Interview: As America’s energy mix decarbonizes, growth spurt in the air for renewables with offshore wind as centerpiece

The American energy arsenal is well positioned to be further enriched with renewables, but it needs to get certain issues, such as permitting delays and grid bottlenecks, out of the way to seize this chance. This was driven home further during our interview with Thomas Gros, a senior energy industry executive with 33 years of experience under his belt, who sees offshore wind as the linchpin of the decarbonised energy mix.

The fossil fuel industry has been the backbone of the global energy mix for a very long time, however, countries around the globe are now working on replacing these carbon-intensive sources of energy with low-carbon and green ones in a bid to bring a net-zero energy future to life. The ramp-up of renewable energy, such as solar and wind, offers a surefire way to reach this goal since renewables are perceived to be the cure for climate change issues, which are tying the world in knots, as heatwaves ravage the globe.

The advantages of scaling up renewables are confirmed by many studies, which have found that wind and solar are the cheapest way to cut emissions that are heating the planet. In light of the benefits of renewable deployment, the U.S. is working toward a 100 per cent carbon-free power sector by 2035 in support of President Joe Biden’s climate goals. This is no easy feat, as switching to renewable energy cannot happen overnight, thus, the proper energy infrastructure needs to be put in place.

The American Petroleum Institute’s new analysis, prepared by PricewaterhouseCoopers (PwC), on the growing economic contributions of America’s natural gas and oil industry in all 50 states, shows the oil and gas industry supported 10.8 million jobs and contributed nearly $1.8 trillion to the U.S. economy in 2021. While oil and gas are not only still in the game but are also expected to keep their spot in the U.S. energy mix for the foreseeable future, the transition journey provides a ripe opportunity to repurpose some of the existing infrastructure for renewables while upping the renewable energy ante.

The American electrical grid currently runs for the most part on gas and coal, thus, the transmission capacity would need to double to reach Biden’s 2035 goal. The efforts to modernize the grid and increase the nation’s clean energy capacity are impeded by the broken permitting process, which is halting U.S. energy development. As proposals to expedite infrastructure projects are making the rounds in Congress, permitting reform is perceived to be part of the solution to the strains created by rapid growth in renewables, as this could help ease U.S. grid bottlenecks.

While the Inflation Reduction Act, which brought a $370 billion provision for climate spending, turbocharged clean energy projects, Wood Mackenzie’s analysis estimates that investments amounting to a whopping $10 trillion are needed for the U.S. to reach its net-zero by 2050 goal along with additional guidance from the Biden administration to see the IRA truly kick-start that investment.

Bearing in mind the thorns on the path to the acceleration of renewables and the complexities of the energy transition puzzle pieces, Offshore Energy obtained views from Thomas Gros, Global Head of Renewable & New Energy at Slalom, a business and technology consulting firm, to put things into perspective.

With a Master of Science in Business, Corporate Strategy, and Management of Innovation from MIT Sloan School of Management, Gros has navigated every primary link in the global energy value chain over the past 33 years, including exploration and production, trading and marketing, renewable energy development, power plant construction and operations, and retail energy sales. Prior to joining Slalom in 2021 to lead the renewable and new energy verticals, he was the Executive Vice President (EVP) of Talen Energy, an Investment of Riverstone Holdings.

As the first-ever offshore wind lease sale in the U.S. Gulf of Mexico approached, several companies prequalified for the auction, including Shell and TotalEnergies. These oil majors not only operate oil and gas assets in this region but have also previously secured offshore wind leases on the U.S. East Coast. The duo are not the only ones from the oil and gas sector, who prequalified for the auction.

In addition, the waters offshore the southern U.S. also attracted Hecate Energy, a solar and storage project developer. This shows that the U.S. offshore wind potential is being recognized by other players in the energy industry arena and not just those entrenched in the renewable market.

During the interview, Gros takes a deep dive into the renewable energy market, discussing key areas of growth and optimization, ways to solve grid challenges on the supply and demand side, and how the U.S. offshore wind sector is poised for growth. The interview questions and Gros’ answers about the evolving energy landscape in the United States, its emerging markets, and challenges are available in full below.

• What do you see as the most pressing challenges impeding renewable energy development?

