Dive Brief:

• The Department of the Interior’s Tuesday auction of three lease areas in the Gulf of Mexico only netted bids on the area offshore Lake Charles, Louisiana, while the two areas offshore Galveston, Texas did not receive bids.
• RWE Offshore US Gulf put in a winning bid of $5.6 million for the 102,480-acre Lake Charles lease, which has the potential to generate up to 1.24 GW, according to Interior.
• Research firm ClearView Energy Partners said in a Tuesday note that a lack of offshore wind targets in the Gulf states, as well as technical difficulties posed by deployment in those waters, may have contributed to a lack of bidder enthusiasm.

Dive Insight:

Though the auction received limited interest from bidders, the Bureau of Ocean Energy Management along with clean energy groups celebrated it as a breakthrough for the region and U.S. offshore wind deployment.

“While today’s auction fell short of expectations, it is nonetheless a critical step for the energy transition on the Gulf Coast,” said the American Clean Power Association’s Vice President of Offshore Wind Josh Kaplowitz in a release. “The Gulf is a pioneer region.”

John Filostrat, BOEM’s director of public affairs for its Gulf of Mexico Regional Office, declined to comment on how the agency will proceed with the unsold lease areas, but said the sale was a “significant milestone” and that BOEM looks forward to holding more offshore wind lease sales in the future.

In a release, RWE said it hopes to bring its planned project for the lease area online by the mid-2030s.

RWE Offshore US Gulf’s winning bid of $5.6 million equates to a bid of around $54.64 per acre, said ClearView – paling in comparison to the last four offshore wind auctions, which netted winning bids of at least $1,000 per acre.

“State solicitations remain the strongest driver for offshore wind,” the firm said. “However, none of the Gulf states have offshore wind targets or other clean energy policies such as renewable mandates or carbon reduction targets that could encourage offshore wind buildout.”

California’s 2022 offshore wind auction similarly underperformed, with winning bids on five lease areas averaging $2,028 per acre after leases offshore New York and New Jersey saw winning bids average $8,951 per acre in a sale earlier that year.

However, California netted more bidder enthusiasm than the Gulf of Mexico auction, with 43 bidders prequalifying and seven participating, while only 15 bidders prequalified and two participated in yesterday’s auction, ClearView said.

Though California’s lease areas pose the technical challenge of being located in water deep enough to require floating offshore wind, which has yet to be deployed in the U.S., the state has adopted ambitious goals of deploying 2 GW to 5 GW of offshore wind by 2030.

In addition to a lack of offshore wind deployment goals in Louisiana and Texas, a 2020 report from BOEM found offshore wind in the Gulf would face several unique challenges – including lower wind speeds that would necessitate larger rotors than were currently on the market, the potential for hurricane damage, lower electricity prices and soft soil.

However, BOEM also found advantages in the region: abundant shallow water resources; a warmer climate and calmer seas, which would make operations and maintenance easier and less costly; and lower labor rates and proximity to the supply chains already established for offshore oil and gas installations.