The first-ever auction of federal offshore wind energy project sites in the Gulf of Mexico, held online, drew just one winning bid on Aug. 29—with German developer RWE securing a 102,480-acre site off Lake Charles, La., for $5.6 million.
Two larger areas off Galveston, Texas totaling about 200,000 acres, did not attract interest from the estimated 15 bidders that the U.S. Interior Dept. said earlier had qualified, including a number with oil and gas operations in the Gulf and those that are developing offshore wind projects in other regions.
In posting the disappointing results after a few hours, Interior said the secured tract has 1.24 GW of offshore wind energy capacity and “represents an important milestone for the Gulf of Mexico region.” It said bid credits earned by RWE will result in more than $860,000 in investments to boost workforce training and domestic supply chain growth, and $430,000 for fisheries impact mitigation.
Despite intentions for offshore wind projects to launch a green hydrogen supply chain for regional oil and gas production, development risks included challenging wind and soil conditions, greater hurricane potential, power price competition from traditional and renewable power sources and a lack of strong state mandates to purchase wind power.
"Our assessment factoring in wind speeds, competition from other onshore renewables, and competitive power market conditions does not, at this time, justify submitting an offer," said a statement from TotalEnergies, the France-based energy giant that is developing offshore wind projects in Atlantic Ocean markets.
Texas has not been a major offshore wind proponent, likely due to its focus on onshore wind energy and solar power development.
In its statement, winner RWE noted Louisiana's goal of 5 GW of offshore wind capacity by 2035. The firm noted its “early investments in jumpstarting the offshore wind industry in the region, including a collaboration with [economic development agency] Greater New Orleans Inc. to ... identify [oil and gas] companies with transferable capabilities.”
RWE has about 5.9 GW of U.S. offshore wind capacity in development, it said.
Even with the tepid market response to the Gulf auction, the Biden administration is pushing U.S. offshore wind expansion, approving last week the fourth commercial-scale project: the 704-MW Revolution Wind off Rhode Island that will serve that state and Connecticut. Interior issued a record of decision for construction to start, possibly in weeks, it said.
Investment bank Morgan Stanley also said last month it will link with maritime and logistics contractor Crowley Marine Services to develop new wind port and feedering sites and expand existing ones. “We believe port infrastructure is essential to the buildout and long-term maintenance of offshore wind projects,” the bank said.
But economic challenges remain. Dominion Energy said last month the cost of its Charybdis wind turbine installation vessel, now being built in Texas and the first to be made in the U.S., will rise to $625 million from $500 million. A spokesman said the increase stems from financing, not building costs, and that Charybdis will be ready to support construction of the utility firm's 2.6-GW wind project off Virginia even though vessel completion is behind schedule.
In an Aug. 24 mreport, the U.S. Energy Dept. noted about $8.5 billion in new supply chain and port infrastructure investment in the sector in 2022, totaling an accumulated $17 billion since 2014. But the analysis also said project costs rose by up to 30% last year, with DOE acknowledging that supply chain shortfalls, inflation and rising finance costs have “raised the level of market uncertainty."