Thomas Gros: Renewable energy development has a couple of key challenges which primarily revolve around uncertainty and risk. If you’re a developer of any asset, including a renewable asset, any time the risk goes up it decreases the probability of success. The first case relates to interconnection risk. Once a company decides to build a renewable asset, such as a wind or solar array, it must apply to connect to the grid. This interconnection process involves the regional transmission organization or the utility that owns the poles and wires.

What’s happened over the last few years is that this process, which used to take a few quarters, has now become years in length. Given this, the uncertainty of the project increases rather dramatically. Part of it is the complexity of the problem has become greater as more and more developers are trying to get access to interconnections on the grid. Another factor is there are a lot of projects that do not have a strong chance of completion but nonetheless, they cloud or add to the uncertainty of the analysis as to the cost of the downstream system impact.

As a result, utilities and regional transmission authorities are struggling to respond to developers in a timely manner. For example, a project that might have been economic if it went live in 2023 may not be as economic if it goes live a year later due to a lesser tax benefit or the investment tax credit—uncertainty that significantly increases the project’s risk. This gets in the way of renewables development in America. The second factor is uncertainty as it relates to things like regulations and import tariff policy. Just over the last year, we’ve seen questions about tariffs on solar panels made in China. As a result, a developer may not know the actual cost of the project’s main component—another considerable source of uncertainty.

• Is a new permitting reform a solution that will get rid of the red tape for U.S. energy infrastructure projects?

Thomas Gros: It depends. It would be useful if the permitting reform included an acceleration of the process to determine the interconnection and system impact costs that result from the solar or wind array being added to the grid. The interconnection process itself is still the elephant in the room. I fear other reforms that people might talk about, while helpful, do not address the core issue.

• How can grid bottlenecks be eased and sorted out on the supply and demand side?

Thomas Gros: The supply side relates to the developers trying to get their solar and wind arrays connected to the grid. While the demand side typically relates to the long-term power purchase agreements (or PPAs). The key bottleneck is what happens in between – the interconnection application and the execution of the power purchase agreement, which typically only occurs after all costs and risks are fully defined and understood by all parties to the agreement.

I believe many developers are capable of coming up with projects that are well-defined and economic and could find buyers for long-term offtake agreements. The question is centered on the technology and if it can connect to the grid in a timely and economic way. The issue is not so much supply and demand as is it the interconnection that’s in between, which is a requirement to allow solar or wind arrays to connect to the grid and so on the consumer.

• What can be done to optimize oil and gas operations with renewables to curb the carbon footprint in the short term?

Thomas Gros: At a high level, we are going to continue to need fossil fuels to power key elements of the grid in coordination with intermittent sources, namely the wind and the solar arrays. While this will be the case for quite some time, I think we’ll gradually see the higher carbon-emitting elements on the generation stack be phased out first.

Take coal for instance, which everything else being equal emits about twice as much carbon as a natural gas power plant. We’ll see those higher carbon elements disappear first and, in many cases, we may see some of those facilities convert from being a large coal-fired power plant to a renewable generation asset. I believe we’ll see the natural migration on the generation side from the most carbon-intensive sites over the course of time.

The key here is what happens with respect to the lower-carbon-emitting fossil-fuel-powered sites. Removing some of that carbon on the front end, perhaps blending with hydrogen and even more importantly leveraging carbon capture and sequestration on the back end, could enable a natural gas-fired power plant to become a very low or zero emission part of the generation stack.

• What needs to be done to speed up renewable energy deployment?

Thomas Gros: Anything we can do to expedite the permitting process, including in particular the interconnection agreement with the grid operator, will speed up renewable energy deployment. It’s largely a data and analysis issue. I believe it can also be aided by the application of artificial intelligence (AI), including generative AI. You should anticipate firms, including Slalom, will introduce tools over the next few quarters that help transmission operators, grid operators, and regional transmission organizations to perform that analysis much more quickly.

Keep in mind this is by definition very dynamic because on any given day there might be another developer wanting to connect at that same point in the grid. The equation that might have been applicable today has now changed as a result of that additional piece of information. To overcome this challenge, it’s important for organizations to have a very clear data strategy and analytical strategy, leveraging the appropriate technologies.

• Which key areas of growth can you see in the U.S. energy market?

Thomas Gros: Over the next decade, I believe we’ll see growth across the broad portfolio of renewables development but one of the areas I’m most excited about is offshore wind. Recently, one of the largest U.S. offshore wind projects began placing steel in the seabed. The $4 billion project, known as Vineyard Wind, began taking shape. Offshore wind is one area of renewable generation where Europe has far exceeded the U.S. This is the first significant offshore development and the first of what I believe will be many.

