After beginning a review of the potential for offshore wind in the Gulf of Mexico in 2021, the Bureau of Ocean Energy Management (BOEM) announced last month that an offshore wind lease auction will take place August 29, 2023, for three lease areas totaling 301,746 acres. This has the potential to lead to 3.7 GW of offshore wind capacity selling into ERCOT and MISO. This is just one of the auctions to have occurred across the US in the past few years as part of the Biden Administration’s goal of deploying 30 GW of offshore wind capacity by 2030. We modelled offshore wind sensitivities for ERCOT and MISO, analyzing the impact of offshore wind on system outcomes:
- Offshore wind has a sizeable impact in the ERCOT market; 2.4 GW of offshore wind selling into the Houston hub displaces solar and baseload thermal capacity by 1.6 GW in 2040. ATC prices in the Houston hub decline by $2.3/MWh on average from 2032–2040 relative to the base case1, and ERCOT-wide prices similarly decrease by $1.4/MWh. Offshore wind GWA prices retain an average $3.3/MWh discount to the Houston ATC price, this is the highest GWA price of any renewable technology in ERCOT.
- The effect of offshore wind in MISO is less extreme than ERCOT; 1.2 GW of offshore wind capacity selling into the Louisiana hub (a much less constrained hub than Houston) reduces ATC prices by only $0.6/MWh (or 1%) on average between 2032 and 2040. However, the offshore wind GWA trades at a premium to the ATC price in Louisiana due to alignment with high-demand hours and less volatility in the MISO market. The GWA prices retain a $0.8/MWh premium over ATC prices on average.
- Sensitivities to test the effect of selling into different hubs confirm that offshore wind realizes a higher GWA selling into the Houston hub (ERCOT) and Louisiana hub (MISO) as opposed to the South hub or Texas hub, respectively.
Click below to access the redacted version of the policy note. If you have any questions or are interested in the full report, please reach out to Danielle Startsev.