RWE emerges as sole winner as first US Gulf of Mexico offshore wind auction draws limited interest
The first ever auction of offshore wind development rights in the Gulf of Mexico ended on Tuesday, with just one of three available areas sold for $5.6m.
German utility RWE placed the highest bid to secure the rights to develop more than 100,000 acres off Lake Charles, Louisiana.
The lease area RWE provisionally won will have the potential to generate 1,24 GW of electricity, enough to power about 435,400 homes.
As part of the sale, RWE earned bidding credits that will contribute to establishing a fisheries compensatory mitigation fund and critical investments for workforce training and a domestic supply chain.
According to the US Bureau of Ocean Energy Management, there was only one other bidder for the Lake Charles project, while the other two lease areas on offer off Galveston, Texas, received no bids. The three areas auctioned have a combined potential to generate about 3.7 GW and power almost 1.3m homes.
The poor bidding highlighted a variety of issues confronting the offshore wind industry, including growing prices caused by inflation, rising interest rates, and licensing delays.
Texas and Louisiana likewise have no legal mandates for clean energy, slower average wind speeds than the Northeast, higher risks from seasonal hurricanes, and substantially lower retail power prices, ranking 36 out of 50 and 44, respectively, for electricity costs to end users in 2021.
“Perhaps, in a commercial climate where the value of the electricity is so important, it is simply more attractive to position a wind turbine elsewhere, in many developers minds,” Phillip Hargreaves, new energy solutions ecosystem program director at TGS, noted on LinkedIn.
“Whilst it will be reported as a reflection of the state of the industry today, tomorrow it is more likely that many developers will see this as a missed opportunity to secure acreage with significantly lower development risks and complexity. With today’s dynamic energy prices, increased electrification, and perhaps even demand for hydrogen for export, this may look like a missed bargain for many in the not-too-distant future,” Hargreaves said.