There are numerous technologies we’ve developed for related industries – including offshore oil and gas – and engineering expertise, which can be applied to offshore wind. There are other elements of technology, including communication, remote operation, and sensing to take into consideration. These are things that firms, including Slalom along with our partners, have made great advances in. We should expect to see these advancements applied across all of the renewable development projects in North America but perhaps none more so than the offshore wind projects.

• Is there an opportunity for more floating solar in the U.S.?

Thomas Gros: There’s an opportunity for more renewables across the U.S. I think the industry will begin to put solar and wind in places that were previously challenged as new solutions and technologies are implemented to help address key barriers. To a large extent, the easy stuff gets done first, such as putting a large solar array on several thousand acres of farmland in a remote location.

The industry is now asking questions like: How do I get my solar and storage arrays closer to the city load pockets? How do I get wind arrays installed in slightly deeper water or in places where the foundation is more challenging? Do I immediately go to a floating platform?

All of these things represent technology challenges, which the energy industry has faced before. Just look at the number of floating and fixed offshore platforms we have. These challenges are things we’ve addressed before, and a lot of that technology, once adopted, is directly applicable. Looking ahead, I expect to see all of the above solution suite here, including floating solar and floating wind.

• Can further advancements in energy storage help push energy transition forward?

Thomas Gros: Renewable assets by definition are intermittent. When the sun doesn’t shine or the wind doesn’t blow, energy is not produced. As these assets become a higher percentage of the overall generation stack, balancing intermittency using other assets including battery storage becomes all the more important.

This goes beyond the intermittency we can plan for. For instance, we know a solar array’s output is going to drop to zero overnight, as this is something that occurs every day. However, we don’t always know that a large cluster of clouds will pass over a solar array, and unplanned intermittency must be countered in real time.

In this case, battery storage is rather important and technology development is tracking well. We do have challenges with regard to accessing the key raw materials, including lithium, graphite, and rare earth metals. These are also technical problems that will slowly be solved as supply and demand achieve a new balance in the face of greatly increased demand.

Lithium-ion battery storage is not economic for extended run times – say beyond two to four hours. We are exploring additional technologies to address extended outages in a more economical way. For instance, flow batteries and fuel cells can come online very quickly and run efficiently for extended periods. Ultimately, when we talk about balancing intermittency, we must keep in mind that the timeframe matters and directly impacts the technology needs.

Today batteries are a great source of balancing short-term intermittency because they’re not mechanical, they come online very quickly, and they can do that relatively economically for short periods of time. For those extended periods of intermittency, we should expect to see a range of other technologies begin to emerge that will be more economically favorable.

• Would repurposing the existing oil and gas infrastructure in the Gulf of Mexico be viable to harvest more offshore wind energy?

Thomas Gros: I think it’s likely that repurposed oil and gas infrastructure could support offshore wind turbines. There are probably platforms that were previously used for exploration, production, or transportation structures which may be repurposed as platforms for renewable assets. The key is having them in the right place, ensuring they are the right height, and that they are equipped to handle the right loads, which are all basic engineering questions. As a result, some of them may prove to be quite useful, and others may not.

• Would this slash offshore installation costs for renewable energy operators?

Thomas Gros: If the platform meets the location, height, and load requirements then it is possible. It remains to be seen but I’m optimistic that we will find at least a handful of existing offshore structures that can be adapted to be useful as renewable energy platforms.

• What can be done to boost the offshore wind sector?

Thomas Gros: A lot of work has been done just in the last couple of years in terms of regulation, tax policy, and things that relate to government views on this sector. In addition, developers have gotten better at addressing the concerns of the communities that the assets may impact, adjusting their plans early and showing the benefits of that – particularly in the Vineyard Wind asset array off the coast of Martha’s Vineyard.

A combination of things related to government policy, demand, improving development procedures, and interactions with the impacted communities have all made a significant difference. In the U.S., we have a huge resource of offshore wind and in many cases, as on the East Coast, that wind is accessible in relatively shallow waters, which makes it more economically viable. There are also some technologies that are helping, particularly with respect to offshore wind. I’ll give you one example of a technology we’re working on with one of our partners around bird strikes and wind assets.

