The following commentary was written by Bill Hayes, a finance executive who focuses on
electricity and environmental markets, and Joe Tedino, a Chicago-based writer focusing on the environment and sustainability. See our commentary guidelines for more information.

Last month, 13 senators — including the two representing our state of Illinois — sent a strongly worded letter to Treasury Secretary Janet Yellen calling out rules around the proposed tax credits for the green hydrogen industry as  “inconsistent with the intent and requirements” of the legislation they approved. 

They noted that the tax credits can be vital for incentivizing the production and market-viability of renewable hydrogen power, but the current proposed guidance could undermine the intent of the Inflation Reduction Act and hinder the green hydrogen economy.

We applaud this Senate effort and are pleased to see Illinois Democrats Dick Durbin and Tammy Duckworth were onboard in calling for revising the Treasury’s overly stringent rules. Both have been strong advocates of the Midwest’s MachH2 clean hydrogen hub, and they recently secured $1 billion in federal funding for this project.

The green hydrogen production tax credit in the IRA — the largest investment to reduce carbon dioxide emissions in U.S. history — has the potential to secure a significant role for clean, zero-carbon hydrogen energy in the U.S. by providing a tax credit of up to $3 for each kilogram of fuel produced. 

Yet as the Treasury Department grapples with how to implement rules for awarding the tax credit to hydrogen producers, there are warning signs that overly restrictive regulations may stifle the growth of what had been projected to be a $515B global market by 2035, according to global consultant Research Nester.  

We support the position led by Sen. Alex Padilla (D-Calif.) that asked for a host of changes to the rules in the interest of boosting a burgeoning energy supply that will achieve the intended carbon reduction in a less burdensome way.

At issue are the so-called “Three Pillars,” which are the standards adopted by the Treasury Department for determining whether hydrogen producers are entitled to receive the tax credit. The standards specify how, when, and where renewable electricity must be added to the grid to match the electrical load drawn to power the hydrogen electrolysis operations.

One of these pillars requires that hydrogen producers add renewable generation to the grid that matches their hydrogen load on an hourly basis, instead of an annual basis. The other two add specific location and facility requirements that further limit the flexibility for how and where hydrogen producers add renewable generation to the grid. 

Here’s the problem:  the standards are overly restrictive, leading to unnecessarily excessive costs for achieving the targeted carbon reduction impacts in the hydrogen sector, according to new research published in response to the Treasury guidelines. 

With regard to the extra costs, energy data analytics firm Wood Mackenzie analyzed the impact of just one of the pillars — hourly matching — and found that this requirement alone would raise the total costs of green hydrogen by 68 to 175%, compared to annually matched generation. 

Other researchers found that there is no additional carbon reduction benefit to this fine-tuned hourly matching. Comprehensive research by the consulting firm Energy and Environmental Economics, also known as E3, found that both annual and hourly matching have similar impact on CO2 emissions, across a wide range of scenarios and geographies. The Open Energy Outlook Initiative of Carnegie Mellon has come to the same conclusion. It’s not surprising, since both annual matching and hourly matching lead to identical increases in new renewable generation, and hydrogen producers have a clear incentive to generate their new renewable electricity in times and locations that maximize the amount of displaced fossil fuels.

In short, the hydrogen industry and the good jobs it will support will simply not grow as planned by the U.S. Energy Department if their costs double unnecessarily.

We hope the Treasury Department will look at this research and feedback closely, in order to achieve the targeted carbon reduction in the hydrogen sector at a competitive cost with environmental concerns in mind. Growth in the hydrogen sector is needed to clean up hard-to-abate sectors like steel and airlines, and it is also vital to address climate change.

There’s a global consensus that we need to urgently decarbonize to address the impacts of climate change. The Biden Administration’s goal to reduce GHG’s by 50% by 2030 and become net-zero by 2050 requires robust incentives to develop green energy industries as fast as possible. Without a viable hydrogen sector, we run the risk of being unable to fully decarbonize our economy.

Business leaders and individuals should call or write to the White House and to their representatives in Congress, urging them to revise the tax credit eligibility rules for hydrogen production to ensure the economic viability of this vital emerging industry.

Commentary: Strict regulations threaten the green hydrogen industry is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

Hoping to tap into the billions of dollars in federal incentives coming available for renewable energy projects, Connecticut is preparing to lay out a strategic plan for developing a hydrogen economy.

A bill approved last week by the House Energy and Technology Committee charges the Department of Energy and Environmental Protection with developing a hydrogen strategic plan that encourages the use of hydrogen produced from renewable energy, and prioritizes its use in the sectors of the economy that are hardest to electrify.

The department would also have to write regulations defining “clean hydrogen,” a process that will likely generate considerable debate.

The legislation is based on recommendations from the Connecticut Hydrogen Task Force, which was established by law last year and led by the Connecticut Green Bank. A January report from the task force concluded that Connecticut is well-positioned to pursue the production and use of clean hydrogen as a fuel or energy source.

