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The fight to define ‘green
hydrogen’ could determine America’s emissions future
Mar 10, 2023
By Emily
Pontecorvo
![](images/images_03_13_2023/pic32.jpg)
With the passage of the Inflation
Reduction Act last year, a decades-long effort to get a major climate
package through Congress is over. But the work of ensuring this
unprecedented bundle of funding for clean energy actually leads to reduced
emissions is just beginning.
A decision with profound implications for that goal now lies with the
Treasury Department, which must settle a debate over the best way of
crafting a tax credit designed to advance the production of clean
hydrogen. Scientists and climate advocates warn that without rigorous
guidelines dictating who is eligible for the subsidy, the government could
spend billions propping up hydrogen production facilities with enormous
carbon footprints, wiping out many of the other climate gains catalyzed by
the legislation.
“Absent strong rules, we could increase emissions by half a gigaton over
the lifetime of the credit,” Rachel Fakhry, a senior climate and clean
energy advocate at the Natural Resources Defense Council, told Grist. “The
current emissions of the power sector is 1.5 gigatons. So this is
completely contrary to U.S. climate goals. The stakes are extremely high.”
Such concerns came up repeatedly during a public comment period that ended
in December. But the hydrogen industry, oil companies like Chevron and BP
that are investing in the technology, and even a few renewable energy
groups argued otherwise. They flooded the Treasury with comments insisting
that arduous rules will undermine U.S. climate goals — by killing this
nascent clean technology before it can even get started.
Onerous rules would “devastate the economics” of green hydrogen, David
Reuter, chief communications officer for the energy company NextEra, told
Grist in an email. They would shut down investment in the industry,
“effectively making it dead on arrival.”
Building a domestic clean hydrogen industry is a key part of the Biden
administration’s climate strategy. The fuel has the potential to replace
oil, gas, and coal in a range of applications, from aviation to industrial
processes like steelmaking and chemical manufacturing. Most importantly,
it does not emit carbon when it’s used.
The dispute over the tax credit comes
down to the unusual business of producing hydrogen. Current supplies are
made by reforming natural gas, which releases greenhouse gasses. The tax
credit is designed to reduce the cost of a carbon-free method that
requires only electricity, water, and a machine called an electrolyzer.
Producers can earn up to $3 per kilogram of hydrogen they produce this
way. The tax credit has no cap, and could pay out more than $100 billion
over the lifetime of the credit.*
The question for the Treasury is how to measure the emissions from the
electricity used. About 60 percent of U.S. electricity still comes from
fossil fuels. Plug your hydrogen plant into the grid pretty much anywhere
in the country today, and it could result in higher emissions than the
conventional production method that uses natural gas.
Late last year, a prominent energy modeling group at Princeton University
circulated new research showing that hydrogen producers could all but
eliminate this emissions impact by following three principles. These are
the rigorous rules that the Natural Resources Defense Council and other
environmental groups want the Treasury to adopt.
![](images/images_03_13_2023/pic33.jpg)
That hourly matching concept is
giving hydrogen producers the biggest headache. “Grid-tied electrolyzers
are most economic when operating as close to 100 percent as possible,”
said Reuter. “A clean hydrogen project may have to curtail its
electrolyzer if renewables are not available at these granular time
periods. Curtailment leads to long idle times and higher costs.”
Instead, NextEra and others in the industry urge the government to accept
a scenario in which they buy enough renewable energy to cover their
electricity usage on an annual basis. That means a hydrogen plant could
run ‘round the clock for a year, total up its energy usage, and buy an
equivalent amount of solar or wind power. Reuter cited an analysis by the
consulting firm Wood Mackenzie which found that such a scheme could bring
enough renewable power onto the grid to cancel out the dirty production
and result in net zero-emissions hydrogen.
Wilson Ricks, who led the Princeton study, noted that Wood Mackenzie made
several different assumptions that led to that conclusion. For one, the
authors didn’t include clean electricity subsidies from the Inflation
Reduction Act, “which leads to significantly higher total costs for both
annual and hourly matching,” he said. It will be up to the Treasury to
parse these differences.
The stakes of eschewing any one of the three principles are not just about
emissions or project costs. Fakhry said that if hydrogen producers
increase demand for electricity when renewable resources are unavailable,
they will undoubtedly cause natural gas and coal-fired power plants to
ramp up. That could worsen air pollution and drive up the cost of
electricity. It also creates a reputational risk for the budding industry
— it will be much harder to make the case for using green hydrogen if
there’s uncertainty about how clean it actually is.
