{"id":1199139,"date":"2023-09-03T13:00:00","date_gmt":"2023-09-03T13:00:00","guid":{"rendered":"https:\/\/grist.org\/?p=617577"},"modified":"2023-09-03T13:00:00","modified_gmt":"2023-09-03T13:00:00","slug":"why-the-gulf-of-mexicos-first-offshore-wind-auction-wasnt-a-smash-hit","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2023\/09\/03\/why-the-gulf-of-mexicos-first-offshore-wind-auction-wasnt-a-smash-hit\/","title":{"rendered":"Why the Gulf of Mexico\u2019s first offshore wind auction wasn\u2019t a smash hit"},"content":{"rendered":"\n

This story was originally published by Canary Media<\/a> and is republished with permission.<\/em><\/p>\n\n\n\n

The Biden administration on Tuesday received a top bid of $5.6 million<\/a> during the first-ever auction of offshore wind development rights in the Gulf of Mexico.<\/p>\n\n\n\n

German energy giant RWE<\/a> placed the highest bid<\/a> for a 102,500-acre swath of water off the coast of Lake Charles, Louisiana, which has the potential to host 1.24 gigawatts\u2019 worth of offshore wind capacity. Two other lease areas near Galveston, Texas didn\u2019t receive any bids.<\/p>\n\n\n\n

The lease sale is an important step toward building clean energy projects in a\u00a0region that has long been dominated by offshore oil and gas production. Wind turbines are already spinning off the East Coast and more are being installed; meanwhile,\u00a0floating offshore wind farms<\/a>\u00a0are being planned for California\u2019s coastal waters. This week\u2019s auction officially brings the emerging U.S. offshore wind industry to Gulf waters.<\/p>\n\n\n\n

At the same time, the sale \u2014 which drew a lackluster response from the industry \u2014 reflects the significant challenges<\/a> facing the offshore wind market in general, and the Gulf of Mexico in particular.<\/p>\n\n\n\n

The U.S. Interior Department\u2019s Bureau of Ocean Energy Management put\u00a0three areas<\/a>\u00a0up for auction that together span nearly\u00a0302,000\u00a0acres off the coasts of Texas and Louisiana. The combined lease area has the potential to generate roughly\u00a03.7\u00a0gigawatts of clean electricity once developed, or enough to power nearly\u00a01.3\u00a0million American homes \u2014 though the power generated by these projects could also eventually go toward producing green hydrogen.<\/p>\n\n\n\n

\u201cWhile today\u2019s auction fell short of expectations, it is nonetheless a\u00a0critical step for the energy transition on the Gulf Coast,\u201d Josh Kaplowitz, vice president for offshore wind for the\u00a0American Clean Power Association<\/a>, an industry group, said on Tuesday in a\u00a0statement.<\/p>\n\n\n\n

According to the U.S. Department of Energy, the United States now has nearly 53 GW<\/a> of offshore wind projects in the early planning, permitting or construction phases \u2014 over a thousand times greater than the current installed capacity of 42 megawatts (0.042 GW). The U.S. project pipeline is booming in large part due to state policies and federal targets for developing offshore wind, including the Biden administration\u2019s goal of deploying 30 GW<\/a> of the renewable energy source by 2030.<\/p>\n\n\n\n

\"A
The orange block (right) shows the offshore wind lease area near Lake Charles, Louisiana that RWE won in the August 29 auction. The yellow block (left) shows the two lease areas near Galveston, Texas, neither of which received bids in the auction. \n BOEM<\/cite><\/figcaption><\/div><\/figure>\n\n\n\n

Yet it\u2019s far from guaranteed that all projects in the expanding pipeline will get built. <\/p>\n\n\n\n

Developers along the East Coast and worldwide are grappling with recent supply-chain bottlenecks, rising material costs and higher interest rates that have made it more expensive and less profitable to install giant offshore turbines in any location. Companies behind about\u00a09.7\u00a0GW\u00a0of proposed U.S. offshore wind farms are expected to renegotiate or outright cancel their existing power purchase agreements with utilities,\u00a0according to BloombergNEF<\/a>.<\/p>\n\n\n\n

On top of those industry-wide constraints, offshore wind developers in the Gulf of Mexico must also confront lower-than-average wind speeds \u2014 which limit how much electricity the turbines can produce \u2014 and seasonal hurricane activity that threatens to topple infrastructure. And while Louisiana has set a nonbinding goal of generating 5 GW of offshore wind power by 2035, the region\u2019s utilities and state agencies have done relatively little to put policies in place for offtaking all the clean electricity.<\/p>\n\n\n\n

\u201cThe business case in the Gulf of Mexico for offshore wind is very vague, and very uncertain,\u201d Chelsea Jean-Michel, a wind analyst at BNEF, recently told Heatmap<\/a>.<\/p>\n\n\n\n

John Begala of the Business Network for Offshore Wind told Canary Media ahead of Tuesday\u2019s auction that participants would have a \u200b\u201cstrategic vision\u201d that looks beyond the current challenges to see the long-term market value of Gulf Coast projects. <\/p>\n\n\n\n

That could eventually include supplying electricity to help produce hydrogen at facilities across Louisiana and Texas. Last week, the hydrogen production company Monarch Energy said it was exploring<\/a> building a $426 million plant in Louisana\u2019s Ascension Parish. The facility would use electrolyzers to split water into hydrogen and oxygen \u2014 a process that requires using massive amounts of clean energy to be considered \u200b\u201cgreen.\u201d<\/p>\n\n\n\n

Large energy companies like RWE are also well-positioned to create new turbine technologies that can perform well in the region, said Begala, who is the network\u2019s vice president for federal and state policy. Shell, for example, has invested<\/a> $10 million in Gulf Wind Technology to build an \u200b\u201caccelerator\u201d hub in Louisiana that will develop offshore wind products optimized for the Gulf.<\/p>\n\n\n\n

Slow winds and hurricanes \u200b\u201care environmental conditions that are found throughout the world,\u201d he said. \u200b\u201cIf Gulf of Mexico [developers] can figure out these twin challenges, you\u2019re going to see that technology explode worldwide, and it\u2019s going to have a major impact on global production,\u201d he predicted.<\/p>\n\n\n\n

Putting towering turbines in the Gulf would also boost the region\u2019s own emerging offshore wind economy. At shipyards in Louisiana and Texas, hundreds of workers are already busy building specialized vessels for installing turbines and substations that help bring offshore wind energy to the onshore grid.<\/p>\n\n\n\n

Environmental-justice groups said they welcomed this week\u2019s offshore wind auction, citing the urgent need to replace heavily polluting fossil fuel projects with new industries that can ideally benefit the communities that have long suffered from poor air quality, a degraded environment and, increasingly, rising sea levels and other consequences of a warming planet. <\/p>\n\n\n\n

But environmentalists also expressed disappointment that BOEM didn\u2019t include incentives for developers to create \u200b\u201ccommunity benefit agreements<\/a>\u201d in the lease terms, as the agency did in California\u2019s offshore wind auction last year. These legal agreements stipulate the terms a developer agrees to provide \u2014 including workforce development opportunities and other economic contributions \u2014 in exchange for earning the local community\u2019s support. The lease terms do offer a 10 percent credit to developers who contribute to a fisheries compensation fund for commercial fishing outfits, but nothing similar for communities.<\/p>\n\n\n\n

\u201cThe Gulf South is uniquely vulnerable to both [oil and gas] pollution and to climate impacts, and so we expected to see the same \u2014 if not more \u2014 benefits headed to the region,\u201d said Kendall Dix, the national policy director for the nonprofit organization Taproot Earth<\/a>.<\/p>\n\n\n\n

Still, he added, local communities will potentially have another opportunity to advocate for and negotiate such terms when developers and utilities forge power purchase agreements in the coming years, or when BOEM opens additional swaths of the Gulf of Mexico to offshore wind development. <\/p>\n\n\n\n

\u201cThe [Biden] administration has been saying that they want to make justice a priority,\u201d he said. \u200b\u201cI just think that the moment calls for something bigger.\u201d<\/p>\n

This story was originally published by Grist<\/a> with the headline Why the Gulf of Mexico\u2019s first offshore wind auction wasn\u2019t a smash hit<\/a> on Sep 3, 2023.<\/p>\n

This post was originally published on Grist<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

The region\u2019s first-ever lease sale arrived at a time of industry turmoil, and in a place saddled with unique obstacles to offshore wind development<\/p>\n","protected":false},"author":1713,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[267],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1199139"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/1713"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=1199139"}],"version-history":[{"count":2,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1199139\/revisions"}],"predecessor-version":[{"id":1199395,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1199139\/revisions\/1199395"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=1199139"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=1199139"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=1199139"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}