At the center of the offshore push was the sale of six commercial leases in the New York Bight between Long Island and New Jersey in February, the most successful offshore wind lease auction in history. The 488,000 acres offshore wind lease auction fetched a record $4.37 billion from companies looking to develop the waters. The installed capacity is expected to be between 5.6 GW and 7 GW, enough to power 2 million homes. The Department of Energy also launched a Building a Better Grid initiative that will tap billions of dollars in funding from the $1T infrastructure law passed in November to finance new lines and grid upgrades.
Well, the Biden administration is planning to roll out a giant offshore wind project that will dwarf New York Bight.
According to Politico, the U.S. government is considering opening 30 million acres of the Gulf of Mexico near Texas and Louisiana to offshore wind energy projects, part of Biden’s goal to build 30 gigawatts of wind power capacity by 2030, enough to power more than 10 million homes.
According to a report by the National Renewable Energy Laboratory (NREL) released in March, the U.S. will need more than 2,100 wind turbines, at least 2,100 foundations, more than 11,000 kilometers of cables, and five wind turbine installation vessels to achieve its offshore wind energy target. Currently, the country has 71,328 existing wind turbines listed in the continental U.S.
Perfect Fit
Though the Gulf’s waters haven’t sprouted any wind turbines yet, there are several reasons why the Gulf of Mexico is a perfect fit as an offshore wind hub.
First off, the Gulf Coast also has an abundance of companies and workers with decades of experience in producing energy offshore. According to the Energy Information Administration, Gulf of Mexico federal offshore oil production accounts for 15% of total U.S. crude oil production. Major fields include Eugene Island block 330 oil field, Atlantis Oil Field, and the Tiber oilfield (discovered 2009), while notable oil platforms include Baldpate, Bullwinkle, Mad Dog, Magnolia, Mars, Petronius, and Thunder Horse.
“We have a really mature base for energy. We’ve got the know-how,” Lefton said. The people, the companies, the manufacturers that know how to do [Outer Continental Shelf] energy development are in the Gulf of Mexico,” the Interior Department’s Bureau of Ocean Energy Management director Amanda Lefton has told Politico.
According to Hayes Framme, government relations manager for North America at Danish wind giant Ørsted A/S (OTCPK:DNNGY), the Gulf’s existing oil and gas infrastructure represents “a historic expertise.”
“One of the things that makes the Gulf area attractive is the fact that you’ve got a workforce that is accustomed to working on rigs in the ocean. It’s not like you have to build an industry. What you have to do here is basically help an existing industry evolve,’’ Dennis Arriola, CEO of the renewable energy company Avangrid Inc. (NYSE:AGR), has said.
Michael Hecht, the president and CEO of Greater New Orleans, says jobs in the Gulf’s traditional oil and gas industry have declined during the past decade, creating a sense of urgency to make a transition that allows people to retain their skills.
The Gulf could also become an important hydrogen hub, with wind power being used to generate green hydrogen to reduce greenhouse gas emissions from industries such as long-haul trucking, fertilizer manufacturing, and aviation.
Offshore Spending Soars
According to the Maritime Professional, as of the end of January 2022, there were over 45 offshore wind projects in development in the United States, representing $136 billion in capital expenditure and $4.4 billion in annual OPEX opportunity. Maritime estimates that 46 offshore wind projects will install 43 GW of capacity in this and the next decade, with the projects forecast to be brought on stream within this and early in the next decade.
The publication says that 17.5 GW of project capacity has already secured offtake commitments, while 16.5 GW of new federal offshore leasing activity in the northeast, South Atlantic, and California is underway.
The U.S. Department of Energy has reported that the U.S. offshore wind pipeline grew 24% Y/Y in 2021, with 35,324 MW now in various stages of development thanks to falling offshore wind prices, federal action, and state-level commitments. That’s impressive, considering it happened at the height of the Covid-19 pandemic. Overall, the U.S. installed 17 GW of wind power in 2020, bringing the total installed capacity to 122GW.
China is the world leader in wind energy, with an installed capacity of 288 GW.
Source: DoE
Falling costs are a big reason for the rapid adoption of clean energy. BNEF has forecast that by 2030, the global average LCOE - levelized cost of energy - for offshore wind farms will drop 41%. Another big advantage: in contrast to onshore wind and solar, offshore facilities can be built on very large scales to directly offset closures of major coal and nuclear plants.
Leading non-US offshore wind companies Ørsted A/S, Canada’s Northland Power (OTCPK: NPIFF), and, to a lesser extent, Denmark’s leading offshore wind turbine manufacturer, Vestas Wind Systems (OCTPK: VWDRY), have clearly benefited from the offshore boom.