Right now, some self-described green hydrogen producers are flocking to
areas like upstate New York, where existing hydropower is cheap, and
Florida, where solar energy is abundant. But if the Treasury agrees that
hydrogen production must be powered by new, clean resources at all times
to earn the tax credit, those projects wouldn’t just lose the ability to
claim the credit — they would lose credibility.
Criticisms of the approach NextEra and others propose are not new, nor are
they unique to hydrogen. Many companies that claim they are “powered by
100 percent renewable energy,” are likely doing some form of annual
matching. But there’s a growing consensus that this claim is misleading.
In 2020, technology giant Google came to the conclusion that it needed to
match its energy usage with clean sources on a 24/7 basis to fully
eliminate its carbon footprint. At the time, there weren’t really any
products or systems set up to facilitate this. But the landscape has
changed dramatically since then, said Maud Texier, director of clean
energy and carbon development at Google. Businesses have sprung up to help
companies track their consumption on a granular basis, and renewable
energy markets have created hourly products.
“We see a whole value chain and ecosystem developing around this 24/7
solution,” she said. “Today for new entrants, there’s many more tools for
them to get started.”
Google still has a ways to go to achieve its goal. But many other
companies, nonprofits, and even governments have signed on to the concept.
A United Nations-sponsored initiative includes more than 100 signatories.
In 2021, the Biden administration set a goal for at least 50 percent of
the power consumed by government buildings to be emissions-free on a 24/7
basis by 2030.
“The market is heading in this direction,” said Fakhry. “The tools are
here and can scale really fast where they’re not. And the Treasury
imposing anything short of that is contrary to momentum in the market.”
First, producers must contract with
new renewable energy resources like wind and solar farms or geothermal
power plants, ensuring that enough new clean electricity comes onto the
grid to cover the hydrogen plant’s demand. Second, these resources must
feed into the same regional grid that the hydrogen plant uses, with no
transmission bottlenecks between them. And third, hydrogen producers must
match their operations with these renewable energy resources on an hourly
basis. That means if they buy power from, say, a solar farm, they have to
shut down when the sun goes down.
The argument that hourly matching would destroy the economics for green
hydrogen also doesn’t entirely stand up to scrutiny. Seven hydrogen and
renewable energy companies filed joint comments to the Treasury arguing
that the approach is technologically and economically feasible. One of
them, Electric Hydrogen, is developing electrolyzers designed to shut on
and off to match renewable energy availability. Raffi Garabedian, the
company’s CEO, acknowledged that today’s electrolyzers are so expensive
that it does make it harder to square a project’s finances if they operate
intermittently. But he said some hydrogen developers are combining wind
and solar contracts, allowing them to operate a lot closer to 24/7.
“You’re still shutting off every day, but that helps the economics,” he
said. “But it’s not possible, nor is it the right thing to do to run
hydrogen production at all hours of the day. I’ll just say that really
bluntly.”
Garabedian and others pointed a hydrogen plant under development in Texas,
a joint project by the energy corporation AES and the chemical company Air
Products. Rather than plugging into the grid, the companies plan to build
wind and solar farms to supply the plant directly. A representative for
AES confirmed that the plant “will ramp up and down with the availability
of renewable energy generation.”
Another project under development in Mississippi by the company Hy Stor is
taking a similar approach, combining wind and solar to power its plant. It
will use underground caverns to store hydrogen so that it can provide a
steady supply to customers when the plant’s operations slow or halt.
It’s true that rigorous rules would significantly skew the geography of
clean hydrogen. Daniel Esposito, a senior policy analyst at the think tank
Energy Innovation, said he expects to see more developers head to wind
belt states like Texas and New Mexico. To him, this would be a positive
outcome, because industries in those areas, like ammonia production and
major trucking routes, are great candidates to become clean hydrogen
customers. “There’s a lot of great uses there that don’t have a lot of
great alternative solutions,” he said.
Whatever Treasury Secretary Janet Yellen and her department decide will
shape the future of the nation’s clean hydrogen industry for years to come
— and by extension, the impact of the Inflation Reduction Act. For
Esposito, the decision turns on a single question.
“Are we aiming for building up the industry, emissions be damned? Or
building up the industry at a slower pace, with the emissions in check
from the start? We just want to make sure that everybody writing the rules
knows the implications.”
Green Play Ammonia™, Yielder® NFuel Energy.
Spokane, Washington. 99212
www.exactrix.com
509 995 1879 cell, Pacific.
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