Europe’s offshore wind & green hydrogen plans offer blueprint for US

• ‍Gulf of Mexico and Texas are areas with ‘significant potential’ for offshore wind & green hydrogen projects
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• ‍Securing project finance for offshore wind combined with green hydrogen is ‘entirely feasible’
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• ‍UK and Europe ‘hydrogen backbone’ plans could be replicated in US  

The US offshore wind sector is wrestling with a number of significant economic challenges at present, which include supply chain issues and interest rate rises, which are having a negative impact on the profitability of projects. With such dark clouds on the horizon, it would be unsurprising if offshore wind developers were reluctant to prioritise incorporating green hydrogen production into offshore wind projects at present. That said, despite such uncertainty, there is a belief that significant potential exists in the US for the development of offshore wind projects that do make provision for this type of technology.

As the latest issue of Tamarindo Finance Quarterly highlights, the Gulf of Mexico, and Texas in particular, are seen as areas where there is significant potential for the development of offshore wind projects that include green hydrogen production. This is due to the fact these areas have extensive oil and gas infrastructure that can be re-purposed for green hydrogen-related uses as well the associated production of methanol, ammonia and sustainable aviation fuel.

Europe takes the lead

In formulating strategies for the inclusion of green hydrogen production in US offshore wind projects, it is instructive for US developers to look at developments in Europe. Source Galileo, which specialises in the development of offshore wind projects in the UK, Ireland and Norway, has incorporated proposals for green hydrogen production in a number of its planned projects. “We believe the future of offshore wind is in green hydrogen – for example a large amount of our energy is currently supplied by natural gas, and green hydrogen could be used as a replacement for this provided that it can be produced at scale,” says Stirling Habbitts, director business development, MD hydrogen at Source Galileo. “If we look at northern Europe, to produce large amounts of green hydrogen at scale – which are not imported and are locally produced – the obvious answer is to go for offshore wind.” 

Grid restrictions

Habbitts explains that restrictions associated with electricity grids mean that it can be beneficial to include green hydrogen production in plans for offshore wind projects. “The electricity grids were not designed originally to accommodate large amounts of renewable energy in a dispersed generation model, so there are significant constraints nowadays with connecting further renewable projects to the grid and this applies to battery projects as well,” he says.  “Around parts of the coast of Scotland or the west coast of Ireland or off parts of the coast of Norway, for example, you don’t necessarily have a very developed electricity network or grid, so relying on the grid in those areas to be able to accept the electricity from large new offshore farms can be a challenge.”

In this regard, incorporating green hydrogen production into offshore wind projects is a game-changer, according to Habbitts. “If you can produce hydrogen, you can use it potentially to produce derivatives or you can put the hydrogen into dedicated hydrogen pipelines and you can transport it over long distances,” he explains. “When you go the hydrogen route, you basically bypass the electricity grid and you don’t have the constraints associated with grids.”

Only 'minority' of offshore wind developers considering green hydrogen

A number of offshore wind developers are exploring the potential for incorporating green hydrogen production into projects, but at the moment they are in a minority, says Habbitts. He adds that one of the reasons is that financing an offshore wind project incorporating hydrogen can currently be more challenging as such projects are still relatively new, though he says there are precedents that provide encouragement. One is the announcement earlier this year that NEOM Green Hydrogen Company had concluded a $8.4 billion financing for what it described as the “world’s largest green hydrogen production facility”, which is being built at Oxagon, in Saudi Arabia’s NEOM region. “There is precedent for project finance for green hydrogen projects, and there is precedent for project finance for offshore wind farms, so it should be entirely possible and feasible to obtain project finance for an offshore wind farm that produces green hydrogen,” Habbitts says.

Habbitts acknowledges that green hydrogen is a relatively new sector, but he stresses that there are projects in Europe and the Middle East that produce green hydrogen via electrolysis that are up and running having secured project finance from banks. He cites the example of Siemens, which last year commissioned one of Germany’s largest green hydrogen generation plants – with an electrical capacity of 8.75MW at Wunsiedel Energy Park. Elsewhere, In April last year, it was announced that the European Investment Bank (EIB) and the Official Credit Institute (ICO) would provide Spanish energy company Iberdrola with a combined total of €88 million for the development of a 100MW photovoltaic plant, a 20MWh battery and a 20MW green hydrogen production plant in Puertollano (Ciudad Real), Castilla-La Mancha.

UK’s ‘Project Union’: The lowdown

Habbitts points out that, across Europe, there are now a number of initiatives aimed at building green hydrogen pipeline networks that take into account the production of green hydrogen by offshore wind farms. “We already have extensive gas networks that are owned by large gas operators,” he says. “We know fossil fuel gas will be a reduced part of the future energy mix because of the greenhouse gas emissions it causes, however the infrastructure and the expertise of the gas network sector can be redirected to a hydrogen network.” One such initiative in the UK is Project Union, a National Grid Gas Transmission initiative aimed at delivering a “first of a kind hydrogen transmission backbone” for the UK. Through the phased repurposing of existing assets alongside new ones, the National Grid says a hydrogen backbone of around 2,000km will be created, representing around 25% of the UK’s current natural gas transmission pipelines. “This approach of primarily repurposing assets is up to five times more cost effective compared to new build,” the Project Union launch report stated.

Habbitts highlights that Project Union’s plan has taken offshore wind into account. “Offshore wind farms are considered in the plan,” he says. “Project Union identifies large industrial clusters where there could be large users of hydrogen, and connects those hydrogen hubs so that hydrogen from offshore wind, for example, in Scotland or in the Celtic Sea, can be moved relatively quickly across the country to where it’s needed,” Habbitts says. “With a network like this, so much more becomes possible because you can then sign offtake contracts from your wind farm producing hydrogen – for example, in the Celtic Sea – with maybe an industrial party on the other side of the country.”

Could US replicate Europe’s ‘hydrogen backbone’?

In a similar vein to the UK’s Project Union, Europe has come up with the European Hydrogen Backbone (EHB) initiative, which aims to “accelerate Europe’s decarbonisation journey by defining the critical role of hydrogen infrastructure – based on existing and new pipelines – in enabling the development of a competitive, liquid, pan-European renewable and low-carbon hydrogen market”. This initiative makes reference to “significant green hydrogen supply potential based on onshore and offshore wind”, which it sees as driving the development of additional supply corridors that can connect Nordic and Baltic hydrogen supply to the rest of Europe. Habbitts envisages a scenario where the US takes a similar approach. He says: “The US is a few years behind, but I absolutely see the US following suit - I would imagine areas like the Gulf of Mexico, Texas, for example – where there’s already a lot of offshore oil and gas infrastructure – would be ideal for bringing in offshore wind.”

This is an abridged version of an article that appears in the latest issue of Tamarindo Finance Quarterly, to download a copy click here

Main image source: iberdrola.com

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