The Biden administration’s historic auction for the rights to develop offshore wind in the Gulf of Mexico on Tuesday morning was something of a flop. Developers were even more hesitant to invest than expected, and no one wanted to be the first to try and build wind farms off the coast of Texas.
Though sixteen companies showed interest in the sale, only two participated, and the event was over after just two rounds of bidding. Both companies vied for a lease area near Lake Charles, Louisiana, with RWE, a German multinational energy company, making the winning offer of $5.6 million, or about $54 per acre. Two other leases for sale near Galveston, Texas, were rejected entirely.
It’s been a rough few months for the offshore wind industry. Projects underway in the Northeast are struggling to fight misinformation about whale deaths and facing higher costs than expected due to high interest rates, inflation, and supply chain issues.
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It’s possible those challenges played into Tuesday's lackluster sale in the Gulf, where the business case for developing offshore wind energy is already relatively uncertain. The region experiences lower wind speeds than the East Coast, but infrastructure must also be fortified to withstand regular hurricanes. Texas and Louisiana also have relatively low electricity rates, which will make it harder for offshore wind projects to compete for utility contracts.
But these factors don’t entirely explain the response. An auction held in December for the rights to develop floating offshore wind farms off the coast of California — another economically challenging prospect — played out over 31 roundfs as companies vied for five lease areas. They sold for an average of $2,061 per acre.
The lack of interest in the two Texas areas may have more to do with politics than the Gulf’s unique weather. The state has not put forward any goals or intentions to procure electricity from offshore wind projects or otherwise support the industry. In fact, Lone Star lawmakers have become increasingly hostile to the idea in recent months. Republican state Senator Mayes Middleton sponsored a bill earlier this year that would allow the Texas General Land Office to deny permits for transmission lines to connect offshore wind projects to the state’s grid.
In July, Middleton criticized the Biden administration’s “wind boondoggle” on X (formerly Twitter), writing that it “puts nearly $900 billion of ship channels economic impact at risk and will destroy grid frequency in our grid,” and vowed to “re-file the bill to stop it.”
Texas Land Commissioner Dawn Buckingham jumped into the conversation, noting that she has “serious concerns” about offshore wind development near Galveston. “Texans deserve reliable and dispatchable energy.”
In mid-August, a member of Texas’ Railroad Commission, the agency that regulates the oil and gas industry, penned a letter to Buckingham and Governor Greg Abbott urging them to “stop President Biden’s offshore wind farms from invading the Gulf of Mexico, which endanger our Gulf Coast by harming delicate ecologies and vital industries and further cripple our electrical grid with more unreliable power.”
These views are supported by the Texas Public Policy Foundation, an influential conservative think tank based in Austin that receives millions of dollars from fossil fuel interests and has a history of opposing efforts to fight climate change. The group has already attempted to sue the Biden administration over Vineyard Wind, an offshore wind project under development near Massachusetts, claiming it would harm the commercial fishing industry.
Bo Delp, executive director of the Texas Climate Jobs Project, a nonprofit that works with unions in Texas to make sure new clean energy industries create good jobs, told me the group blames Texas lawmakers for scaring away developers. "State leadership is really failing Texans by antagonizing this new industry," he said. "It is just a total abdication of leadership, from our perspective, while Texas is struggling to keep the lights on, to undermine the certainty for this really critical industry to create electricity and stabilize our grid."
Louisiana, on the other hand, has been more welcoming. The state has a Climate Action Plan that recommends the procurement of 5,000 megawatts of offshore wind energy by 2035. It has already opened up state-controlled waters to developers, with at least three offshore wind projects in the pipeline.
“The Lake Charles area being of the most serious interest is an indicator that states stepping up to create a market is important,” Jenny Netherton, a senior program manager at the Southeastern Wind Coalition, told me on Tuesday morning after the auction closed. The coalition is made up of nonprofits and energy companies. “Offshore wind needs stable offtake mechanisms to support development and while Louisiana has made progress in this area, work still remains.”
The Biden administration claimed the Gulf sale as a win for Bidenomics, touting the 1.24 gigawatts of offshore wind energy capacity that could be generated when RWE develops its holding, which it said could power nearly 435,400 homes.
“The Biden-Harris administration is making once-in-a-generation investments in America’s infrastructure and our clean energy future as we take steps to bring offshore wind energy to additional areas around the country,” said Secretary of the Interior Deb Haaland in a press release.
The Bureau of Ocean Energy Management did not respond to an inquiry about why there was no interest in the Galveston lease areas and whether the agency might re-list them in a future auction.
Read more about wind power in the Gulf:
The Gulf of Mexico Is a Very Hard Spot to Build a Wind Farm
Editor's note: A previous version of this article misstated the purview of Texas’ Railroad Commission. It has been corrected. We regret the error.
Auke-Florian Hiemstra
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