast of Bald Head Island. Both are about 55,000 acres.
 
Of 16 eligible bidders, at least five opted to participate, resulting in an eventual price-per-acre of $2,861. That’s markedly higher than the $74 price-per-acre of Kitty Hawk – North Carolina’s first offshore wind lease – sold in 2017 when the market was less mature. Wilmington’s price-per-acre is less than the record set in February in the New York Bight auction, which drew an unprecedented $4.37 billion at $9,472 an acre.
 
The New York Bight auction drummed up more interest given its access to major metropolitan markets and comparatively stronger regulatory and infrastructure commitments.
 
“With the North Carolina lease sale coming on the heels of the New York Bight lease sales it is tempting to compare the two, but we shouldn’t,” said Erik Milito, president of the National Ocean Industries Association, a group that represents offshore energy developers working in the U.S. “Fundamentally, you’re looking at different markets with different needs and at different points of maturation.”
 
Milito cited the 2018 lease sale for an area off the coast of Massachusetts, which BOEM declared was a “bidding bonanza.” In that lease, the space sold for $1,042 an acre – less than half of what Wilmington East lured. Last week’s lease was “very impressive,” Milito said. “Needless to say, North Carolina should be excited about offshore wind and the willingness of companies to invest in the region. Bids are just the tip of future investment.”
 
DOLLARS AND JOBS
 
North Carolina stands to gain billions from planned wind farms, a recent study suggests. An analysis by the Southeastern Wind Coalition in January projected that the construction of 2.8 gigawatts of offshore wind energy by 2030 (this represents Gov. Roy Cooper’s goal established last summer) would result in a net economic benefit for the state of $3.7 billion in a base scenario and up to $4.6 billion on the high end. This could create between about 28,500 and 32,000 jobs, with the bulk of the economic opportunity occurring during the construction phase, per the analysis.
 
John Hardin, executive director of the N.C. Department of Commerce’s office of science, technology and innovation, said it’s probably safe to assume Wilmington East presents the largest economic opportunity for North Carolina among the leased areas so far. The bulk of the initial economic benefits from Kitty Hawk are likely headed to Virginia.
 
In its pending construction and operations plan submitted in July, Avangrid, the winner of the 2017 Kitty Hawk lease, proposes to install up to 69 turbines with cables making landfall in Virginia Beach. In 2020, Virginia passed a law requiring Dominion Energy, the likely purchaser of Kitty Hawk power, to produce 100% renewable energy by 2045 and to procure at least 5.2 gigawatts of offshore wind energy by 2034.
 
North Carolina lacks a similar mandate to purchase offshore wind but has taken steps over the past year to establish a more inviting climate for this activity.
 
Unlike Kitty Hawk, where progress is further along and leaning toward Virginia, about 95% of the economic opportunity for Wilmington East is still yet to be determined, Hardin said.
 
Compared to the more mature U.K. markets, the offshore wind industry in the U.S. is “still very nascent,” Hardin said. “There’s still a lot of uncertainty, which is why we need to start doing what we’re doing now: have a plan.”
 
Although there is a string of proposals in the pipeline – with more speeding along in accordance with President Joe Biden’s 30-gigawatt goal by 2030 – only two projects are active off the U.S. shore.
 
“The [domestic] supply chain is virtually nonexistent,” Hardin said. “So it’s still up for grabs.”
 
A LOOK AT RADIO ISLAND
 
Last month, the N.C. State Ports Authority took the first step in what could turn into a lengthy environmental review process, seeking input on the possibility of developing Radio Island, a 253-acre spoil area just outside the Port of Morehead City.
 
About 154 acres of the island could be transformed into a multiuse terminal to serve the automotive and wind industries, according to the ports’ initial proposal for a “vehicle and wind energy lay down area,” 200,000-square-foot manufacturing facility, 100,000 square feet of office space, a new 1,600-foot berthing facility and enhanced rail access.
 
In his budget, the governor recently proposed allocating $20 million for infrastructure investments on Radio Island. “That is the kind of investment we have to see if we’re going to compete with these Northeastern states,” said Katharine Kollins, president of the Southeastern Wind Coalition. Thus far, no state dollars have been allocated for local infrastructure to prepare for offshore wind.

The ports authority has been relatively mum about its plans; a spokesperson didn’t answer questions about the proposal or other potential staging areas and instead provided a statement saying the requested formal environmental study could take up to 18 months to complete. Any additional capital funding for a project of the scope ports officials propose would have to come from the legislature.

Ports director Brian Clark told members of the N.C. Taskforce for Offshore Wind Economic Resource Strategies (TOWERS) on May 5 that the ports had completed the first step in the process of developing Radio Island, which involved applying for a federal grant, and had initiated the first environmental step to kickstart redevelopment. In December 2021, the U.S. Department of Transportation awarded the ports $1.6 million to upgrade the Radio Island rail line, which had fallen into disrepair; Clark told the task force the port is awaiting receipt of those funds pending a final grant agreement.  
 
