Big, But Not Easy: Can Offshore Wind Spark Economic Transformation in the Gulf Coast?

In Brief

The Biden Administration wants to invest in offshore wind production beyond what the East Coast can carry. So...

Can the Gulf Coast's oil-and-gas apparatus support an upsurge in wind-power manufacturing and generation? And how can wind support the region? 

Experts say the transition seems feasible- but warn that a lot of politics, policy and execution will need to align to make it succeed. 

Can these Louisiana workers find prosperity making offshore wind equipment?

Workers, investors and policymakers peer into the Gulf Coast's future. (Courtesy the Bureau of Safety and Environmental Enforcement.)

In President Biden’s first joint congressional address, he tied the climate crisis to job creation: “For me, when I think climate change, I think jobs.” He meant unionized, stable, American jobs, adding: “Think about it—there is simply no reason why the blades for wind turbines can’t be built in Pittsburgh instead of Beijing.” While Pittsburgh has become a symbol for reconciling America’s clean energy ambitions with its fossil-based heritage as a means of job creation, one of the places the nation’s transition can play out soonest and most clearly is the Gulf Coast. Known as a longtime oil and gas cluster, the Gulf Coast is now poised to be the major manufacturing engine for an east coast offshore wind supply surge, and recent research reveals the region’s potential to host turbines of its own. 

Demand for turbines figures to grow if the administration can fulfill its plans. In March, the Biden Administration  unveiled an initiative to “Jumpstart Offshore Wind Energy Projects to Create Jobs.” The announcement puts forth a slew of targets, permitting advancements, investments, loan opportunities, and the creation of a new multi-agency coalition. By 2030, the Biden Administration is aiming to deploy 30 gigawatts of offshore wind, scaling up to a $12 billion per year industry that employs 44,000 direct workers and supports 33,000 additional jobs. The broader implications are vast—the Administration sees potential for 110 gigawatts of power by 2050, employing scores more Americans. 

Today, the nation’s offshore wind industry is most firmly established in New England, with projects in the pipeline up and down the east coast and some lawmakers in California now looking to join the action. However, practitioners in the Gulf Coast describe their region as one of the nation’s highest-potential offshore wind areas for both manufacturing and generation. Stretching from Southern Texas to Florida’s panhandle, the blustery coastline tracing the Gulf of Mexico could provide an under-recognized opportunity not only for clean power, but to enable a transition for the thousands of offshore oil and gas workers in the region who possess skills and expertise relevant to offshore wind. 

Synergies with Offshore Oil and Gas

While it may seem strange to consider the fossil-rich Gulf Coast region following in the footsteps of Denmark, the United Kingdom, and New England, its oil and gas heritage stands to be a significant asset for achieving its wind-powered potential. 

“In many ways, an offshore wind project bears a closer resemblance to an offshore oil and gas project than it does to an onshore wind project,” says Sean Whittaker, Principal Renewable Industry Specialist at the International Finance Corporation. 

Above the surface, offshore oil and gas platforms scarcely resemble offshore wind turbines. However, many of the physical components that support the structures and moor them to the ocean floor, such as mounting and cabling, are very similar. For both, the installation and regular operations require custom-built vessels, worker safety and risk management measures to carry out complex tasks in an unforgiving environment, and an array of marine services and regular maintenance. 

Moreover, the amount of project capital required befits well-established oil and gas majors, whose executives already know the Gulf. “An offshore wind farm will typically cost two to three billion dollars, so being able to finance that is no small feat,” Whittaker notes. It comes as no surprise, then, that many of the leading developers in the industry are either current or former oil and gas companies, such as Denmark’s Ørsted (formerly Danish Oil and Natural Gas), and more recently Equinor (formerly Statoil), Shell, and BP. By comparison, U.S. oil and gas majors such as Exxon, Chevron, and ConocoPhillips have been slower to embrace offshore wind, among other green technologies. However, last month Chevron’s venture capital arm invested in an offshore wind project, a first for a U.S. major. While this is a small step, Whittaker sees more oil and gas firms dipping their proverbial toes in the water. “For them, it’s a natural transition,” says Whittaker.

