On December 13th the Louisiana State Mineral and Energy Board approved operating agreements for a 6,162-acre lease with Diamond Offshore Wind (DOW Wind) and a 59,653-acre lease with Cajun Wind, an affiliate of Vestas. This is a major step forward for offshore wind development in Louisiana, allowing the projects to begin more detailed site assessment. These two lease areas are in addition to RWE’s Lake Charles lease (102, 480 acres) awarded in BOEM’s August auction, which is in federal waters 42 miles off the coast of Louisiana. The award of these two additional lease areas creates the opportunity for competition for offshore wind offtake in a future offshore wind procurement, recognizing that Louisiana has a 5 GW offshore wind goal. Establishing an offshore wind procurement framework would represent a major advancement in Louisiana energy policy, recognizing that the 5 GW target was advanced by the current Democratic Governor who will be replaced by a new Republican Governor in January. Such a procurement framework would need the support of the Louisiana Public Service Commission, which is very focused on least cost power supply resources, or the State legislature. Green hydrogen is a possible offtake opportunity, but the economics of offshore wind as an electricity input aren’t compelling given the cost of other clean energy resources. Clearly, the path to market for these offshore wind projects isn’t readily apparent. Nonetheless, the up-front payments for the two state leases are a modest $300,000+, a reasonable option premium for future, albeit uncertain, development opportunities for the lease areas.