“As a result of Connecticut’s support of the aerospace industry, we currently host an ecosystem of local clean hydrogen and fuel cell technology innovation and manufacturing companies that could grow to support potential future demand for clean hydrogen,” said James Desantos, the Green Bank’s legislative liaison and associate director of regulatory policy, in testimony submitted to the energy committee. 

There is a growing consensus that clean hydrogen will have a major role to play in the shift to a clean energy economy. The task force report notes that it could be a vital alternative fuel in sectors that are challenging to decarbonize, such as aviation, cargo shipping, heavy-duty trucking, and high-temperature industrial processes.

Currently, most hydrogen is produced using natural gas. Clean hydrogen can be produced by running renewable-sourced electricity through an electrolyser that will extract hydrogen from water. 

The U.S. Department of Energy plans to award up to $7 billion to establish six to 10 regional hydrogen hubs across the country for the production, processing, delivery, storage and end-use of clean hydrogen. Connecticut has applied to be part of a Northeast hub along with Massachusetts, New York, New Jersey, Maine, Rhode Island and New Hampshire.

Nel Hydrogen, a Wallingford company that makes electrolysers, is expanding its facility to allow for up to 500 megawatts a year of electrolyser production, according to testimony submitted to the committee by Kathy Ayers, the company’s vice president of research and development.

And the Bridgeport Regional Business Council is evaluating how that city might benefit from the hydrogen economy, said Dan Onofrio, the council’s president.

“We see a lot of opportunities coming down the road in the renewable energy space that we think we are well-positioned for with our deep-water port” on Long Island Sound, Onofrio said. “And we have dormant properties that could be put back into productive use.”

At the same time, he said, the council is aware that the potential development sites are located in communities that have historically been greatly impacted by environmental harms and risks.

“Those communities have been the subject of us not being as responsible as we should be,” Onofrio said. “This is our time to make it right.”

The hydrogen legislation would add clean hydrogen projects to a state law requiring developers of large renewable energy projects to negotiate a community benefits agreement and establish a workforce development program.

The Department of Energy and Environmental Protection will issue a white paper on clean hydrogen this spring, as part of its work on the state’s Comprehensive Energy Strategy. That paper will include a straw proposal for a definition of clean energy.

The federal definition of clean hydrogen is hydrogen produced through a process that results in a lifecycle greenhouse gas emissions rate of up to 4 kilograms of carbon dioxide equivalent per kilogram of hydrogen, and less than 2 kilograms at the point of production.

That may be the starting point for discussion, said Charles Rothenberger, climate and energy attorney for Save the Sound, but he and other environmental advocates will be pushing for a tighter limit. 

“We’d like to see a more stringent definition that really does incentivize green hydrogen development,” he said. “Right now, there is very little of it and it’s relatively expensive. It makes sense to incent the industry to figure out how to bring down that cost.” 

The Sierra Club is advocating for the feedstock for hydrogen production to be non-fossil fuel, non-biomass, non-biofuel — “to make sure that in producing hydrogen we aren’t eviscerating our greenhouse gas reduction goals,” said Samantha Dynowski, state director. 

Environmental advocates also say the state shouldn’t focus solely on maximizing the growth of the hydrogen economy, but consider how clean hydrogen fits in most efficiently with the state’s decarbonization goals. 

Renewable energy is still relatively scarce, and as more sources come online, that power will be needed to power heat pumps in homes and buildings and charge electric vehicles, Rothenberger said. Diverting that renewable energy to produce hydrogen only makes sense if the hydrogen is being used to decarbonize the sectors that are the hardest to electrify, he said.

Environmental advocates had objected to a portion of the legislation that would have granted tax exemptions to projects related to clean hydrogen. The committee subsequently removed that language. 

“It was a very broadly defined exemption for anything touching the hydrogen economy,” said Ben Butterworth, director of climate, energy and equity analysis for the Acadia Center. “You would end up incentivizing technologies that aren’t in line with the task force recommendations, like hydrogen passenger vehicles and hydrogen boilers for homes.”

The bill has been filed with the Legislative Comissioner’s Office but hasn’t yet been scheduled for a vote by the full House.

Connecticut needs a plan — and a definition — for ‘clean hydrogen,’ stakeholders say is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

A Minnesota gas utility says it is successfully blending “green” hydrogen into its natural gas pipeline system in one of the first such tests in the country.

Since last summer, CenterPoint Energy customers near downtown Minneapolis have been burning a bit of hydrogen alongside the usual mix of methane gas in their stoves and furnaces.

The utility completed a $2.5 million hydrogen production pilot facility last year and began injecting the carbon-free fuel into its system in small amounts in June. Hydrogen accounts for no more than 5% of the overall blend at any time.

“The good news is that this facility has integrated well with our distribution system,” CenterPoint spokesperson Ross Corson said of the facility’s first months of operation.

The pilot project is a chance for the utility to iron out operational challenges. It’s already made several adjustments, including changes to a water circulation system and the way in which it removes moisture before injecting the gas into its pipelines.