This transition has already begun in the UK, where former oil and gas workers are manufacturing components for offshore wind platforms, and operating them as well. Dr. Stephanie McClellan, Founder of the Special Initiative on Offshore Wind (SIOW) at the University of Delaware, blurs the line between the two industries: “We don’t have to call them offshore wind workers or offshore oil and gas workers. They are offshore energy workers.”

The Gulf Region as a Burgeoning Supply Hub for the East Coast Boom

In that light, why shouldn’t Gulf Coast offshore energy workers build supplies for use in the Northeast? As the east coast prepares to erect more than 30 gigawatts of new offshore wind, many components that comprise the installations—even the ships that transport them—will be manufactured in the Gulf region. 

Because operators in the region extract 17% of the United States’ oil and refine half its oil and gas, the region is well-suited to manufacture a range of offshore wind equipment similar to that used in offshore oil and gas projects, such as seabed foundations and cabling. Based on research from SIOW, meeting the Biden Administration’s 2030 target would require $26 billion in cumulative capital expenditures for the manufacturing and installation of seabed foundations alone. This, along with the manufacturing of other components, could represent a considerable engine for the regional economy. For scale, analysts at Louisiana State University expect the Gulf to see a total of $104 billion in fossil energy investment over the decade.

Ship-building provides another opportunity. The Jones Act of 1920 requires ships transporting cargo between U.S. ports to fly an American flag, meaning that law-abiding companies must amass a stable of American-built vessels. Among these ships are turbine installation vessels, behemoths which carry the turbine parts to the project site and then extend legs to the seafloor, transforming into an installation platform in order to raise the skyscraping towers and affix the blades. Virginia utility Dominion recently announced the construction of the first American-made installation vessel with a whopping $500 million price-tag. The ship is being built in Brownsville, Texas and will utilize 14,000 tons of domestic steel, including some from Alabama. The east coast buildout will also require a fleet of maintenance vessels, such as one being constructed jointly by Ørsted and Boston-based utility Eversource Energy. Their ship reportedly costs around $80 million and is expected to create over 300 construction jobs in Florida, Louisiana, and Mississippi.

Rhode Island’s Island Wind Farm, the nation’s first, utilized expertise and components from Gulf region oil and gas suppliers, and subsequent wind farms should follow. In particular, Louisiana “already is this emerging hub for the offshore wind industry,” according to Harry Vorhoff, Deputy Director of the Louisiana Governor’s Office of Coastal Activities. He points to Louisiana-based liftboat operators, as well as local firms that designed and constructed pieces of the foundations used in the Block Island project. “We have most, if not all, of the components that go into designing, fabricating, installing, and operating a wind farm,” Vorhoff adds.   

We have most, if not all, of the components that go into designing, fabricating, installing, and operating a wind farm.

Still, transferring components from the oil and gas industry is far from a simple copy-and-paste job. Investment is needed to ensure that these supply chains are able to sustain the expected surge in growth. Dr. McClellan stresses that “it takes investment, and this is where we really hope the Biden Administration, and also the private sector itself, [can] help these kinds of American companies access what they need to make this diversification opportunity a reality.”

An Emergent Offshore Resource in the Gulf of Mexico

While the Gulf Coast region is primed to benefit as a supply chain hub, manufacturing only accounts for a fraction of an offshore wind farm’s value. Other elements include installation, maintenance, operation, and the zero-carbon electricity itself. Experts are especially excited about the Gulf region’s potential to add these missing pieces, enabling a local offshore wind industry while leveraging a workforce already rich in transferable offshore energy expertise.   

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A 2020 study from the National Renewable Energy Laboratory (NREL) and U.S. Bureau of Ocean Energy Management (BOEM) finds that while the Gulf region doesn’t quite boast the average wind velocity of the east coast, the bounty of potentially suitable sites is notable. Louisiana, Texas, and Florida are three of the top four states in the country in terms of resource capacity at suitable sites. The report prognosticates that with cost declines by the end of the decade, offshore wind in the region could be cost-competitive with wholesale electricity. 

