Wind

US cancels Gulf of Mexico offshore wind lease sale amid scant interest

Regulator BOEM received interest from only a single developer in the round even as renewables firm Hecate requested rights to acreage outside designated wind energy areas

The Gulf of Mexico.
The Gulf of Mexico.Photo: Shutterstock
US Offshore Wind Editor, Recharge

The US has cancelled its proposed offshore wind lease sale in the Gulf of Mexico due to scarce interest from developers, Bureau of Ocean Energy Management (BOEM) announced on Friday, even as it received a request for coastal acreage outside its designated areas.

In March, BOEM proposed selling 410,060 acres (1,660 km2) in four wind energy areas (WEAs) off the US Gulf states of Louisiana and Texas holding around 5GW of capacity.

Only a single developer, German energy firm RWE, expressed interest in the sale, however.

“As a result, BOEM is cancelling this sale,” the bureau said, adding it “may decide to move forward with a lease sale at a future time, based on industry interest.”

This would have been the second auction in the US Gulf following its first-round last year that saw three leases attract only two bidders, with RWE taking the sole lease off the coast of Louisiana for some $5.6m, the lowest price paid for offshore wind acreage in a decade.

Two leases facing Galveston, Texas, didn’t attract any bidders.

Hecate lease request

Despite the cancellation, BOEM announced an unsolicited lease request by Chicago-based renewables developer Hecate Energy for acreage outside the designated WEAs.

The two areas totalling 142,352 acres (576 km2) located off the coast of southeast Texas had been identified by BOEM in 2021 as potentially suitable for leasing.

BOEM will issue a request for competitive interest (RFCI) to see if other developers are likewise interested in the areas requested by Hecate.

If one or more developers express interest, BOEM may decide to move forward with a lease sale. If not, it may “move forward with a noncompetitive lease issuance to Hecate Energy,” the regulator said.

The RFCI will be published in the Federal Register, the nation’s journal of record, on 29 July.

“The interest from industry leaders such as Hecate and RWE demonstrates the commercial potential in the region,” said BOEM Gulf of Mexico (GoM) regional director James Kendall.

Recharge has reached out to Hecate to learn why it chose to request a lease outside the designated WEAs rather than participate in the auction.

Gulf supply chain

The US Gulf is the centre of offshore oil and gas production in the US and has a well-developed energy supply chain of manufacturers, shipbuilders, and steel fabricators that could potentially allow for cheaper development.

Industry advocate Oceantic Network found 23% of 1,500 contracts issued for the US offshore wind industry have been given to Gulf-based suppliers, including nearly $1.3bn in vessel orders and retrofits to GoM shipyards from Texas to Florida.

GoM “is the US offshore wind industry’s supply chain engine, providing the workforce, offshore expertise, vessels, and fabrication yards that are building out our first East Coast projects, and is poised to become a major regional market of its own,” said Oceantic's vice president of strategic communications, Sam Salustro.

Sector hurdles

The region however experiences generally lower wind speeds of little more than 7 metres per second (m/s), just over the threshold for commercial viability as reckoned by National Renewable Energy Laboratory.

It also experiences frequent powerful hurricanes that would require more robust – and costly – infrastructure.

Uncertain route-to-market poses an even greater challenge as Louisiana is the only Gulf Coast state to set industry goals with a 5GW by 2035 target established by its previous governor, Democrat Jon Bel Edwards.

His Republican successor, Jeff Landry, is an oil & gas lobbyist who has expressed skepticism about offshore wind and renewable energy in general.
Neighbouring Texas is already the nation’s leader in renewable energy with some 40GW of onshore wind in operation and has expressed little interest and in some cases outright hostility to offshore wind.

Resources in the eastern sections of the Gulf meanwhile are insufficient for commercial development.

Market progress

Despite market ambiguity, sector activity continues. Louisiana has begun its Offshore Wind Roadmap, while the US Department of Energy has started to assess transmission needs to support sector development.

Further, two projects in Louisiana state waters, Mitsubishi's 200MW Gulf Wind and Vestas' Steelhead Wind, have signed operating agreements with local authorities and continue to make progress.

BOEM intends to move forward with offshore wind lease sales in the Gulf of Maine and coastal Oregon this year, with another 12 planned over the next few years to meet President Joe Biden’s goals of 30GW by 2030 and 110GW by 2050.

(Copyright)

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Published 26 July 2024, 19:03Updated 29 July 2024, 08:37
AmericasUSLouisianaGulf of MexicoTexas