Modest Beginnings: Gulf of Mexico Wind Energy Auction Nets $5.6 Million for a Single Offshore Tract

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In a first-of-its-kind auction for the Gulf of Mexico, a company bid $5.6 million on Tuesday to license federal waters off the coast of Louisiana for the generation of wind energy. It was a modest beginning for offshore wind energy development in the Gulf, which trails behind the Northeast. Only one of the three available parcels was bid on. And only two firms placed bids. RWE Offshore US was deemed the successful bidder.

According to the Biden administration, the tract comprises more than 102,000 acres (41,200 hectares) and has the potential to generate 1.24 gigawatts of wind energy, enough to power 435,000 residences.

Analysts attributed the current, relatively low interest in the lease sale to a variety of factors, including inflation and challenges specific to the region, such as reduced wind velocities and the need for designs that account for hurricane threats.

Tuesday, the Washington-based research firm Clearview Energy Partners concluded in an analysis that the governments of Gulf states lack the offshore wind targets or renewable energy mandates necessary to encourage more wind development.

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Offshore Wind’s Vital Role in Sustainable Hydrogen Production: Challenges and Opportunities for Wind Developers

Wind energy is anticipated to play a significant role in the development of sustainable hydrogen production, according to Clearview’s report. According to the report, the Biden administration has yet to implement a planned tax credit for hydrogen, which is a potential impediment to immediate interest in Gulf wind leases.

“Offshore wind developers must choose where to invest their resources, time, and effort. It is not surprising that they are more interested in regions like the Northeast, where electricity prices are higher and offshore wind is better positioned to compete, says Becky Diffen, a partner at the Houston law firm Norton Rose Fulbright who specializes in renewable energy financing.

Other factors are favorable for the eventual development of wind in the Gulf. “While RWE may be the only company to have won a bid for federal waters in the Gulf, there are a few companies interested in pursuing offshore wind in Louisiana state waters,” said Clearview. “Last year, Louisiana legislators passed a law that increased the size of offshore wind farms permitted in state waters,” the authors write.

In a region where offshore oil and gas production continue to be a significant economic driver, industries are also adopting wind power. For example, the Louisiana shipbuilding behemoth Edison Chouest Offshore is constructing a 260-foot-long (80-meter) vessel to house offshore wind technicians and their equipment used to operate wind farms in the Northeast.

“Today’s auction results demonstrate the critical role that state public policy plays in the development of the offshore wind market,” said Luke Jeanfreau of the Business Network for Offshore Wind, an organization created to promote the growth of offshore wind. “Gulf’s expertise in offshore construction is unparalleled, and their innovative solutions will continue to drive the U.S. and global offshore wind industry forward.”

 

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Source: ABC News

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