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An upcoming lease sale will be historic — but also quite risky for offshore wind.
The Biden administration will be holding the first ever auction for the right to develop offshore wind farms in the Gulf of Mexico on Tuesday. The sale represents a hopeful, historic shift for the region, where the economy has long been defined by oil and gas.
But wind energy is not a sure bet in the Gulf — at least not yet. Slower winds and frequent hurricanes will raise costs and require new turbine designs. Low power prices in the area and a lack of supportive policy make for an uncertain market. These hurdles mount on top of what is already a tumultuous time for the industry. Costs for offshore wind farms on the East Coast have soared due to high interest rates, inflation, and supply chain constraints.
“The business case in the Gulf of Mexico for offshore wind is very vague, and very uncertain,” Chelsea Jean-Michel, a wind analyst at BloombergNEF, told me. “It doesn't really make a lot of sense.”
The Bureau of Ocean Energy Management has put up three areas for sale in the Gulf, which it estimates will produce about 3.7 gigawatts of energy once developed, or enough to power nearly 1.3 million homes. Two of the areas are 30 to 40 miles off the coast of Galveston, Texas, while the third is closer to Lake Charles, Louisiana, just over 40 miles offshore.
Analysts expect Tuesday’s auction to be uncompetitive and the leases to sell for low prices that bake in uncertainty. Sixteen wind developers have signed up to participate, including legacy oil companies Shell, TotalEnergies (formerly known as Total), and Equinor, as well as renewable-focused companies that have offshore projects in the Northeast, like Invenergy, and newcomers, like energyRe. But they may not all end up putting in bids. More than 40 entities were registered to bid on offshore leases in California last December, but only seven ultimately took part in the auction.
The federal government has been studying offshore wind development in the Gulf of Mexico for years. In 2020, National Renewable Energy Lab scientists published an assessment of different types of energy resources that could go in the Gulf, including wave energy and ocean-based solar panels. The authors found that offshore wind had the most potential, by far, but would face numerous challenges, and likely be more expensive than offshore wind energy in the Northeast.
For one, engineers need to design turbines that can safely and economically produce energy in the Gulf’s unique weather conditions. Most of the time, the Gulf has lower wind speeds than the coasts, but other times, it has hurricane-force gales. The report called this “a challenging design optimization problem” and says that a new class of turbines will be needed. I spoke to Walter Musiel, one of the authors, who said that this was doable, and that turbines have since been installed in typhoon-prone areas in Asia that will provide some helpful data. The challenge, he said, will be building a supply chain for turbines with bigger rotors, and figuring out how intense future hurricanes could be in order to design blades that are strong enough.
The Gulf also has advantages that the report said could offset some of these expenses. Smaller waves and shallower water could lower capital costs for installation and maintenance. The report also cited “lower labor costs” in the region. However, workers there are currently fighting to ensure jobs in offshore wind depart from the low-wage, unsafe, exploitative conditions that pervade the local construction and offshore oil industries.
Another big advantage, though, is the maturity of the area’s offshore oil industry. “Despite low winds, the Gulf of Mexico is uniquely positioned,” wrote David Foulon, the managing director for offshore wind at TotalEnergies, in comments to BOEM, “thanks to its unequaled history of offshore expertise, established industrial supply chain, strength of workforce base, and maritime assets’ pool that can drive the growth of offshore wind in the U.S. to new heights and spread around the world thereafter.”
Justin Williams, the vice president of communications at the National Ocean Industries Association, told me Gulf Coast companies have already brought their expertise to offshore wind construction in the Northeast. “Take the Block Island Wind Farm offshore Rhode Island,” he said. “Gulf Island Fabrication built the steel jackets for its foundations and Montco Offshore provided heavy lift vessels to move the equipment on site.”
The National Renewable Energy Lab study took these benefits into account. But it still found that offshore wind energy would be pricier in the Gulf of Mexico than elsewhere. While the lab expects the average cost of offshore wind to land at $63 per megawatt-hour by 2030, it estimated that Gulf wind would cost in the range of $73 to $91 per megawatt-hour by that date. That could make it harder for Gulf wind projects to compete in local energy markets, which have lower power prices than the Northeast.
