August 31, 2023 — The problems derailing various East Coast offshore wind developments because of inflation, supply chain issues, and the rising cost of capital, are reflected in the recent Gulf of Mexico wind lease sale. The Biden administration talked up this first sale in the Gulf, but the results were a resounding dud!
The government offered three offshore wind leases for bid Tuesday — one off Lake Charles, La., and two off Galveston, Texas. Only the Louisiana lease was contested with two bids received.
Germany’s RWE Renewables won the 102,480-acre lease by paying $5.6 million. That works out to $54.65 per acre, well below the bounty the government collected from its last sale in the New York Bight area. That 2022 sale raised nearly 800 times more money ($4.37 billion) in a 64-round bidding contest than the Gulf sale. The average price per acre paid was 160 times the Louisiana sale.
In reviewing our offshore wind sale records, the Gulf outcome is more comparable to the 2013 sale result for the two leases off Massachusetts than any other sale. In that sale, 164,000 acres were leased for $3.8 million, or $23 per acre. The price paid per megawatt of potential offshore wind power was nearly $30,000/MW, 11 times the price for the Louisiana lease.
BOEM Director Elizabeth Klein applauded the sale. “Today’s lease sale represents an important milestone for the Gulf of Mexico region — and for our nation — to transition to a clean energy future,” she said.
A more sobering view was offered by Mona Dajani, global head of renewables, energy and infrastructure at law firm Shearman and Sterling. “This first-ever Gulf offshore wind auction was viewed as a big deal, a potential game changer. Those of us hoping to see a real offshore wind boom in the Gulf may have to wait.”