Two foreign companies have signed agreements to build the first offshore wind farms in Louisiana waters.
Danish firm Vestas was granted nearly 60,000 acres off Cameron Parish and Mitsubishi-owned Diamond Offshore Wind was approved for a 6,162-acre area off Terrebonne and Lafourche parishes, the state Department of Natural Resources announced Wednesday.
Gov. John Bel Edwards called the agreements a big step in diversifying Gulf of Mexico energy production beyond oil and gas.
"For generations, the state of Louisiana has been a leader in energy production and offshore wind energy is the next chapter in that great history,” Edwards said.
The two companies and state officials have declined to give specifics about the proposed wind farms.
Operating in Louisiana under the name Cajun Wind, Vestas bills itself as a world leader in wind energy development, installing more than 164 gigawatts of onshore and offshore turbines in 88 countries. The company has developed several offshore wind projects in Europe, but its focus in the U.S. has been on turbine manufacturing.
Japanese automaker Mitsubishi has been diversifying into natural gas and other energy enterprises. Its Diamond Offshore company has seven commercial-scale offshore wind projects and is developing a floating wind farm project off the coast of Maine.
Last year, Diamond and Entergy Louisiana signed a memorandum of understanding to evaluate potential offshore wind sites in Louisiana waters, which extend three miles from the coast.
Norwegian company Kontiki Winds has also been negotiating an offshore wind agreement with DNR.
While unlikely to be large wind farms that power millions of homes, projects in state waters have several advantages, according to American Clean Power, a renewable energy advocacy group. Projects closer to shore have lower transmission costs and can operate on a scale that suits the testing of new technologies.
Some energy companies have expressed interest in using offshore wind energy in the Gulf to power the production of 'green hydrogen,' a low-emissions fuel made by electrolyzing water.
DNR’s agreements with Vestas and Diamond have different payment structures. Diamond’s project will cover a smaller area but the company will pay more in up-front costs and rental fees per acre, according to DNR. The larger Vestas project has a lower per-acre fee for up-front and rental payments but a higher energy royalty over the length of the agreement.
Diamond will pay the state just over $308,000 up-front and 1.5% of gross revenues. Vestas will pay almost $358,000 and 2.2% of gross revenues.
"These being the first wind energy operating agreements for the state, we were breaking new trails in negotiating these agreements," DNR Secretary Tom Harris said. "I believe we have established that we can be flexible in how we set up payment structures while still ensuring that the state and its people are appropriately compensated for using our resources."
The agreements come nearly four months after the first-ever wind lease auction in the Gulf’s federally managed waters. In late August, German energy firm RWE won the right to develop a wind project on 102,000 acres about 40 miles south of Lake Charles. Federal lease areas off the Texas coast drew no bids.
The Texas coast boasts stronger wind speeds but Louisiana’s political support for offshore wind development has steered interest toward the Pelican State.
Edwards, a strong backer of offshore wind, set a goal of net zero carbon emissions by 2050 and has pushed the state to get at least 5 gigawatts of power from offshore wind by 2035. RWE cited Edwards support before bidding on the Lake Charles lease area.
Wind energy projects are a "natural fit" for Louisiana, which already has infrastructure and expertise that support offshore oil and gas and can easily transition to the offshore wind industry, Edwards said.
"Wind energy projects off Louisiana’s coast will benefit from having transportation, fabrication and engineering expertise that has long supported our traditional offshore industry already in place," he said. "And our existing ports and offshore support companies will benefit from new customers and new opportunities to work and grow jobs."