The region also lacks the policy support found in the Northeast. Massachusetts plans to contract 5,700 megawatts by 2027, New York has a goal of 9,000 megawatts by 2035, and New Jersey recently increased its goal to 11,000 megawatts by 2040. These policies gave developers a level of certainty that there would be a buyer for the electricity generated. Although Louisiana has a Climate Action Plan that recommends the state procure 5,000 megawatts of offshore wind energy by 2035, it’s not legally binding and no utilities have included offshore wind in their resource plans yet.
“They’re the only state down there that has expressed any interest,” Samantha Woodworth, a senior research analyst for North America wind at Wood Mackenzie, told me in an email. “Unless there are state-driven procurement targets or unless the project can produce power at significantly lower cost than what has bid elsewhere in the U.S. and somehow balance that with sufficient project returns, [offshore wind] projects down there are likely to be uneconomic.”
In public comments submitted to BOEM, the American Clean Power Association, the leading industry group for offshore wind, also warned that the leases would not provide developers with the certainty needed to establish a local workforce or supply chain. It urged the agency to either increase the number of leases or establish a regular leasing schedule. But this is the only such sale the agency has announced to date.
However, when I reached out to American Clean Power to ask how its members were approaching this uncertain environment, the group echoed Total’s optimism about the strengths of the local workforce and supply chain. “The region is eager to get into the offshore wind game, and developers understand both the challenges and opportunities that exist in building in the Gulf Coast,” spokesperson Phil Sgro said by email.
Jenny Netherton, a senior program manager at the Southeastern Wind Coalition, which is made up of nonprofits and energy companies, told me that there’s a lot of room for innovation and to try “different routes to market.” For example, developers could forgo the energy market altogether and sell their electricity directly to industrial clients, such as incoming green hydrogen production facilities. Louisiana currently produces 30% of the country’s hydrogen through a polluting process using natural gas. But the federal government has billions of dollars in grants and subsidies available to develop new facilities that produce it with renewable electricity.
If turbines do go up in the Gulf, it may not be until 2034-2035, according to BloombergNEF. This means that communities who are looking forward to the clean energy and economic benefits of a new offshore wind industry could end up waiting a lot longer than they might have hoped.
Local environmental justice groups are already frustrated that the BOEM did not include an incentive for developers to create community benefits in the lease terms. The lease terms for the recent offshore wind sale in California gave companies up to a 10% discount on their purchase if they pledged to spend a comparable amount on community benefits, such as hiring commitments, job training, or economic contributions. If fulfilled, nearly $53 million will go toward these agreements in California.
“It was disappointing to see,” said Jackson Voss, climate policy coordinator for the Louisiana-based Alliance for Affordable Energy. “I don't think that it makes very much sense for different regions of the country to receive different benefits, especially considering the Biden administration’s commitment to environmental justice.”
The Gulf lease terms have a similar provision but it is limited to investments in local workforce training, supply chains, and a fisheries fund that will be used to compensate fishermen for potential losses. A spokesperson for BOEM told me the agency determined it would be too challenging to implement community benefits agreements in the Gulf equitably “due to the number and variety of community groups.”
Overall, the challenges facing Gulf offshore wind are representative of a theme that runs through renewable energy development. As much as the costs for technologies like wind and solar have plunged, what works in one place may not work in another. The cost of offshore wind in the Gulf may never match the cost of offshore wind in the Atlantic. But as Netherton said, there’s still a lot of room for innovation.
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And more on the week’s most important fights around renewable energy projects.
1. Ocean County, New Jersey – A Trump administration official said in a legal filing that the government is preparing to conduct a rulemaking that could restrict future offshore wind development and codify a view that could tie the hands of future presidential administrations.
2. Prince William County, Virginia – The large liberal city of Manassas rejected a battery project over fire fears, indicating that post-Moss Landing, anxieties continue to pervade in communities across the country.
3. Oklahoma County, Oklahoma – The Sooner state legislature on Monday held a joint committee meeting on solar and wind setbacks featuring prominent anti-wind advocates.
4. Tippacanoe County, Indiana – The developers of a large-scale solar project are suing the county over being rejected.
5. Dane County, Wisconsin – The Wisconsin Public Service Commission approved Invenergy’s Badger Hollow wind project – the state’s first new fully-permitted wind energy project in more than a decade.
A conversation with Courtney Brady of Evergreen Action.
This week I chatted with Courtney Brady, Midwest region deputy director for climate advocacy group Evergreen Action. Brady recently helped put together a report on rural support for renewables development, for which Evergreen Action partnered with the Private Property Rights Institute, a right-leaning advocacy group. Together, these two organizations conducted a series of interviews with self-identifying conservatives in Pennsylvania and Michigan focused on how and why GOP-leaning communities may be hesitant, reluctant, or outright hostile to solar or wind power.
What they found, Brady told me, was that politics mattered a lot less than an individual’s information diet. The conversation was incredibly informative, so I felt like it was worth sharing with all of you.
The following chat was edited lightly for clarity. Let’s dive in:
Okay, so tell me first why you did this report.
Clean energy deployment is getting increasingly challenging for a variety of reasons. What’s happening on the federal level is one thing, but something we don’t talk about much in the climate movement is what’s happening locally, what actually determines the odds of a project being successful and incorporated into the grid.
The side of the story we often hear that’s the loudest is from people at the local level who are opposed to these projects, and it limits our ability to understand the nuances. It’s not always that everyone opposes these projects in their community — that’s often not the case. We talked to several farmers in this report who are using these projects as a lifeline to keep farms in their families’ hands, generate income, preserve their farms. These projects can provide an income lifeline for these farms.
Something we tried to accomplish with this report was to understand the different perspectives, what was driving them. The only way we could do that was by going out and talking to these people in their own communities, on their own land.
The group we worked with has a very conservative background. They work on Republican campaigns. They’re very involved in local government relations. And they were the ones who were able to go out and interview these folks about what this means for their communities.
A few weeks ago, I interviewed the head of the League of Conservation Voters about the way that renewables are perceived as culturally left wing. Are there any takeaways in your research about how to deal with that?
You know, I expected to hear a little bit more of that political ideological leanings than what we actually got in these interviews. Our partners went out and interviewed seven folks; four of the case studies were in Pennsylvania, and three of them were in Michigan. It was a mix of local government officials and landowners themselves, most of whom were farmers. And they asked them, What are you hearing in your community? Where’s the opposition coming from?
I’d assumed this would be a left-versus-right, red-versus-blue issue, but this is not what we heard. We heard a lot about a lack of information or misinformation in these communities and the crucial incomes these projects can provide to landowners themselves. Again, everyone in this report that was interviewed identified as a conservative or said they were Trump supporters. It’s interesting to hear that hasn’t impacted their views of clean energy at large. They were either really happy with the projects they’d sited or still trying to get projects sited years and years later.
When you talked about misinformation, what came up?
The sizing of these leases. We heard about fears in communities that land was going to be completely overtaken over by solar or wind.
Some of these farmers said one of the biggest things they heard from their neighbors was that we’re giving away hundreds and thousands of acres to solar projects and wind projects and taking away land that should go towards crops and food. We’re hearing from these farmers that a lot of this land is no longer fertile, so providing a temporary solar lease allows that farmer to continue generating revenue while letting that land breathe.
People really had this fear of farmland being completely converted to energy production. I don’t know where a lot of that came from. We asked if that was something spread on the internet and we heard, Neighbors talk and there are Facebook groups. So there’s this overblown fear about the size of projects.
When it comes to these interviews, it does seem like you spoke to a lot of people who believe what you say. But did you speak to people who don’t believe this stuff? Because right now we’re seeing cases where opposition is either winning over county commissioners or voting out of office local officials who believe exactly what you heard from some folks.
We’ve heard so much of the opposition. It’s trending, really growing across the country. And understanding the root of why opposition is there is important. But so often we don’t hear the other side of it, these really nuanced perspectives.
There are these folks in the middle who are really thematic in these interviews — this is not about energy but a core American property rights issue. That resonates with people regardless of party.
The other piece is, there’s fear in communities of being the person to speak out against groups that are loud, the ones who want to kick people out of office over energy things. So it was really important to elevate these voices and in the interviews just made a lot of common sense. This was about elevating voices that don’t always get a seat at the table in discussions around these issues.
A list of terminated grants obtained by Heatmap contains a number of grants that will cost jobs and revenue in Republican-led states.