One of the technologies being developed is through the application of cameras enabled with AI to project the flight trajectories of birds that might impact a wind turbine blade, determine that probability and, if necessary, shut down the turbine for the period where that danger might exist. Then restart the turbine once the danger to the birds has subsided. We’ll continue to find methods to help to overcome obstacles and ultimately, I am very optimistic about the future of offshore wind in the United States.

• Where do you see more potential growth for this sector?

Thomas Gros: I see the potential for growth for offshore wind on all three coasts. The industry will continue to learn lessons on how to do this right, build consensus within the community to get support and develop technologies that help to overcome obstacles. Wind is one of the sources of renewable energy that helps to diversify the generation portfolio and provide power around the clock. For instance, there’s lots of wind all day long, including overnight, when solar by definition is producing nothing.

• With the grid mostly running on gas and coal, how much will it cost to convert it for hydrogen use?

Thomas Gros: Keep in mind that the U.S. grid today is powered by more than gas and coal. Coal is now about 20% and gas is about 40%. We leverage lots of other sources, including renewable sources like wind, solar, and also nuclear. Hydrogen is potentially an answer to a couple of the elements.

First, we’ve already shown it can be blended with natural gas, which is overwhelmingly methane, to reduce the carbon on the input side of the combustion equation. If you combine that with carbon capture and sequestration (or CCS) on the output side, you can get to a very low carbon output, which would be very useful.

Hydrogen is also potentially quite useful as a direct input into fuel cells, which act more like batteries –fuel cells simply convert the hydrogen into electrons and water. Additionally, some fuel cells (for instance, HyAxiom) can ramp up and ramp down to follow the load, balancing intermittency from renewable sources like solar and wind arrays.

Also, if we look at other areas of electrification, hydrogen might be interesting. While lithium-ion-powered electric vehicles (EVs) have dominated the next generation of automobiles, the jury is still out as to what technology will propel the next generation of large trucks. Hydrogen fuel cells may also power ships and trains—particularly those near hydrogen hubs.

• Do you believe green hydrogen will play an important role in the U.S. energy sector?

Thomas Gros: There’s already been a significant boost on the green hydrogen side. The Inflation Reduction Act and follow-on legislation have established a $3 per kilogram investment tax credit for the production of hydrogen produced without emitting carbon. What we’re now seeing, in terms of industry and government push, is developing the demand side so that we can match what we know on the supply side is a viable means of producing hydrogen without releasing carbon into the atmosphere.

We’ll need to understand very clearly who’s going to consume it and where. The challenge that hydrogen presents is it’s a third of the energy density in its gaseous form versus natural gas and doesn’t transport or store economically. This will likely result in the formation of hubs where it’s produced and consumed in close proximity.

• Is there anything you would like to add?

Thomas Gros: Talent can be transitioned from more carbon-intensive fields to renewable ones. Offshore oil and gas platforms include a lot of technology that can be directly applied to offshore wind structures. Similarly, reservoir engineering skills used to find and develop hydrocarbon reserves are also useful in engineering underground carbon capture and sequestration assets.

---

The timing seems to be everything since taking advantage of the existing infrastructure and skillset requires supportive policies and consistent and profitable work for green projects. Based on the Energy Industries Council’s recent report oil and gas segments have the highest FID rates globally, averaging around 20% for projects with start-up dates between 2023 and 2028. In contrast, renewable energy and energy transition technologies have much lower FID rates, thus, offshore wind stands at only 8%, hydrogen at 3%, carbon capture at 2%, and floating offshore wind at just 1%.

While the oil and gas industry appears to be on top of its game with the highest FID rates, challenges to net-zero are starting to rear their heads, as oil and gas projects seem more likely to proceed with full funding compared to renewable and energy transition technologies. Are these rapidly growing disparities between green ambitions and the reality of what businesses see in their order books pushing the energy supply chain into the arms of the fossil fuel industry?

EIC believes this to be the case, thus, more measures need to be undertaken for the scales to tip in favor of renewables, ushering in a low-carbon and green economy both in the U.S. and worldwide, so that, the energy transition doors can be opened wide to reach and step over the net-zero threshold while embracing the sustainable energy future.

---

Do you want to attend Europe’s leading event for the entire offshore energy industry? If the answer is yes, come to Offshore Energy Exhibition & Conference (OEEC) 2023 at RAI Amsterdam in the Netherlands on 28 & 29 November 2023.

Click here to register for OEEC 2023

Follow Offshore Energy’s Fossil Energy market on social media channels: