Data Dive: As tax debate rages, massive scale needed for clean hydrogen

BY:?AMENA H. SAIYID

The United States will need to turbocharge clean hydrogen production if it hopes to meet the Biden administration’s ambitious targets, according to a recent study by two think tanks.

The green dot in the above chart represents the less than 1% (11,300 metric tons (MT)) of U.S. hydrogen currently made from electrolysis, according to the?study ?from Carbon Solutions and Industrial Innovation Initiative.

Most current production, estimated at 12.3 million MT, comes from unabated fossil fuels, as shown by the much larger, darker circles.

This juxtaposition highlights the enormous scale-up required while Washington, D.C.,?fiercely debates ?to what degree new federal tax credits should be given to hydrogen made with energy from a largely fossil fuel-powered electric grid.

Clean hydrogen can be produced either from natural gas equipped with carbon capture and storage equipment or with zero-emitting energy used to split water molecules in a process known as electrolysis in a machine called an electrolyzer. Only one plant in the U.S. makes hydrogen from natural gas with carbon capture tech, according to the environmental nonprofit Clean Air Task Force.

The gas is viewed as an energy Swiss Army Knife for its ability to replace hydrocarbons as the fuel for hard-to-abate sectors within transportation, power and manufacturing. The Biden administration has set a?target ?to produce 10 million MT of clean hydrogen by the end of the decade and 50 million MT by midcentury.

Renewable hydrogen production capacity would need to be ramped up more than 1,000 times from current levels to meet the 2030 goal and more than 5,000 times to reach the 2050 target, Dane McFarlane, Carbon Solutions’ director of climate and policy, told Cipher.

As the U.S. Internal Revenue Service drafts guidance on the hydrogen tax credit, due out this summer, it’s receiving an earful from energy companies, environmentalists, electrolyzer makers and academics arguing over how all this new hydrogen should be made.

One camp, led by Princeton’s Zero-carbon Energy Research and Optimization (ZERO) Laboratory, says hydrogen made from default electric grid power at hours when renewables aren’t generating would drive up carbon emissions. Like the?European Union , this camp wants the tax credit to apply only for hydrogen made with renewable power generated nearby at the same time, a concept called “hourly matching.”

Another camp wants looser requirements around energy use and production timing, arguing such restrictions would prevent the industry from getting off the ground.

Earlier this month, the nation’s top renewable trade group, the American Clean Power Association, an influential player in this debate, shifted its position seeking to strike a balance between the two camps.

It endorsed the use of new wind and solar generation hooked up to a mostly fossil-based power grid to make hydrogen, in a nod to the stricter camp. But it also recommended hourly matching only for electrolyzers that begin construction in 2029 to give the technology time to catch up.

“Our intent is to support first movers in the space to create a commercial scale industry,” said Jason Grumet, the association’s CEO, during a recent press call.

The move drew mixed reactions from different stakeholders.

Jessie Jenkins, who heads Princeton’s ZERO Lab,?acknowledged ?a phased approach may be necessary to help the nascent sector. However, Jenkins and the?Natural Resources Defense Council ?cautioned the long phase-in time would result in hundreds of millions of tons of additional carbon emissions.

Editor’s note: Research for the hydrogen report was supported by Breakthrough Energy, which also supports Cipher.