Results of Gulf of Mexico Offshore Wind Auction & Recent U.S. Offshore Wind Updates
On August 29, 2023, the United States Bureau of Ocean Energy Management (“BOEM”) held its first-ever offshore wind auction in the Gulf of Mexico. After only two rounds, RWE Offshore US Gulf, LLC (“RWE”) was announced the provisional winner of the Lake Charles, Louisiana lease for $5.6 million. Unlike previous BOEM offshore wind auctions that were heavily contested, lasted multiple days, and attracted bids in the hundreds of millions, the BOEM Gulf of Mexico auction only had two participants that bid for a single lease area over two rounds and BOEM only awarded one of the three lease areas.
Gulf of Mexico Auction Results
During the auction, BOEM offered three leases totaling 301,746 acres on the outer continental shelf in the Gulf of Mexico — one lease area (102,480 acres) off Lake Charles, Louisiana, and two lease areas (102,480 and 96,786 acres) off Galveston, Texas. The lease areas combined have the potential to produce over 3.6 gigawatts of offshore wind energy and provide power for almost 1.3 million homes.
Fifteen entities were qualified to bid in the auction, but only two entities participated. While it was known that not all qualified entities would participate, participation in the auction was much lower than anticipated and lower than the participation in previous BOEM offshore wind auctions. By comparison, for the New York Bight auction, 25 entities were qualified and 14 ended up competing, for the North Carolina auction, 16 entities were qualified and five ended up competing, and for the California auction, 43 entities were qualified and seven ended up competing.
As compared to previous BOEM offshore wind auctions that lasted for days and went through tens of rounds, the Gulf of Mexico auction was much shorter and finished within a day, lasting only two rounds. The bidders bid exclusively on the Lake Charles lease area, and the two Galveston lease areas received no bids during the auction. The Lake Charles lease area alone has the potential to generate approximately 1.24 gigawatts of offshore wind energy capacity and power nearly 435,400 homes.
RWE was announced as the provisional winner of the Lake Charles, Louisiana lease area. However, the winning bid of $5.6 million (approximately $54 per acre) is extremely low compared to the $157.7 million that RWE Offshore Wind Holdings, LLC paid for a 63,338 acre lease area (approximately $2,490 per acre) in the California auction. As part of the bid, RWE earned a bidding credit equal to 20 percent of the cash bid (approximately $860,000) for committing to supporting workforce training programs and a domestic supply chain, and a bidding credit equal to 10 percent of the cash bid (approximately $430,000) for fisheries compensatory mitigation. Because both Galveston lease areas received no bids during the auction, they will remain unleased for the time being.