First-ever offshore wind lease sale in the Gulf of Mexico attracts just 2 bids - Straight Arrow News
First-ever offshore wind lease sale in the Gulf of Mexico attracts just 2 bids
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The recent fist-ever auction of offshore wind farm leases in the Gulf of Mexico has been hailed by the Department of the Interior as a “significant stride” in the Biden administration’s “efforts to create a clean energy future.” However, the response from investors has been less enthusiastic, potentially signaling challenges ahead for the offshore wind industry’s expansion in the region.
The Bureau of Ocean Energy Management (BOEM) completed auctions on Tuesday, Aug. 29, for three lease areas: one off the coast of Lake Charles, Louisiana, and two off the coast of Galveston, Texas. These combined leasing areas have the potential to generate electricity for nearly 1.3 million homes, presenting a substantial opportunity for clean energy production.
“By catalyzing the offshore wind energy potential of the Gulf of Mexico, we can tackle the climate crisis, lower energy costs for families and create good-paying jobs,” Interior Department Secretary Deb Haaland said.
“The Gulf of Mexico is poised to play a key role in our nation’s transition to a clean energy future,” BOEM Director Elizabeth Klein added.
However, the auction saw a lackluster investor turnout. The government received only two bids in total, both of which were directed towards the Lake Charles lease area. The remaining two areas failed to garner any bids.
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Renewable energy experts are now suggesting that any anticipated offshore wind boom in the Gulf of Mexico may face delays, with only the Lake Charles sale moving forward.
“This first-ever Gulf offshore wind auction was viewed as a big deal, a potential game changer,” said Mona Dajanj, global head of renewables, energy and infrastructure at the law firm Shearman and Sterling. “Those of us hoping to see a real offshore wind boom in the Gulf may have to wait.”
The subdued interest from investors aligns with ongoing challenges within the offshore wind industry.
Rising costs of turbine building materials have become a hurdle for developers. Since 2020, the average price of the seven most crucial critical minerals required for offshore wind farms has increased by 93%. This surge in costs has prompted some energy companies to opt for paying out substantial sums of millions of dollars to exit their leasing agreements on the East Coast rather than proceed with projects that have become progressively more expensive.
“Two substantial headwinds threaten to make [offshore wind] projects uneconomical,” wrote James E. Hanley, a senior policy analyst at the nonpartisan think tank Empire Center for Public Policy. “One is the recent high inflation, which raised the costs of materials and labor across all industries, and the other is bottlenecked supply chains that are causing a bidding-up of the prices of materials and components needed for building wind turbines.”
In the Gulf of Mexico, the tepid response to the inaugural wind lease sale was not entirely unexpected among industry leaders. Besides financial pressures faced by developers, the Gulf region presents its own set of challenges. Those challenges include lower wind speeds, the persistent threat of hurricanes and a lack of firm commitment from states in the area to purchasing clean energy.
“The business case in the Gulf of Mexico for offshore wind is very vague, and very uncertain,” said Chelsea Jean-Michel, a wind analyst at BloombergNEF. “It doesn’t really make a lot of sense.”
“It is striking just how bad the economics clearly must be in order for two of the three sites to remain unsold,” said Alon Carmel, a partner at PA Consulting who advises offshore wind companies.
Nonetheless, the Interior Department, responsible for overseeing the lease auctions, has highlighted the sole successful sale as a “vital milestone” in the push by the White House for increased clean energy infrastructure.
The German-based energy company RWE secured the lease for the Lake Charles area following a $5.6 million bid, as the company aims to “deliver a new energy resource into the region.”
The department projects that this lease has the potential to generate sufficient electricity to power about 435,400 homes and could potentially lead to the creation of hundreds of jobs.
“It always looks dire in the short term but the long-term foundation of this industry is still very strong and moving forward,” said Sam Salustro, a spokesperson for the Business Network for Offshore Wind.
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US holds first ever offshore wind lease sale in Gulf of Mexico
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6M bid for one offshore tract marks modest start for Gulf of Mexico wind energy – American Press
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
Click to see story on MY Northwest
Low interest in first US offshore wind energy auction
Click to see story on Business Live
First US offshore wind auction in Gulf of Mexico attracts one winning bid
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy – Odessa American
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Untracked Bias
$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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$5.6 million bid for one offshore tract marks modest start for Gulf of Mexico wind energy
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First Gulf of Mexico Offshore Wind Auction Flops
Click to see story on maritime-executive.com
Low Interest Shown in US’ First Gulf of Mexico Offshore Wind Auction
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The Gulf of Mexico offshore wind auction begins today. Here’s what you need to know
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Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.