For policymakers, offshore wind can provide sizable and relatively predictable amounts of zero-carbon electricity without occupying precious land area. Louisiana’s governor John Bel Edwards has issued an executive order calling for the climate-vulnerable state to reach carbon-neutrality by 2050. However, the state has limited land available for solar and wind development to meet a demand that ranked second per capita in the U.S in 2018. Texas already has plentiful wind resources and is on track to build more utility-scale solar than any other state, but could benefit from its strong wind resources in the southern Gulf, which tend to blow even when its onshore wind does not. As land constraints limit new onshore clean electricity capacity, NREL Principal Engineer and study author Walt Musial asserts: “I think that offshore wind [in the region] is going to have a bigger role than people think.”

Musial envisions the east coast boom helping to foster the local manufacturing industry and bring down overall costs, both of which can benefit the region down the line. “ partly because of the pull from the northeast markets,” Musial adds. 

At the request of Governor Edwards, BOEM is convening an intergovernmental regional task force (including state officials from Texas, Louisiana, Mississippi, and Alabama) in June. The meeting aims to advance offshore wind in the Gulf and take steps to conduct an offshore wind auction. According to Vorhoff, the NREL study sparked significant corporate interest in the area, especially due to shallow coastal waters and cost-saving proximity to supply chains. Auctioning off leases in the region would provide an opportunity for displaced oil and gas workers to gain employment in installation, maintenance, operations, and servicing. “When [projects] are being built off the coast of Louisiana or Texas, that’s a direct pipeline of projects to put those folks to work,” says Dr. McClellan. Even before then, surveying and pre-development work will require more local expertise. 

A thriving homegrown industry could represent an economic windfall for the region. NREL’s study finds that just a single large project in the region could support nearly 5,000 construction jobs, 150 operations jobs, and generate nearly $500 million in GDP during construction and $14 million annually through operations. 

However, several hurdles must be overcome before this vision can become a reality:   

  • Research, development, and deployment (RD&D), especially around more Gulf-specific challenges such as hurricane-proofing; 

  • Leasing and siting challenges; 

  • Bottlenecks along the supply chain as the industry moves to meet surging demand;

  • Tepid interest from most Gulf region states. 

For offshore wind to scale up in the Gulf region, time is of the essence. Yet according to Musial, some of the hurdles outlined above “are the problems that can’t be addressed with just money. It takes time. And you have to have both.” “If we can anticipate what those issues are,” he continues, “we can work on them now so that the technology and the infrastructure is ready when the industry needs to take off.” 

Repositioning the Gulf Coast as an Energy Hub of the Future

Offshore wind looks to play an outsized role in the nation’s energy mix for the remainder of the century. The Biden Administration’s envisaged 110 gigawatts of offshore capacity by 2050 would be greater than that of the nation’s current nuclear fleet.

Meanwhile, the outlook for oil and gas in the region is more uncertain than ever, according to the LSU forecast. Recent challenges for the sector have included the Biden Administration’s federal leasing freeze, heavy layoffs in the industry during COVID-19, and a global shift away from oil. The International Energy Agency (IEA) recently voiced doubt that oil demand can ever reach pre-Covid trajectory. 

Ambassador Paul Simons, formerly Deputy Director of the IEA and currently a Senior Fellow at the Yale Jackson Institute for Global Affairs, echoes the apprehension, saying “the oil industry in general around the world is reassessing and focusing a lot more on projects that are lower-cost and that have a shorter investment cycle.” He adds, “there’s uncertainty about exactly where demand is going to go and where the politics are going to go in terms of climate change.” Although it is unmistakably weakened, oil’s reign is not yet over. The petrochemical industry is ballooning, and Simons points to the numerous large emerging economies still increasing their oil consumption, as well as the infrastructure lock-in for oil-guzzling trucks and ships around the world. 

The upstream oil and gas sector in the Gulf region was particularly hard-hit by COVID-19 and collapsing oil prices, as each saw a 20% decline in workforce, with just a fraction of jobs expected to be regained in 2021. For both states, upstream oil and gas jobs have been nearly halved since 2015. Amidst this upheaval, offshore wind could present a viable on-ramp for displaced oil and gas workers, enabling them to utilize some of the skills and expertise they’ve spent their careers developing. Advocates of a “just transition” away from fossil fuels have faced criticism for oversimplifying the adjustment from one energy industry to another—coal to solar, for example. However, transitioning offshore oil and gas workers to excel in the offshore wind industry looks like a process that can achieve a more natural fit.

