U.S. Holds First-Ever Offshore Wind Lease Sale in Gulf of Mexico
The Biden administration made history recently by holding the first-ever auction for the right to develop offshore wind in the Gulf of Mexico, a region that is currently the nation’s primary source of offshore oil and gas. The sale is a major milestone in President Joe Biden’s agenda to make offshore wind a cornerstone of his plan to fight fossil-fuel driven climate change.
The sale, which was run by the Interior Department’s Bureau of Ocean Energy Management (BOEM), offered up three sites for bidding: one lease area of 102,480 acres off the coast of Lake Charles, Louisiana, and two areas totaling nearly 200,000 acres offshore Galveston, Texas. Together, these areas have the potential to generate about 3.7 gigawatts of power and could supply nearly 1.3 million homes with clean energy.
The auction attracted 15 qualified bidders, including offshore wind development arms of European energy companies Equinor, Shell, RWE and TotalEnergies, as well as newer entrants to the US offshore wind industry such as South Korea’s Hanwha, US renewable energy developer Hecate Energy, and Houston private equity firm Quantum Capital. However, only one of the three available areas was sold during the auction, receiving a high bid of $5.6 million from Equinor Wind US, LLC. The other two areas did not receive any bids.
The low interest in the Gulf auction reflects some of the challenges and opportunities that the region poses for the offshore wind industry. Unlike the Northeast and Mid-Atlantic regions, where several states have passed laws requiring utilities to buy power from offshore wind projects, the Southeastern United States has low electricity prices which make it economically challenging to compete. Moreover, the Gulf’s lower wind speeds, soft soils and hurricanes are potential technical hurdles requiring innovative solutions.
On the other hand, the Gulf also offers unique benefits for offshore wind development, such as its existing energy production infrastructure and workforce. The region has a long history of offshore oil and gas operations, which could provide valuable expertise and resources for offshore wind projects. For example, Equinor plans to use its existing oil and gas facilities in the Gulf as staging areas for its offshore wind projects. The company also intends to hire local workers and contractors for its project, creating new jobs and economic opportunities in the Gulf Coast area.
To support the creation of better jobs, BOEM has included incentives in the lease sale for bidders who commit to supporting workforce training programs, encouraging offshore wind jobs to be offered to workers from the fossil fuel industry. The bureau also encourages the use of Project Labor Agreements – agreements between developers and unions that establish wages, safety protections and benefits for workers before hiring.
Another opportunity for offshore wind in the Gulf is to fuel a “green” hydrogen supply chain for the region’s vast industrial corridor. Green hydrogen is produced by using renewable electricity to split water into hydrogen and oxygen, creating a zero-carbon fuel that can be used in various sectors, such as transportation, manufacturing and power generation. Several developers have expressed interest in using offshore wind power to produce green hydrogen in the Gulf, helping reduce emissions from industries that are hard to decarbonize with electriciy alone as an energy source.
This historic auction in the Gulf of Mexico signals an economic transition in a region which has long been married to the oil and gas industry. However, it is also a sign that more work needs to be done to ensure that transition is just and equitable for the communities most harmed by the fossil fuel industry. As National Policy Director Kendall Dix of non-profit Taproot Earth stated: “We need to make sure that this new industry is not just replicating some of the same problems that we’ve seen with oil and gas – like environmental racism, worker exploitation and corporate capture – but instead is creating a new model of energy democracy that benefits everyone.”
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8/29/2023
Sources:
- US holds first ever offshore wind lease sale in Gulf of Mexico by Dharna Noor on The Guardian
- First-Ever Gulf Coast Wind Auction Could Be A Boon For U.S. Green Hydrogen by Irina Slav on OilPrice.com.
