Aug 29 (Reuters) – The Biden administration’s first-ever auction for offshore wind energy development rights in the Gulf of Mexico ended with a single win of $5.6 million on Tuesday, reflecting weak demand for the clean energy source in a region known for oil and gas production. .
Germany’s RWE (RWEG.DE) has won rights to 102,480 acres (41,472 hectares) off the coast of Louisiana — the lowest winning bid for a federal offshore wind lease in an auction since the Obama administration — while the other two leaseholds offered off Texas have not received bids. According to the findings, which were published online by the US Office of Ocean Energy Administration.
The auction was by far the weakest of the four held since President Joe Biden took office in 2021 vowing to accelerate industry as part of his climate change agenda.
The Biden administration wants to deploy 30 gigawatts of offshore wind capacity by 2030, and the Interior Ministry said the three Gulf leases offered combined could account for more than 10% of that amount.
“It’s amazing how obviously bad the economic situation must have been for two of the three sites to remain unsold… and for the one that was sold to remain at such a low price,” said Alon Karmel, partner at PA. Consult who advises offshore wind companies.
A RWE spokesperson said the sale was “a great opportunity to enter the Gulf’s offshore wind industry on the ground floor,” and noted that the first lease sales in the Atlantic had similar participation and pricing.
RWE is among the largest developers of offshore wind power in the world, has an extensive portfolio in Europe, and has also secured leases off the coasts of California and New York.
French energy giant TotalEnergies (TTEF.PA), which is developing offshore wind projects elsewhere in the US, is one of the companies that has opted out of the sale, despite being eligible to bid.
“Our assessment of wind speeds, competition from other onshore renewables, and competitive energy market conditions does not currently warrant an offer,” a company spokesperson said in a statement.
Offshore wind lease sales off New York and New Jersey in February 2022 attracted bids in the billions of dollars, while recent auctions for areas off the coasts of the Carolinas and California attracted hundreds of millions of dollars.
Many of those states have passed laws requiring utilities to buy power from offshore wind projects — states that are crucial for a technology estimated to produce electricity at twice the cost of a natural gas plant.
The Gulf region’s low wind speed, soft soil and hurricanes are among the challenges facing the industry. Energy prices are also low in the Southeast, which could make it difficult for high-cost offshore wind generation to compete for electricity contracts.
The sale also comes at a difficult time for Offshore Wind.
In recent months, owners of several planned projects in the Northeast have sought to renegotiate or cancel power delivery contracts due to rising cost inflation. Several of these companies have been qualified to bid on Gulf of Mexico leases.
RWE said the Louisiana lease was attractive because the state has a strong coastal port and supply chain infrastructure and a goal of installing 5 gigawatts of offshore wind capacity by 2035. Texas does not have an offshore wind target.
“Today’s auction results demonstrate the important role that state public policy plays in developing the offshore wind market,” Liz Burdock, chief business network at Offshore Wind, said in a statement.
The Biden administration viewed the sale as a major milestone for the industry.
“Today’s lease sale marks an important milestone for the Gulf of Mexico region – and for our nation – for the transition to a clean energy future,” said Elizabeth Klein, BOEM Administrator.
She said the Louisiana lease has the potential to power 435,400 homes and create hundreds of jobs.
According to the BOEM document, fifteen companies were eligible to bid on the sale.
These include the offshore wind development arms of European energy companies Equinor (EQNR.OL) and Shell (SHEL.L), which also have oil and gas operations in the Gulf.
Reporting by Nicola Groom. Editing by Margarita Choi, Nick Zieminski, and Daniel Wallis
Our standards: Thomson Reuters Principles of Trust.
“Typical beer advocate. Future teen idol. Unapologetic tv practitioner. Music trailblazer.”