This blog is the eighth in a series, “The ABCs of the AJP.”
The latest Energy Transition technology now attracting massive investment and policy attention is “green hydrogen” produced using renewable energy to separate hydrogen from water that can be used both for bulk energy storage and then used to fuel gas-fired power plants or hard-to-abate sectors such as manufacturing, shipping and long-haul trucking. President Biden’s American Jobs Plan matches that level of investment and attention by proposing 15 decarbonized hydrogen demonstration projects in distressed communities and by including hydrogen among an additional $15 billion increase in funding for climate R&D priorities. The AJP also includes an expansion of production tax credits for energy storage, that has led to the introduction of at least one bill — SB 1017 – endorsed by the American Clean Power Association proposing a $3/kg tax credit for green hydrogen.
Other industry groups also are jumping on the hydrogen policy advocacy bandwagon. On April 7th, shortly after the AJP was issued, prominent industrial gas producers, automakers and fuel cell producers – all members of Hydrogen Forward – sent a letter to the White House urging the administration to develop a clear strategy for hydrogen investment through mass-scale infrastructure, development and deployment. The group indicated that it agrees that hydrogen technologies are an essential part of achieving the Administration’s emission reduction goals and called on President Biden to introduce the right policies so that the U.S. does not fall behind globally when it comes to hydrogen technology.
While some suggest that it is “inescapably inefficient,” green hydrogen produced through electrolysis can essentially act as a form of bulk energy storage: Electricity generated by renewable resources is used to separate the hydrogen from the oxygen molecules in water – most optimally during periods when the renewable resources would otherwise be curtailed – for combustion of the hydrogen in power plants and hard-to-abate sectors such as manufacturing, shipping and long-haul trucking. Green hydrogen can also be produced through other zero-carbon or net-negative methods, such as pyrolysis of biomass with carbon capture and sequestration (CCS). Today, however, 95 percent of hydrogen is produced from non-green sources, such as steam methane reformation of natural gas, which is referred to as “grey hydrogen,” or, if coupled with CCS, “blue hydrogen.”
A comprehensive “Road Map to a US Hydrogen Economy,” prepared late last year with input from industrial gas manufacturers, electric utilities, oil companies and automakers, suggests that hydrogen could meet 14 percent of U.S. final energy demand by 2050 and that, by 2030, it could generate an estimated $140 billion in annual revenue supporting 700,000 jobs. While the Road Map’s near-term focus is on use of hydrogen in fuel cell vehicles for transportation, its long-term vision includes a much broader set of applications, such as delivery of blended hydrogen and natural gas to buildings and homes through the existing gas distribution infrastructure or through upgraded pipelines that can handle pure hydrogen.
Hydrogen is also viewed by many as key to decarbonization of hard-to-abate industrial processes, including the production of cement, steel, glass and other industrial materials, which require extremely high temperatures that cannot easily or efficiently be attained by renewables, such as wind and solar. Princeton’s Net-Zero America Study envisions a future in which hydrogen produced through electrolysis or biomass gasification with CCS could be used for combustion in industrial boilers, in medium- and heavy-duty vehicles, as a fuel for gas turbines, and to synthesize liquid fuels using recycled carbon dioxide.
Development of hydrogen technologies also provides opportunity to strengthen the resiliency of the electricity grid against climate change. Fuel cell technologies are already being used by hospitals and other essential services to act as a primary and backup fuel source during hurricanes, rolling blackouts, and other emergencies.
Building out the infrastructure needed to realize the potential of hydrogen as a key decarbonization tool could require as much as $15 trillion in investment between now and 2050, according to the Energy Transitions Committee, an international coalition of energy industry executives committed to net zero emissions by 2050; the bulk of that investment would be for the purpose of developing dedicated renewable energy generation resources needed to produce green hydrogen.
Beyond the massive investment needed, hydrogen also faces significant obstacles to its deployment and market penetration, including its relatively high efficiency losses, safety risks and its bulkiness and associated transportation and storage costs, according to the IEA. The AJP’s proposed 15 demonstration hydrogen projects may help address some of these challenges. But additional, firm commitments of government funding may be needed to mobilize the private capital necessary to deploy the technology at scale.
Investors should watch closely to see if Congress proposes, in forthcoming legislation to enact the AJP’s objectives, funding levels that either are commensurate with rapid market penetration of hydrogen or would maroon the technology as little more than a gap-filler on the pathway to a net-zero economy.