Offshore wind energy in the Gulf of Mexico could pave the way for the development of a green hydrogen supply chain, according to players in the nascent US offshore wind industry. The region, traditionally known for oil and gas production, offers cheap electricity and lacks state mandates for renewable energy procurement. The upcoming offshore wind auction in the Gulf of Mexico, to be held by the Biden administration, presents an opportunity to fuel a new green hydrogen industry. Green hydrogen, produced using electrolyzed water with renewable energy, can help decarbonize heavy-emitting industries and transportation.
The auction, organized by the Bureau of Ocean Energy Management (BOEM), will offer three areas off Louisiana and Texas to offshore wind developers. This marks a departure from previous federal offshore wind lease sales, which have mostly been held in the Northeast. The Gulf of Mexico’s existing infrastructure, including port and pipeline facilities, positions it favorably for the production and use of green hydrogen. A range of companies, such as Shell, Invenergy, and TotalEnergies, are set to bid at the sale.
While the Gulf Coast auction is not expected to attract the same level of investment as the Northeast, where strong state-level subsidies for carbon-free electricity and high power prices exist, there is potential for offshore wind to provide a new resource to Texas’ grid. However, developers would need to find buyers willing to pay above-market prices for the electricity, as it is not subsidized by the state. The introduction of tax credits for hydrogen in President Biden’s Inflation Reduction Act has increased the appeal of pairing offshore wind with hydrogen production, potentially driving interest from Gulf developers.
The Gulf of Mexico’s existing petroleum industry could serve as a ready market for green hydrogen, as companies aim to lower their carbon intensity and satisfy investor demands. By replacing carbon-intensive hydrogen feedstocks and fuel sources with green alternatives, wind power can play a significant role in decarbonizing the regional industrial sector. As the auction approaches, industry players are optimistic that the Gulf of Mexico’s offshore wind potential will fuel not only the growth of clean energy but also the development of a flourishing green hydrogen supply chain.