But even a technical success for the project is unlikely to resolve broader questions in Minnesota and beyond about the role of hydrogen in a clean energy economy. Some experts and climate advocates have argued that blending hydrogen into the natural gas system is an inefficient and expensive climate solution compared to switching to electric appliances, and that hydrogen should be reserved for industrial uses and other difficult-to-decarbonize sectors.

Inside CenterPoint’s plant

Most hydrogen today is produced from a chemical process involving fossil fuels that releases significant carbon emissions. “Green” hydrogen is produced by using electricity to split water molecules into hydrogen and oxygen. If done with renewable electricity it can be a zero-emission fuel source.

“The color wheel of hydrogen is complex and a little bit overwhelming, but green hydrogen, as long as it’s generated using renewable electricity, is the gold standard,” said Joe Dammel, buildings program manager for the St. Paul clean energy advocacy group Fresh Energy, which publishes the Energy News Network.

CenterPoint’s small plant sits on the site of a former coal gasification plant that began operating when CenterPoint was called the Minneapolis Gas Light Company. The company chose the site due to its central location in its pipeline system and the availability of space. The grounds now host the green hydrogen center and a parking lot for workers taking courses across the street at a CenterPoint training center. 

John Heer, the utility’s director of gas storage and supply planning, oversees the facility. Making green hydrogen is not a huge technical feat and involves electrolysis, Heer said.

City water is purified before being piped into a 1-megawatt electrolyzer that processes two gallons a minute. The facility disperses oxygen through fans outside the plant. “We’re learning by doing,” Heer said. “We need to know how it works before we can scale it in a larger facility.”

The facility gets electricity from Xcel Energy’s grid and offsets its electricity use with wind energy renewable credits, also purchased from Xcel. Critics have disputed whether hydrogen facilities that use renewable energy indirectly through offsets should qualify as “green.”

Costs and risks

Part of the pilot is determining how hydrogen changes the characteristics of natural gas in pipelines. Hydrogen is less dense than methane and only carries about one-third as much energy per cubic foot. The molecules are the smallest in the universe and can exacerbate pipeline cracks and cause embrittlement, increasing leakage and explosion risks above certain concentrations, according to the National Renewable Energy Laboratory.

In July, a California Public Utilities Commission study found that 5% blends of hydrogen and natural gas are safe but going above that amount could require modifications to stoves and water heaters. Moreover, since green hydrogen carries less energy content, more of it would be required to replace natural gas, the report said.

Even if produced from fully renewable sources, hydrogen is unlikely to replace natural gas for various reasons, Dammel said. The manufacturing process absorbs more energy than it produces, with roughly a 30% to 35% loss. Larger green hydrogen plants will need to compete for clean electricity at a time when demand for wind and solar power has skyrocketed.

“We think that just adding hydrogen to the distribution system to substitute for fossil gas has economic and technical limitations,” Dammel said. “It’s not going to be a 100% substitute for every molecule of fossil gas that’s right now in the system.”

To replace all the nation’s natural gas consumption with green hydrogen would be an enormous undertaking, demanding hundreds of billions of dollars in investment in renewable energy, electrolysis technology, pipeline infrastructure and storage.

Critics also say green hydrogen production requires much water, a potential problem in more arid regions than Minnesota. Yet one study and market data suggest that its manufacture consumes far less water than plants using coal, nuclear, natural gas, biomass or solar.  

For now, clean energy advocates believe the best application for green hydrogen will be heavy-duty industrial applications where using electricity cannot  cost-effectively replace natural gas, Dammel said.  

Hydrogen’s future

The biggest hydrogen markets currently are petroleum refiners, fertilizer companies, food processors and metals treatment firms. Hydrogen’s advocates, however, believe that in addition to manufacturing it can revolutionize the transportation sector.

Hydrogen is expected to get a boost in 2023 from the federal government. The Infrastructure Investment and Jobs Act, signed in 2021, includes $9.5 billion in incentives for clean hydrogen. The Department of Energy’s Hydrogen Shot program has set a goal of reducing the cost of 1 kilogram of hydrogen to $1 in one decade.

In September, the Energy Department released a 112-page clean hydrogen roadmap that calls for funding regional hydrogen hubs, support for manufacturing plants, and research into reducing the cost of electrolysis.

The Inflation Reduction Act includes a tax credit for green hydrogen that will soon provide up to $3 a kilogram credit for producers. The U.S. Treasury Department is expected to decide soon what criteria need to be met, with some environmental groups lobbying for on-site renewable generation to be a requirement.

“It costs more to produce hydrogen than to use natural gas today, so $3 a kilogram is kind of a big deal,” said Heer, the utility spokesperson. CenterPoint also wants to build a larger, second hydrogen plant but the timing on that has yet to be determined. The pilot is expected to avoid 1,200 tons of carbon emissions annually.

Gas utility’s Minnesota hydrogen pilot ‘good news’ so far, but questions remain is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.