In a historic auction for the Gulf of Mexico, a company placed a bid of $5.6 million on Tuesday to lease federal waters off the coast of Louisiana for wind energy generation.
Although this is a modest start for wind energy development in the Gulf, as it currently lags behind the Northeast in offshore wind power, it is still a significant step forward. Out of the three available tracts, only one received bids, with only two companies participating. RWE Offshore US emerged as the winning bidder.
The tract, spanning more than 102,000 acres, has the potential to generate 1.24 gigawatts of wind power, which is enough to supply electricity to approximately 435,000 homes.
Various factors have been cited for the relatively low interest in this lease sale, including inflation and specific challenges in the area such as lower wind speeds and the need for designs that can withstand hurricane threats.
An analysis by Washington-based research group Clearview Energy Partners highlighted that Gulf states’ governments lack the necessary offshore wind targets or mandates for renewable energy, which could potentially encourage more wind development.
The report from Clearview also emphasized that wind energy is likely to play a significant role in the development of clean hydrogen production. However, the Biden administration has yet to implement a planned tax credit for hydrogen, which could be another factor affecting immediate interest in Gulf wind leases.
Becky Diffen, a partner specializing in renewable energy financing at the Norton Rose Fulbright law firm in Houston, pointed out that offshore wind developers prioritize locations like the Northeast, where power prices are higher and offshore wind is better positioned to compete.
In spite of the current scenario, there are positive signs for wind development in the Gulf in the long run. Clearview noted that while this auction only saw RWE winning a bid for federal waters in the Gulf, several companies are interested in pursuing offshore wind in Louisiana state waters. Furthermore, Louisiana lawmakers enacted a law last year that expanded the size of allowable offshore wind leases in state water.
It’s worth mentioning that even in a region where offshore oil and gas remain dominant, industries are increasingly embracing wind energy. For example, Louisiana shipbuilding company Edison Chouest Offshore is constructing a 260-foot-long vessel specifically designed to serve as floating quarters for offshore wind technicians and their tools, supporting the operation of wind farms in the Northeast.
The auction results demonstrate the important role that state public policy plays in the development of the offshore wind market. Gulf expertise in offshore construction is unparalleled, and their innovative solutions will continue to drive the U.S. and global offshore wind industry forward, according to Luke Jeanfreau of the Business Network for Offshore Wind.
