Posted on October 31, 2023
The Bureau of Ocean Energy Management (BOEM) today announced it has finalized four new Wind Energy Areas in the Gulf of Mexico. The Biden Administration continues to push forward with its plan for offshore wind energy despite the recent setback for the industry and the lackluster response to the first Gulf of Mexico wind auction.
Today’s announcement outlined four additional areas mostly off the coast of Texas, as well as one closer to Louisiana, that they are saying hold the potential to power more than three million homes. It is an interim step that will be followed by the publication of the proposed sites and a 60-day public comment period. The proposed lease areas are likely to be further refined based on input before the lease auction is scheduled.
“Creating an offshore wind industry in the Gulf of Mexico will take time and partnership,” said BOEM Director Elizabeth Klein. “BOEM is pursuing another offshore wind lease sale in the Gulf of Mexico due to continued industry interest and feedback from our partners and key stakeholders.”
The first Gulf of Mexico offshore wind lease sale took place at the end of August and ended up resulting in just one bid. BOEM had used three leases as tests for the region, with two offered near Galveston, and one near Lake Charles. RWE Offshore US Gulf was the successful bidder, offering $5.6 million for the Lake Charles Lease Area, which according to BOEM has the potential to support up to 1.24 gigawatts of offshore wind energy capacity and power nearly 435,000 homes. Experts cited a long list of challenges that make the Gulf Coast a different proposition for wind energy versus the Northeast United States. RWE reportedly said it had not determined any plans for the lease area at this time.
Biden administration is proposing four additional lease areas for offshore wind in the Gulf of Mexico (BOEM)
The four wind areas proposed in the second phase of the offering include the largest of just over 495,000 acres approximately 47 miles off the coast of Texas. A second one is just over 91,000 acres approximately 53 miles off the coast of Texas, and the third is nearly 120,000 acres approximately 61.5 miles off the coast of Texas. The single area proposed for Louisiana is nearly 57,000 acres and 82 miles off the coast.
Since the start of the Biden administration, BOEM highlights it has approved the nation’s first four commercial-scale offshore wind projects, held four offshore wind lease auctions, and initiated environmental reviews of 10 offshore wind projects. They opened both the Pacific Coast and the Gulf of Mexico to wind, although both have been met with strong opposition, and BOEM continues the process of exploring additional opportunities in Oregon, the Gulf of Maine, and the Central Atlantic.
Critics are calling on the administration to do more to recognize the emerging financial challenges that have caused developers to walk away from projects in the Northeast. Today, it came out that Equinor recorded a $300 million impairment charge against its U.S. offshore wind power portfolio during the quarter. New York State recently rejected its bid to revise power purchase agreements due to inflation and cost increases for the planned wind farms the company is developing with BP. The company says it is still reviewing the next steps and likely will seek to rebid the projects in 2024.
Earlier in the year, another major developer Ørsted reporting would take a $2.3 billion write-off on its U.S. wind portfolio and was also reconsidered the viability of the projects due to rising costs and an inability to realize tax incentives. Developers of projects in both Massachusetts and Connecticut have also agreed to fines to end power purchase agreements and open their projects to rebidding.
