U.S. bets on offshore wind boom in oil-rich Gulf of Mexico

The Gulf of Mexico has been a hub for U.S. oil production for decades. A government auction Tuesday could help make it a nexus for offshore wind, too.

More than a dozen companies have qualified to bid for wind development rights during the first sale of tracts off the Texas and Louisiana coast.

The sites have the potential to generate 3.7 gigawatts of emission-free electricity that could be used to produce green hydrogen and provide power to Gulf Coast refineries, ports and shipyards.

“All of a sudden, you could see the greening of what has been a rather carbon-intensive industrial base,” said Erik Milito, head of the National Ocean Industries Association.

Three tracts, each spanning about 100,000 acres, are up for grabs in the auction, which is set to unfold anonymously over successive rounds Tuesday.

Companies that have registered as potential bidders include apparent affiliates of offshore oil heavyweights BP, Equinor, Repsol, Shell and TotalEnergies as well as renewable power companies Hanwha, Hecate Energy and Invenergy.

Past Interior Department auctions of wind leases along the U.S. East Coast have drawn big interest, buoyed by near-guaranteed demand from states vowing to procure the resulting power from strong gusts typically measuring around 19 to 22 mph.

By contrast, the winds are less potent across the areas of the Gulf of Mexico that are for sale – about 15 to 20 mph.

Developers will have to design around – and deal with – seasonal hurricanes.

And while a task force chartered by Louisiana Governor John Bel Edwards set a goal of producing five gigawatts of offshore wind power by 2035, no Gulf Coast state has established firm commitments to buy it.

Yet what the area lacks in wind speed and purchase commitments it makes up for in infrastructure and supply chains.

Developers can tap into a vast network of construction companies, shipyards, ports and engineering firms that have long supplied offshore oil and gas development in the Gulf.

“East Coast states have had to invest a significant amount of funding to get to the place where the Gulf just gets to start at,” said Sam Salustro, a vice president at the Business Network for Offshore Wind.

Developers can take advantage of “direct access to an existing industrial supply chain,” said Josh Kaplowitz, vice president of offshore wind at the American Clean Power Association.

“Texas and Louisiana have been doing offshore energy for decades, and leveraging the facilities and expertise and workforce is a huge opportunity.”

That could help insulate Gulf Coast offshore wind projects from some of the challenges that have confronted ventures along the Atlantic seaboard, with supply chain challenges and rising costs spurring delays.

President Joe Biden has set a goal of deploying 30 gigawatts of offshore wind by the end of the decade – and development in the Gulf of Mexico is key to hitting that target as well as U.S. climate pledges.

The U.S. has lagged behind European competitors in deploying offshore wind, with most leasing concentrated on the Northeast.

By contrast, the Gulf Coast’s expertise could feed innovation in offshore wind – with local engineers and fabrication companies developing new ways to build and install turbines. And regional companies, in turn, can foster new business lines insulated from the boom-and-bust cycles of oil and gas.

The excitement is palpable, said John Begala, with the Business Network for Offshore Wind, as he met with welders in Freeport, Texas, last week.

“They understand the business proposition,” Begala said. “There’s a lot of real possibility here, and the Gulf is ready.”