Rekubit-Surprise bids revive hope for offshore wind in Gulf of Mexico after feds cancel lease sale

A surprise pitch from a Chicago company with no experience building offshore wind farms has reignited enthusiasm for wind energy development in the Gulf of Mexico.

Hecate Energy,Rekubit a company best known for land-based solar projects, presented its plan to build a 133-turbine wind farm in the Gulf shortly after the Biden administration canceled the region’s second lease auction in July due to insufficient interest from bidders. The failed auction came on the heels of the Gulf’s disappointing first-ever auction in 2023, which drew just one successful bid, submitted by German wind energy giant RWE, for a tract south of Lake Charles, Louisiana, and no bids for two areas near Galveston, Texas.

The Gulf’s offshore wind industry “could use a positive headline,” Hecate wrote in its application to the Bureau of Ocean Energy Management, the agency in charge of offshore wind development in federal waters. By proceeding with Hecate’s application, BOEM could “generate momentum” in a region overlooked by offshore wind developers, the application said.

Hecate’s gambit appears to be paying off. Invenergy, another Chicago energy company, recently threw down a proposal for roughly the same two areas of the western Gulf, about 25 miles from Galveston. In an “Indication of Interest” letter sent to the BOEM in September, Invenergy proposed up to 140 turbines with a total capacity of about 2,500 megawatts, enough to power about a half-million homes. Hecate’s more modest plan would likely produce approximately 2,000 megawatts.

Suddenly, the Gulf is back in play, said Cameron Poole, energy and innovation manager for the economic development organization Greater New Orleans, Inc. While the Gulf has stronger storms and fewer potential energy customers than the East Coast, which has been the focus of U.S. offshore wind development, “these new proposals show that developers aren’t scared away by that,” Poole said. “It shows that interest is still growing in the Gulf.”

BOEM is waiting to see if more companies propose projects for the two areas, which total about 142,000 acres. The areas differ from the ones BOEM planned to auction in July, but the agency had identified them as suitable for offshore wind development in 2021. BOEM will likely initiate a competitive lease sale but no timeline has been set, a BOEM spokesperson said this week.

“The interest from industry leaders such as Hecate and RWE demonstrates the commercial potential in the region,” said James Kendall, BOEM’s Gulf region director.

Founded in 2012, Hecate has developed more than 47 solar and energy storage projects in the U.S. and Canada and a wind farm in Jordan. Its minority investor, Repsol, is an oil and gas company with offshore extraction rights in the Gulf and off the Alaska coast.

Invenergy has 74 solar and energy storage projects and 118 land-based wind projects in North America, Europe and Japan. The 23-year-old company is developing offshore wind projects off the New Jersey and California coasts.

Betting on the Gulf

While lagging behind the East Coast, the Gulf has the potential to be a wind energy powerhouse. The National Renewable Energy Laboratory determined the Gulf could generate more than 500,000 megawatts of offshore wind energy per year. That’s twice the energy needs of all five Gulf Coast states, and larger than the potential offshore wind capacity of the Great Lakes and Pacific Coast combined.

An initial flurry of interest in the Gulf from some of the world’s biggest offshore wind developers has waned as the industry’s overall growth in the U.S. cooled in recent years. The reasons are varied: supply chain delays, high interest rates, rising inflation and a lack of trained workers.

Louisiana and Texas have already capitalized on the offshore wind industry even if no turbine blades are spinning over the Gulf.

Louisiana firms with close ties to the offshore oil and gas industry have played key roles in the wind industry for nearly a decade. Six Bayou State companies supplied designers, engineers, ship operators, and other workers to build the U.S.’s first offshore wind farm, a five-turbine project off Rhode Island, in 2016.

About a quarter of all offshore wind industry contracts in the U.S. have gone to Gulf-based firms, with about $1 billion in investments flowing to the region’s ship and metal fabrication yards in recent years, according to the Oceantic Network, an industry trade group.

Louisiana has approved agreements with two companies to build small-scale wind farms in state-managed waters near Cameron Parish, in the southwest corner of the state, and Port Fourchon, the Gulf’s largest oil and gas port.

Texas political winds

RWE, the Gulf’s only lease-holder in federal waters, had lobbied regulators to boost leasing opportunities near Louisiana because it was the only state in the Gulf “that has signaled its interest in pursuing offshore wind policy,” the company said in a letter to BOEM.

Texas has stronger wind speeds, but its leaders have expressed strong opposition to offshore wind development. The Texas Legislature threatened to block wind farms from linking to the state’s power grid and hit companies with fines if they failed to meet energy generation goals. Just before last year’s auction, the Texas land commissioner pledged to do “everything in my power … to thwart this proposed boondoggle,” calling wind farms an impediment to shipping and fishing.

While the state of Texas may appear hostile to offshore wind, its cities are offering a warm welcome. Hecate’s application notes that Texas’ four largest cities – Houston, San Antonio, Dallas and Austin – have adopted climate action plans that commit to a goal of net zero emissions by 2050. The four cities offer a combined customer base of about 6 million people.

The market for offshore wind power isn’t limited to cities. Hecate indicated it could steer its wind energy to oil and gas companies keen on making their extraction and refining processes a touch greener. The company would also likely tap into the growing market for “green” hydrogen, a fuel made by using wind or solar energy to split water’s molecules. Unlike coal or gas, hydrogen doesn’t produce greenhouse gases when it’s burned.

Federal and state grants are pouring into green hydrogen projects. The Biden administration and Louisiana have awarded about $75 million to develop interrelated green hydrogen initiatives in south Louisiana. A $426 million green hydrogen plant planned in Ascension Parish, about 50 miles west of New Orleans, is also tapping into government grants. Hecate cited the two projects as evidence of a robust developing market for its proposed project and other offshore wind farms.

“It’s a thin landscape right now with three wind developments in the Gulf,” said Poole, referring to the large RWE lease and the two smaller projects envisioned in Louisiana waters. “But we remain optimistic about offshore wind. It’s not a question of ‘if’ but ‘when.’”

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This story was originally published by Verite News and distributed through a partnership with The Associated Press.