As it pertains to wind, Radio Island could primarily serve Wilmington East, with big parts making the roughly 100- mile water-bound trip down the Southeastern coastline, Hardin said. Given turbines’ gargantuan components (with blades often as long as a football field), a staging and manufacturing area’s proximity to its offshore construction zone is often touted as an important factor in wind energy development. But Hardin said, “75 miles, 100 miles, that’s not too far down – not at all.”
 
An N.C. Department of Commerce report published last year identified and assessed several potential operations or staging areas: Radio Island; the ports’ 600-acre property in Brunswick County (home to the “megaport” proposal that died in 2010); the former Vertex Railcar Corp. site (marketed as the Wilmington Business Park); Eagles Island; the Sunny Point terminal; property surrounding the Port of Wilmington, and other Northeastern North Carolina assets.
 
At a recent offshore wind conference, Hardin said images of both Morehead’s and Wilmington’s port assets were displayed for developers to observe, showcasing each’s strengths. Developers were drawn to Radio Island, he said.
 
TIME TO PREPARE
 
Kollins said it’ll take about seven to eight years before construction would actually begin on Wilmington East.
 
“That is plenty of time for the state, the developer and suppliers to put into place the port logistics required to support a large-scale wind operation,” she said. “We [should] play our cards right, roll out the red carpet as best we can, because that’s what states in the Northeast are doing.”
 
North Carolina’s strong manufacturing presence could amp up even now, Kollins said, to serve the Northeastern offshore projects that are further along while preparing for Wilmington East. Bigger state investments could help capture more economic opportunity, Kollins said. “Currently the state only has one person working on offshore wind – for a $100 billion+ industry,” she said. “That isn’t enough to maximize the opportunity before us.”
 
That one person is Jennifer Mundt, who was named the state’s first assistant secretary of clean energy economic development, a role created by Cooper when he set the offshore wind goal last summer. Mundt said the state has the greatest potential for offshore wind generation out of any East Coast state – a strength the industry recognizes.
 
“Our central location on the East Coast and our two deepwater ports at Wilmington and Morehead City mean we can support offshore wind efforts up and down the entire East Coast,” Mundt said. “Radio Island at the Port of Morehead City presents great potential for North Carolina’s offshore wind efforts.”
 
Mundt highlighted Cooper’s recent Radio Island line item: “This significant investment in the future of Radio Island will ensure that NC Ports are able to serve a variety of future economic development opportunities, especially emerging opportunities in offshore wind and automobiles,” she said. “Partnership with federal, state, and local stakeholders will be necessary to carry out improvements at the site, and this budget recommendation is a signal that North Carolina is serious about investing in our Ports, offshore wind and our growing clean energy economy.”
 
WORKFORCE NEEDS
 
Randall Johnson, director of the N.C. Biotechnology Center’s Southeastern Office, said the industry represents an unparalleled opportunity. “The broad range of long-term job roles needed to realize the benefits of this opportunity is impressive, varying from turbine inspection and maintenance personnel, engineers of all types, marine technologists, and energy production and transmission experts, just to name a few,” he said.
 
Johnson said he was confident that with focused educational programs and customized training from the community college system and universities, the region would be well prepared to meet the industry’s workforce and talent development needs.
 
“What is less certain is our ability to capture components of the manufacturing supply chain needed to make wind turbine parts of all kinds for the industry,” he said. “Those parts will be manufactured somewhere, and we would all love for that manufacturing supply chain to spin up here in North Carolina. But we must continue fervently and with urgency to pursue these manufacturing opportunities before other states capitalize first.”

Wilmington Chamber of Commerce CEO Natalie English said existing companies in the region and state will likely encounter growth as suppliers emerge to meet the industry's needs. She encouraged both in- and out-of-state companies to join the N.C. Department of Commerce's available supply chain registry, which is building a database of business connections to help connect stakeholders. 
 
The private sector is waiting for a glaring public greenlight to make significant moves in this space, according to Glenn Anderson, chair of Cape Fear Ocean Labs, a nonprofit that is aiming to help bridge the public education gap for the locally unknown industry.
 
“People just aren’t familiar with it. I mean, it literally is an 800-pound gorilla from another planet,” he said. “Subdividing tracts of the ocean is an alien concept to developers who are subdividing tracts onshore. There’s actually a real disconnect on that.”
 
With manufacturing potentially heading to Morehead City, Anderson said Wilmington could relish in the longer-term gains the operations and maintenance phase can bring, with higher-paying jobs that last a couple of decades before the turbines reach the decommissioning phase.
 
“This is a 40-year cycle … but every day counts because it gets away from you fast,” he said. “Beach time is not about urgency. When people are investing $500 million in your neighborhood, they’re going to be urgent.”
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