Auction designs for allocating wind energy leases on the U.S. outer continentalshelf

Abstract

The anticipated expansion of offshore wind energy in the U.S. has been the subject of considerable legislative effort. The Energy Policy Act (EPAct) of 2005 and the Outer Continental Shelf Lands Act (OSCLA) detail the criteria the federal government must follow when allocating leases for offshore wind farms. The Bureau of Ocean Energy Management (BOEM) provides primary federal oversight to offshore wind in federal waters, and in 2009 they released their formal management guidelines going forward. This research examines lease allocation methods BOEM may use, as well as several promising alternatives, through the lens of the mandated criteria set forth by OSCLA and the EPAct of 2005. We find significant variation between allocation methods in terms of how well they meet each of the criteria. Price-based allocations will have difficulty in meeting criteria while also accounting for the immature status of the offshore wind energy industry. Instead, a multiple factor approach which includes non-monetary considerations may be a more appropriate way to balance federal mandates and industryneeds.