Delaware business and elected leaders have been excitedly touting the promise of clean hydrogen as a carbon-free fuel of the future for the past few years, and that enthusiasm has ratcheted up dramatically since the Mid-Atlantic Clean Hydrogen Hub (MACH2) was selected as one of a handful of federally supposed sites in October.
The First State, with an array of legacy and startup companies that have been working on hydrogen production and storage solutions, could stand to substantially benefit from the Hydrogen Hubs program as a MACH2 member. Billions of dollars in investment and thousands of jobs are potentially at stake in the development of projects under the hub.
Editor
Delaware Business Times
And on its face, the science is clear: burning hydrogen is cleaner than burning coal or natural gas.
While the burning of coal produces harmful carbon dioxide and fracking to produce natural gas releases even more harmful methane, the burning of hydrogen would only release water vapor.
That potential to help convert hard-to-abate industries such as steel and cement manufacturing or long-haul trucking and shipping – the industrial sector alone contributes nearly a third of U.S. greenhouse gas emissions – is why there is so much optimism about the role that the world’s most abundant element could play.
The reality is a bit more complicated.
Nearly all hydrogen is currently made via steam methane reforming (SMR), a power-intensive process that uses natural gas and water to create captured hydrogen and carbon dioxide that is emitted, known as “gray hydrogen.” If carbon capture is employed to sequester the greenhouse gas, a greener but not entirely renewable process, it would be classified as “blue hydrogen.”
As of 2020, less than 1% of the 10 million tons of hydrogen produced in the United States qualified as “green hydrogen,” or that made with renewable power like solar, wind or biogas.
The U.S. isn’t alone either, as less than 1% of consumed hydrogen worldwide came from green sources in 2022, according to the International Energy Agency. Yet global consumption of hydrogen grew 3% year-over-year to a new record high, implicating the gas’s growth to the 900 megatons of carbon dioxide released into the atmosphere that year via the power required to produce it, according to the IEA.
One of the biggest hurdles is cost, with clean hydrogen costing between $3 and $6 a kilogram to produce, or two to three times more than the cost of SMR hydrogen.
Hydrogen has real promise, but the current reality of its production should not be overstated as a panacea for our current climate crisis, nor should it impede the development and implementation of more readily available green energy sources like wind and solar.
There are real challenges to the advancement of clean hydrogen, including lowering the price point of electrolysis to make it more appealing for more end users, improving and scaling membrane production needed for electrolysis units, and building a national distribution network and storage standard.
Until some of those challenges can be solved, SMR will continue to be the dominant, and cheapest, method for hydrogen production. Only advancements on the renewable energy production side will help to change that equation while we wait for those solutions.
It’s the primary reason why the Biden administration proposed perhaps the strictest regulations for its tax credit known as 45V that will subsidize clean hydrogen production up to $3 a kilogram.
In the draft regulations released last month, the tax credits would only apply to projects that have created new renewable power generation within the last three years and in the same region as the hydrogen plant. Starting in 2028, the credits will also be matched to hourly renewable power generation, ensuring that subsidized electrolyzers aren’t drawing power from carbon sources when the wind isn’t blowing or sun isn’t shining.
The federal regulations largely matched the requests of environmentalists, who worried that subsidizing hydrogen production could actually lead to increased coal or gas usage to fuel the plants while acquiring existing renewable energy credits from across the country.
“With this new guidance, we can see the Biden administration is making the right choices for ensuring only truly clean hydrogen is eligible for the highest credit, enabling heavy industry to decarbonize without rewarding dirty hydrogen production,” Sierra Club Director of Climate Policy Patrick Drupp said in a statement.
The restrictive regulations on subsidized clean hydrogen production notably has one prominent opponent: Sen. Tom Carper (D-Del.), who chairs the Senate Environment and Public Works Committee and was the lead author of the Inflation Reduction Act’s clean hydrogen production tax credit (45V).
“The development of the U.S. clean hydrogen industry is critical to reducing greenhouse gas emissions, meeting our nation’s climate goals, and creating good-paying jobs across America. While I applaud the Biden Administration’s work to advance clean hydrogen, I fear that this proposed rule may well miss the mark,” Carper said in a statement. “When developing the Inflation Reduction Act, we intended for the clean hydrogen incentives to be flexible and technology-neutral. Treasury’s draft guidance does not fully reflect this intent, potentially jeopardizing the clean hydrogen industry’s ability to get off the ground successfully.”
As we’ve seen with the stumbles of the offshore wind industry in recent months, the economics are as important for the viability of an emerging industry as the environmental benefits. Limiting U.S. innovation in clean hydrogen via overly restrictive regulations risks scuttling the industry on the launch pad, but the Biden administration should concurrently promote the building of new renewable energy sources.
