The Interior Department will hold its first-ever offshore wind auction in the Gulf of Mexico on Tuesday, a move that comes as the Biden administration looks to slash fossil fuel emissions and combat climate change.
The sale will include 102,480 acres offshore Lake Charles, Louisiana, and two areas totaling nearly 200,000 acres offshore Galveston, Texas, according to Interior, which announced the sales last month.
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Combined, the areas being auctioned off have potential to generate 3.7 gigawatts of energy, or enough to supply roughly 1.3 million homes.
The auction, which will include major players such as Shell, Equinor, and TotalEnergies, comes after years of engagement between Interior’s Bureau of Ocean Energy Management, or BOEM, and other government agencies, states, and industry stakeholders in the region.
The areas being sold will offer much different opportunities for development than traditional offshore acres leased by BOEM, which are almost entirely concentrated in the Northeast.
That’s because the Gulf has lower wind speeds and a six-month annual hurricane season that could delay or derail development of a traditional offshore wind farm.
Instead, potential bidders largely see the offshore acres in the Gulf acres as a potential hub for green energy production, one that will allow them to tap into state-level subsidies for carbon-free energy production and infrastructure in the region as they look to develop one of the most expensive forms of clean energy.
Ahead of the first auction, here's a look at the challenges and opportunities for the offshore acres being leased on the Gulf Coast:
Wind project skepticism
Experts are skeptical about the potential for offshore wind generation in the Gulf of Mexico, noting that it has lower wind speeds than the Northeast, softer soils that will complicate construction, and a hurricane season that lasts for half the year.
“The vulnerability of massive structures the size of the Chrysler Building to hurricanes, nor'easters, and superstorms has not been adequately investigated and vetted,” Rep. Chris Smith (R-NJ) said at an offshore wind hearing earlier this year. “Imagine 1,000-foot poles falling like dominoes into the sea.”
Wind turbines are also vulnerable to collapse in destructive hurricanes that frequent the Gulf. According to a 2012 Carnegie Mellon University study, there is a “very substantial risk that a Category 3 or higher hurricane can destroy half or more of the turbines at some locations.”
As a solution, some companies have started work to adapt wind turbines and project infrastructure to account for the different conditions. The New Orleans-based company Gulf Wind Technology, for example, recently teamed up with Shell to begin developing turbines that can withstand high-speed winds and other weather patterns unique to the region.
In the interim, these factors make it “harder to justify an investment decision” in the Gulf, Alon Carmel, a partner at PA Consulting who advises offshore wind companies, told Reuters.
Green hydrogen possibilities
What the Gulf lacks in favorable wind farm conditions, it makes up for in infrastructure, skilled workers, and a well-developed supply chain that has been decades in the making. BOEM and others see it as a natural spot to begin innovating in the green hydrogen space.
The Gulf "is uniquely positioned to transition to a renewable energy future, including the development and implementation of the production and use of green hydrogen,” John Filostrat, a spokesman for BOEM, said.
Offshore turbines can help create green hydrogen through electrolyzing water, or a process known as electrolysis, and power refineries and other energy industry operations located in Texas and Louisiana.
"All of a sudden, you could see the greening of what are rather carbon-intensive industrial facilities along the coast," Erik Milito, the head of the National Ocean Industries Association, which represents both offshore wind and oil and gas companies, told the Washington Examiner.
NOIA and their clients are "thrilled" about the potential of offshore wind developments in the Gulf of Mexico, he added.
Some developers see the pairing off offshore wind and hydrogen as an opportunity to allow them to tap into the Inflation Reduction Act's subsidies for carbon-free energy projects while also relying on existing infrastructure that’s long been used for offshore oil and gas development in the region to cut down on costs for green hydrogen production.
“The Gulf of Mexico is uniquely situated to facilitate and benefit from green hydrogen production via offshore wind," Shell said in comments posted to BOEM earlier this year, noting that the area’s existing infrastructure, including ports and pipelines, made it particularly lucrative to help facilitate the development and distribution of green hydrogen.
“These opportunities have the potential to rapidly advance integrated decarbonization and renewable energy generation activities that are only possible with the Gulf of Mexico's unique energy landscape, supply chain and workforce,” Amanda Dasch, the vice president of Shell Offshore Americas, said in the filing.
Others in the region agree.
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“They understand the business proposition,” John Begala, a senior official with the Business Network for Offshore Wind, said last week.
“There’s a lot of real possibility here, and the Gulf is ready," he added.