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Biden Administration Explores Offshore Wind Development in the Gulf of Mexico

Earlier this week, the Biden Administration announced its intent to consider further expansion of offshore wind development in the Gulf of Mexico. This announcement comes two weeks after the Biden Administration announced an agreement to lease almost 400 miles off California’s northern and central coasts for wind development. Potential offshore wind leasing in the Gulf of Mexico may play an integral role in the administration’s goal of installing 30 gigawatts of offshore wind by 2030.

To continue its exploration into offshore wind development in the Gulf of Mexico, the US Department of the Interior’s Bureau of Ocean Energy Management (BOEM) will publish a Request for Interest (RFI) in the Federal Register on June 11 to evaluate development interest, potential environmental consequences and other possible uses of the proposed area. Interior Secretary Deb Haaland acknowledged that, “Offshore wind development has the potential to create tens of thousands of good-paying, union jobs across the nation. This is an important first step to see what role the Gulf may play in this exciting frontier.”

The RFI will focus specifically on the Gulf of Mexico’s Western and Central Planning Areas offshore to Louisiana, Texas, Mississippi and Alabama. Although the emphasis is on wind energy, BOEM is also seeking information on other renewable energy technologies, according to the Interior Department. Publishing the RFI will open a 45-day comment period, after which the agency will review comments and data received to determine the next steps in the renewable energy leasing process in the Gulf.

“The Gulf of Mexico has decades of offshore energy development expertise,” Mike Celata, regional director of BOEM’s Gulf of Mexico office in New Orleans, said. “Working directly with our partners in the Gulf, we will make sure that offshore renewable energy development proceeds in an orderly, safe, and environmentally responsible manner.”

Developing offshore wind projects in the Gulf may prove more difficult than projects on the east coast (or even deepwater projects in California) for a few reasons. First, other than the Electric Reliability Council of Texas (ERCOT), wholesale power markets are generally not developed in the region. Second, the wind resource (with some exceptions) is not as strong as the wind resource on the east coast. Finally, it is unclear whether states will provide the necessary incentive programs (in the form of offshore wind renewable energy certificate (OREC) programs or otherwise) to support development. There are a few mitigating counterfactors however, including the historic presence of major oil developers in the region that are collectively looking to “go green,” vocalized support from leadership—including the Governor of Louisiana—the declining price of offshore wind technology and the recently expanded offshore investment tax credit (ITC).

Currently, BOEM has leased approximately 1.7 million acres in the Gulf of Mexico’s Outer Continental Shelf for offshore wind development and has 17 commercial leases on the Atlantic— from Cape Cod to Cape Hatteras. After the comment period concludes on the RFI, information on offshore wind development in the Gulf is expected to [...]

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Texas Is Open for Business, but Can We Keep the Lights On?

by Matt Archer and Maine Stephan Goodfellow

The Electric Reliability Council of Texas (ERCOT) is a leader in the development and advancement of the competitive power markets in the United States and has successfully delivered some of the nation’s lowest energy costs to consumers.  ERCOT’s energy-only market does not include fixed payments to generators for their plant’s capacity. Adequate energy price signals should trigger construction of new generation, making fixed payments unnecessary.  This fundamental faith in the market is now being tested in Texas. Growth in demand is resulting in smaller reserves of generating capacity.

To read the full article, click here.




Texas PUC Approves Proposals to Raise Energy Price Offer Caps

by Kimberly Brame Glasspool

The Public Utility Commission of Texas (PUCT) approved two proposals to raise system-wide energy price offer caps at an open meeting held on April 12, 2012. The proposals aim to ease growing generation resource adequacy concerns in the Electric Reliability Council of Texas (ERCOT) power market, which is one of the few major energy-only electric power markets that exist worldwide and represents about 85 percent of electric power usage in Texas.

The overarching goal of the PUCT in approving these two price cap hikes is to ensure adequate electric power supply in ERCOT as forecasts for reserve margins, or the difference between available generating capacity and expected peak system load, grow increasingly narrow. The target reserve margin for the ERCOT region is 13.75 percent. Projections from ERCOT representatives indicate that reserve margins for the remainder of 2012 may be tight but should exceed the target reserve, while reserve margins may dip below that target in 2014 (potentially around 7 percent) depending on various uncertainties, such as environmental regulations and gas prices.

Under Section 25.505 of the PUCT Electric Rules energy price offers are currently limited to $3,000 per MWh. When competitive energy price offers in ERCOT become scarce, the price of energy from certain types of services, particularly power dispatched for reliability purposes, is administratively set to the high system-wide offer cap. The first of the two recently-approved proposals raises the high system-wide offer cap to $4,500 per MWh beginning on August 1, 2012. The second of these proposals raises the high system-wide offer cap incrementally over a two-year period to $5,000 per MWh beginning on June 1, 2013, $7,000 per MWh beginning on June 1, 2014 and $9,000 per MWh beginning on June 1, 2015. 

A difference of opinion among the three-member PUCT resulted in the high system-wide offer cap increases being tentatively approved in two separate proposals. Chairwoman Donna Nelson and member Rolando Pablos approved the August 1, 2012 increase to $4,500 per MWh. PUCT member Ken Anderson argued against raising the cap this August and instead for long-term, permanent change to give market participants direction to plan, finance and build new generation. He stated that the August 1, 2012 increase won’t “make a wit’s bit of difference” in bringing mothballed generation back online this summer or encouraging long-term development of generation resources. Commission Anderson also argued such sudden action might leave market participants with insufficient time to readjust their risk strategies and might enable retail electric providers that offer fixed-rate contracts to residential customers to raise retail prices under these fixed-rate contracts to cover costs associated with the difference between the current system-wide offer cap and any higher cap approved by the PUCT. Note that Section 25.475 of the PUCT Electric Rules limits the ability of retail electric providers to increase charges during the term of fixed-rate contracts but contains an exception for changes resulting from laws that impose new or different costs on a retail electric provider that are beyond its control.

PUCT staff will conduct a public [...]

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