A Louisiana-based group of economic development agencies has been awarded a breakthrough $50m federal grant for an offshore wind-powered green hydrogen project in the Gulf of Mexico (GoM) that would be an early mover in helping to decarbonise the state's heavily polluting coastal industrial complex, while building renewable energy plant at sea.
The Greater New Orleans (GNO)-led H2theFuture plan won the funding via the $1bn Build Back Better Regional Challenge, an initiative set up last year by the US Economic Development Agency to boost economic recovery and rebuild communities in the state through “transformative investments” in regional industry clusters.
Governor John Bel Edwards said the H2theFuture federal grant, which will be supplemented by $24.5m in matching funds from the state, bringing total project funding to $74.5m, was “a significant milestone in Louisiana’s transition to a cleaner, more sustainable and more diversified energy future” .
“As the first state in the Gulf south to implement a
climate action plan, Louisiana has demonstrated the vision and leadership required to meet the historic challenge that climate change represents,” he stated
The state’s large industrial sector – dominated by oil refineries, chemical plants and fertiliser-making facilities, which together consume around 30% of total US hydrogen supply and generate 60% of the state’s emissions – is seen as a prime candidate for decarbonisation.
Louisiana is also the centre of US offshore oil & gas development in GoM, with a vast infrastructure, including pipeline and supply chain networks, that could be deployed for green hydrogen development.
Joe Tirone, a representative with GNO, said earlier this year: “In the GoM, there’s already a large existing demand for hydrogen, and there’s also existing infrastructure that may be utilised to help kick start green hydrogen when offshore wind starts.”
The
GoM holds some 500GW of commercial offshore wind potential streaming over its waters, according to the National Renewable Energy Laboratory. The Bureau of Ocean Energy Management (BOEM), the regulator of energy development in federal waters, last year established a 30-million-acre ‘call area’ for prospective project development.
The call area has yielded
two wind energy areas off the coasts of Louisiana and Texas with some 15GW of combined potential capacity. Lease sales are expected to begin in 2023.
Developer interest has been muted, however, deterred by lower average wind speeds, a soft seabed, and frequent hurricanes that require more robust and costlier infrastructure, as well as power prices lower than the national average. BOEM’s initial request for interest last autumn garnered comment from only a single developer, German utility RWE.
Even before the win, however, the H2theFuture proposal spurred industry interest in Gulf offshore wind development from major players Shell, Orsted, RWE, and Mainstream Power, which see green hydrogen demand as another potential market.
“The potential of offshore wind development in the region is not limited to wholesale electricity generation, but can also present opportunities for green hydrogen,” Orsted has noted.
Katie Theoharides, head of offshore development (East) for RWE Renewables, told Recharge: “South Louisiana is well positioned to support the production and use of zero-carbon hydrogen. This is an opportunity for workers in the Gulf to retain good paying jobs in the energy industry and create new pathways while meeting the goals of the Louisiana Climate Action Plan.”
In parallel to federal moves to advance the industry,
Louisiana passed legislation this year allowing offshore wind development in state waters extending from 3-13 miles (5-21km) from shore.
State representative Joseph Orgeron, a key sponsor of the legislation, told Recharge this would allow for the development of pilot projects linking offshore wind to green hydrogen.
“Louisiana is engaging with developers to fast track leases in Louisiana territorial waters to make pilot projects,” he said. “The plan is for those to be done in such a way to primarily use that power for green hydrogen production.”
The H2theFuture plan aims to create a new clean energy business model in Louisiana and will include workforce training to upskill displaced oil & gas workers, rural residents and minorities, as well as business development to attract new and existing local and regional energy companies into the hydrogen value chain.
The Louisiana State University and University of Louisiana will conduct research on low-carbon hydrogen technologies while public-private partnerships will aim to de-risk green hydrogen investments at commercial scale.
A green hydrogen planning hub focused on industry growth and sustainability will be located at the University of New Orleans.
The recently passed federal
Inflation Reduction Act (IRA) also offers generous incentives for the production of green hydrogen that will likewise spur investment into the sector, but the law’s further provisions may complicate offshore wind leasing.
BOEM’s GoM regional head Mike Celata told a recent conference that offshore wind leases could be auctioned off in the Gulf as early as next spring, but the IRA mandates
a minimum annual oil & gas leasing of 60 million acres before offshore wind leases can be sold.
BOEM looks set to go ahead with an oil & gas acreage tender next March but it remains unclear whether this will suffice to allow offshore wind leases to be auctioned off, or if the Gulf offshore wind lease sale will have to wait until the second round of oil & gas leasing in September.
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