HomeThe Case for Hydrogen in Louisiana

The Case for Hydrogen in Louisiana

Louisiana Reimagined as an Energy State of the Future

Since the invention of the first submersible drilling rig, launching the boom in offshore oil and gas exploration in the Gulf of Mexico and across the globe, South Louisiana has been at the center of energy innovation.  For six decades, South Louisiana offshore oil and gas expertise has served the country by ensuring stable, cost-effective energy, indelibly defining Louisiana as an “energy state.”  In recent years, however, this historical hydrocarbon dominance – dependence even – has created challenges.  Louisiana has seen more oil and gas job loss than any U.S. state, with nearly 22,000 positions lost from 2001 – 2020 (Emsi).

Consumers, investors, and governments are focused on reducing CO2.  This is the opportunity for Louisiana – to become an energy state of the future.

South Louisiana is well positioned to bridge to a higher-job, lower-carbon future.  Specifically, a transition to the production and use of “clean” (zero-carbon) hydrogen (H2) can both decarbonize South Louisiana’s industrial corridor, and preserve well-paying jobs.  Green hydrogen – in contrast to traditional “gray” or “blue” hydrogen extracted from fossil fuels – is produced by splitting water (H2O) with electrolyzers powered by renewable electricity, such as wind.  As a flexible, zero-carbon energy carrier, green hydrogen can decarbonize hydrogen end-users (petrochemicals, refineries) as well as new, hard-to-abate sectors (long-haul road/maritime transportation, steel refining).  In fact, green hydrogen has the potential to reduce total emissions by as much as 68% in Louisiana (IEA). Analysts estimate global demand for green hydrogen will soar 500+% by 2050, to account for 71% of total hydrogen use, while creating 3.4M new jobs (McKinsey & Co.)

The H2theFuture strategy is significantly de-risked by Louisiana’s strong competitive advantages to become both a clean hydrogen producer and consumer.  Most importantly, Louisiana’s current, existing demand for hydrogen is the highest in the U.S. per capita (and second highest on an aggregate basis), consuming 30% of all U.S. industrial hydrogen.  Beyond this pre-existing user base, Louisiana also enjoys access to a dense hydrogen pipeline system, the largest port complex in the Western Hemisphere, and immense offshore wind energy potential (#4 in U.S.; NREL). 

The financial investment to replicate this infrastructure is nearly insurmountable and creates a competitive “moat.”  If leveraged, these advantages position Louisiana as a global leader in green hydrogen, resulting in over 34,546 new high-paying direct jobs.  Most jobs will emanate from renewable electricity projects (primarily offshore wind); technical and engineering talent in hydrogen-related fields; and, new firms with green hydrogen end-use innovations.  Without intentional, strategic investment, the state will miss a generational opportunity to transition existing energy jobs and catalyze innovation for decarbonization and economic diversification.

Based on extensive industry interviews conducted by McKinsey & Co. on behalf of the H2theFuture coalition, the greatest barrier to attract private capital and catalyze a sustainable green hydrogen economic boom in South Louisiana is the marginal average cost gap between gray/blue hydrogen and green hydrogen (currently $2/kg vs $5/kg).  If not cost-competitive, green hydrogen will fail to find sustainable commercial application.  The higher marginal cost for green hydrogen is largely a consequence of the relatively small scale of projects to-date. 

To overcome this barrier and reduce the green hydrogen cost per kg, industry is asking for organizational and governance systems that will: facilitate large-scale green hydrogen projects; leverage existing and new stakeholder assets; and, support innovative technologies that will increase renewable energy and electrolyzer capacity – all underpinned by a well-trained and abundant workforce.Given the rapid cost decline in renewable energy in solar and offshore wind over the last decade, -97% and -67%, respectively (IEA), expert projections indicate that, with sufficient scale, green hydrogen will be cost competitive with grey hydrogen within seven to eight years.

A Region with a Rich History of Innovation and Challenges

South Louisiana is a region of unique economic and cultural significance.  In 1803, the Louisiana Purchase secured nearly 1/3 of the continental U.S., solely to take possession of the entrepôt of New Orleans.  South Louisiana has since provided the U.S. with agriculture, energy, and even the advanced manufacturing that played a pivotal role in WWII (Higgins Boats) and put a man on the moon in 1969 (NASA’s Michoud Facility).  However, concurrent with historic, economic, and cultural contributions, populations have suffered from disinvestment, inequity, and compounding impacts of environmental injustice.

The region’s GDP is $187.8B and is responsible for 80% of Louisiana’s total value added (U.S. Bureau of Economic Analysis).  South Louisiana is home to many assets critical to the success of the regional green hydrogen cluster, including a massive industrial base that consumes 30% of America’s industrial hydrogen (15 oil refineries – 15% of U.S. capacity; four ammonia facilities – 35% of U.S. capacity); one of the densest pipeline network in the world, including the largest hydrogen system, stretching more than 700-miles from Galveston Bay in Texas to New Orleans (EIA); significant clean-energy potential with #4 most offshore wind potential in U.S. (NREL); the largest combined port complex in the western hemisphere; generations of population trained in relevant energy work (e.g., process technology); multiple universities skilled in energy training; and, major private sector industrial companies already leading the hydrogen revolution like CF Industries, Dow, and Shell.  Land-based assets are protected by levee systems, grounded in $14.5B in federal investment since Hurricane Katrina, and a frontline of wetlands under restoration through the State-led $50B Coastal Master Plan.

There are four H2theFuture target participant groups: 1) 20,000+ workers who have lost traditional energy jobs, and can transition to new, clean energy jobs; 2) Rural workers, who have been hit hardest both by the waning of traditional oil and gas; 3) BIPOC communities, who have historically lacked access to well-paying energy jobs; and, 4) Future workers, who must receive STEM training to thrive in the decarbonized economy.

Creating Equity

The Background

There is a strong and multifaceted equity argument for South Louisiana to make this transition to clean hydrogen.

Additional Challenges

Louisiana has also endured more recent socioeconomic challenges.  Hurricanes Laura and Ida were two of the largest storms to ever hit the U.S.  Together, the hurricanes caused $84B of damage and over 116,000 people to lose their jobs. 

The Strategy

H2theFuture has a multi-pronged strategy that specifically addresses two groups impacted by the above challenges:

  1. Black populations that have been historically excluded from opportunity
  2. Rural oil & gas workers who have lost their jobs (or are in danger of losing them in the future, given trends)
H2theFuture can create new jobs to advance economic opportunity, while improving environmental outcomes at the same time.

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