The Trump administration terminated billions in climate and clean energy grants on Wednesday, in what appears to be yet another act of retribution against Democrats over the government shutdown. White House budget director Russell Vought announced on X that “nearly $8 billion in Green New Scam funding to fuel the Left's climate agenda is being cancelled,” noting that the projects were in 16 states, all but two of which — Vermont and New Hampshire — have Democrats in their governor’s mansion. A Department of Energy release published late last night further clarified that it was terminating 321 awards supporting 223 projects, with a total closer to $7.5 billion.
But a list of the 321 canceled grants that the Department of Energy sent to Congress, obtained by Heatmap, tells a different story. While much of the funding was awarded to blue state-based companies, the intended projects would have benefitted communities elsewhere, including in Texas, Florida, and Louisiana.
The list identifies the grants by their award numbers, and includes information on the DOE office overseeing the grant, the recipient name, and state. The document does not specify the project names, the programs under which they were awarded, or the amounts awarded.
That leaves a lot of open questions about the true impact of the terminations. It’s unclear, for instance, whether the $7.5 billion price tag the Department of Energy assigned to the cancellations is an estimate of the total amount awarded or the unspent remainder still in the agency’s coffers. Five of the listed projects, worth nearly $900 million, were already announced as terminated in an earlier round of cuts back in May.
Many of the projects listed have signed contracts with the government, are already well underway, and have spent at least some of their award. For example, the Northeast Energy Efficiency Partnerships has already published copious educational materials related to its community-driven transportation plan for the Northeast, a project supported by one of the terminated grants.
The list does seem to confirm that blue state grants were the hardest hit, with 79 award cancellations in California, 41 in New York, 34 in Colorado (Secretary of Energy Chris Wright’s home state), 33 in Illinois, and 31 in Massachusetts.
But when I began looking up projects by their award number, I found that many would actually have benefitted Republican strongholds. Take, for example, Moment Energy, a Delaware-based company that was awarded $20 million by the Office of Manufacturing and Energy Supply Chains to build the first certified manufacturing facility in the United States producing battery energy storage systems from repurposed electric vehicle batteries. The plant was set to be built in Taylor, Texas, creating 50 construction jobs and 200 new permanent positions. After receiving the Energy Department’s stamp of approval, the company raised a $15 million Series A funding round in January to help finance the plant.
Also listed are a $10 million grant for Carbon Capture Inc, a California-based company, to conduct an engineering study for a direct air capture plant in Northwest Louisiana, and a $37 million grant to New York-based Urban Mining Industries to build one of its low-carbon concrete manufacturing plants in Florida. Linde, the global industrial gas company based in Connecticut, had $10 million to build hydrogen fueling stations for heavy duty trucks in La Porte, Texas, clawed back. BKV, a Colorado-based natural gas company set to study the transportation of captured CO2 by barge throughout the Gulf Coast region, also had its $2.5 million grant canceled.
In addition to hurting investments and jobs in Republican states, the Department of Energy’s cancellations also target some unlikely victims. The list names 16 grants for General Electric, including 11 for GE Vernova, the company’s manufacturing arm, which produces natural gas turbines and components for wind energy generation; many of those awards were for wind technology research projects. The agency also canceled 24 grants for the Institute for Gas Technology and the Electric Power Research Institute, the research arms of gas and electric companies’ two biggest trade groups, respectively. Several of these awards funded research projects into carbon capture and storage.
Also on the list was a more than $6.5 million grant for a controversial study to retrofit the Four Corners coal plant in New Mexico with carbon capture equipment. The plant is currently scheduled to close in 2031.
Back in May, Wright promised Congress his agency’s review of Biden-era climate funding would be over by the end of the summer. “Certainly in the next few months, by the end of this summer — hopefully before the end of this summer — we will have run through all of the four or 500 large projects that are currently in the pipeline at the DOE,” he said during a House Appropriations Committee hearing.
As reported yesterday by Bloomberg, two regional Hydrogen Hubs in California and the Pacific Northwest — projects awarded funding from the Bipartisan Infrastructure Law to develop full hydrogen production and consumption ecosystems — are on the list. That leaves the agency’s intentions for the remaining five hubs scattered throughout the Midwest, Midatlantic, Appalachia, the Great Plains, and Texas unclear. And while the list includes a few smaller grants for early-stage Direct Air Capture Hubs, it is still a mystery whether the Department of Energy plans to support the two more advanced direct air capture projects in Louisiana and Texas that were selected for $1.2 billion under the Biden administration.