First-Ever Gulf Coast Wind Auction Could Be A Boon For U.S. Green Hydrogen
First-Ever Gulf Coast Wind Auction Could Be A Boon For U.S. Green Hydrogen | OilPrice.com
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In a groundbreaking move, the Biden administration is set to hold its first-ever offshore wind auction in the Gulf of Mexico this Tuesday. Unlike previous offshore wind auctions concentrated in the Northeast, this one aims to fuel a green hydrogen supply chain for the Gulf Coast's extensive industrial sector.
According to Cheryl Stahl, principal project manager at DNV, the Gulf Coast offers a unique opportunity for innovation.
"When we get to the Gulf, (offshore wind) will start becoming much more disconnected from the grid," she said. "The Gulf gets to be sort of a breeding ground for innovative solutions."
The Bureau of Ocean Energy Management (BOEM) will auction three areas off the coasts of Louisiana and Texas. John Filostrat, a BOEM spokesperson, emphasized that the Gulf "is uniquely positioned to transition to a renewable energy future, including the development and implementation of the production and use of green hydrogen."
Big players like Shell, Invenergy, and TotalEnergies are among the qualified bidders.
These companies have previously highlighted the Gulf's potential for green hydrogen production, leveraging its existing port and pipeline infrastructure.
However, the Gulf auction faces challenges. Unlike the Northeast, states like Texas and Louisiana lack legal mandates for clean energy. They also have slower average wind speeds, higher hurricane risks, and lower retail power prices.
Alon Carmel, a partner at PA Consulting, noted that "it's harder to justify an investment decision" in the Gulf, but tax credits for hydrogen could make the venture more appealing.
Lacy McManus of Greater New Orleans Inc sees the existing petroleum industry as a potential market for green hydrogen.
"They want to start replacing these gray hydrogen feedstocks and fuel sources with green," McManus said. "Wind provides that at the scale and capacity that we need in the industrial sector."
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The Gulf Coast offshore wind auction is a bold step toward a green hydrogen future, despite the region's challenges. It's a move that could redefine the Gulf as not just an oil and gas hub, but also a center for renewable energy innovation.
By Michael Kern for Oilprice.com
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Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.