Dr. McClellan, who has spent significant time with oil and gas workers in the Gulf, says that she sees an openness towards the shift. “They’re not like ‘I only want to work in carbon-intensive sectors.’ They’re just like ‘I want to work. I want to have a thriving business.’” She relates a story of a third-generation oil and gas worker looking towards his family members who represent generations four and five and saying, “I want this to be a sustainable business for them, and they’re not going to solely work in offshore oil and gas. They’re also going to work in offshore wind.” Plus, evidence from existing offshore wind powerhouses lends credence to the employment argument. “For most countries that have invested in offshore wind…they’ve had very favorable employment impacts,” says Simons, pointing to the UK, Denmark, and Germany. 

They’re not like: ‘I only want to work in carbon-intensive sectors.’ They’re just like: ‘I want to work. I want to have a thriving business.’

But Gulf coast states must move expeditiously through the notoriously protracted planning process in order to fully capitalize. “By the time they get to building plants after they go through the necessary steps of doing stakeholder engagement, siting, marine spatial planning, the costs will have come down sufficiently enough,” Musial notes. “But they have to want to do it.”

Texas, Mississippi, Alabama, and Florida can take similar steps as Louisiana in setting up a committee to explore the industry’s potential in their respective states. Offshore wind prospects can also benefit from state incentivization of clean electricity, such as through a Renewable Portfolio Standard (RPS). For many states in the Northeast and Mid-Atlantic, setting lofty RPS targets has placed a greater emphasis on the need for massive amounts of offshore wind. But even if the mandate-averse Gulf states don’t set renewables targets, virtually the entire coast is covered by electric utilities that have set targets to achieve net-zero CO2 emissions by 2050. Although their targets are not binding, Entergy (in Louisiana and Texas), AEP (Texas), Southern Company (Alabama and Mississippi), and NextEra (Florida) could utilize the region’s copious offshore wind resources if they are serious about slashing emissions. 

The Biden Administration’s Role in Making this a Reality 

In the near-term, the Biden Administration has a major opportunity to spur the region’s offshore wind industry and begin the process of a just transition for oil and gas workers. “There are many tools in the toolbox that the federal government can use to help the [offshore oil and gas] sector to diversify,” says Dr. McClellan. 

We’ve already seen the Administration take steps, most prominently with the March announcement and new interagency offshore wind coalition. Musial commends the signal that the Administration’s move sends, saying, “This extra push from the Administration will also help the established oil and gas industry in the Gulf of Mexico reposition itself as a leader in the clean energy supply chain, before projects are built in the Gulf, by setting up production for this $12 billion per year [domestic] industry.” 

One significant piece of the announcement is the Department of Energy’s Loan Programs Office making available $3 billion in loan guarantees for projects across the industry, which could provide support for necessary transmission infrastructure as well as the eventual deployment of younger technologies such as floating turbines and wind-powered hydrogen production and storage. The Administration is also making moves to address supply chain bottlenecks, most notably with $230 million in funding for port upgrades. The industry also stands to benefit from the Administration’s broader push to extend tax credits and cut back on fossil fuel subsidies.   

Throughout these initiatives, the Administration would do well to apply special focus to the region to ensure it meets its potential as a hub for production, a source of good jobs, and an exemplar of a just energy transition. 

One policy it could consider is the bipartisan Offshore Wind Jobs and Opportunity Act, which proposes to establish a $25 million per year grant program focused on offshore wind job training, with 25% of funds directed to community colleges. The legislation from the last Congress specifically prioritizes workers displaced from fossil fuel industries. Industry experts also reiterate the need for RD&D to focus on region-specific challenges, as well as fully engaging with state and local governments, labor groups, and other regional stakeholders. 

“I think there has to be better connections made between the east coast focus on creating jobs and economic development from this industry and making sure that we are drawing upon some of our greatest assets in this country” in oil and gas workers, says Dr. McClellan. “And that’s not something that will just happen…there has to be a mindset there in order to make that all happen.”

 

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