Green Hydrogen

Scaling Up Innovation to Drive Down Emissions

Find out more about the briefings in this series below:

Green Hydrogen

Direct Air Capture

Building Out Electric Vehicle Charging Infrastructure

Offshore Wind Energy

How Start-Up Accelerators Can Drive Climate Action

The Environmental and Energy Study Institute (EESI) invites you to view a briefing on green hydrogen. Green hydrogen—hydrogen produced using renewable energy—will likely be necessary for decarbonizing hard-to-abate sectors like steel production and providing a low- and no-emissions alternative to the existing carbon-intensive hydrogen industry. The problem? Green hydrogen currently makes up less than one percent of U.S. hydrogen production and is far more expensive than fossil fuel-based hydrogen. Panelists discussed opportunities and considerations for ramping up green hydrogen, including the role of federal policy.

This briefing is part of a series called, Scaling Up Innovation to Drive Down Emissions, which ran through July and focused on the role of innovative technologies and emerging energy sources in reducing greenhouse gas emissions. The series covered green hydrogen, direct air capture, electric vehicle charging infrastructure build-out, offshore wind energy and how start-up accelerators can drive climate action. 

This series ran in parallel with another briefing series, Living with Climate Change, that covered polar vortices, sea level rise, wildfires, extreme heat, and integrating equity into emergency management. 

Highlights

 

KEY TAKEAWAYS

In June 2021, the Department of Energy (DOE) launched the Energy Earthshots initiative with hydrogen as a top priority. The Hydrogen Shot goal is to reduce the price of clean hydrogen by 80 percent to $1 per kilogram (kg) by 2031. Hydrogen currently costs about $1.50/kg when derived from natural gas, but over $5/kg when made via electrolysis (the use of electricity to split water into hydrogen and oxygen) using renewable energy. A preliminary modeling analysis by the Natural Resources Defense Council (NRDC) examines how the United States can achieve net-zero greenhouse gas emissions by 2050. Hydrogen growth in this model is dramatic and begins to take off in the 2030s, primarily in hard-to-electrify sectors. Leading up to this deployment, the United States should focus on laying a solid foundation through policy. Heavy industry and transport sectors such as steelmaking, metals production, maritime shipping, heavy-duty vehicles, and, in the longer term, aviation will require hydrogen to decarbonize. From these areas alone, four to six percent of U.S. emissions can be addressed with clean hydrogen. Hydrogen from Next-generation Electrolyzers of Water (H2NEW) is a consortium of nine national labs and three universities working to advance hydrogen-making via electrolysis. Electrolysis has the most competitive economics in the long term and allows for a balance of renewable energy generation and demand in ways that other hydrogen generation methods do not.

 

Representative Don Beyer (D-Va.)

• The Clean Hydrogen Production and Investment Tax Credit Act of 2021
  (H.B.5192), introduced by Rep. Beyer, Rep. John Larson (D-Conn.) and Rep. Suzan DelBene (D-Wash.), is designed to stimulate green hydrogen production. The tax credit would be available to hydrogen producers that achieve a 40 percent reduction in greenhouse gas emissions compared to steam-methane hydrogen production.
• Electrification is part of the solution to address climate change, but electrification will not be the most effective tool in all situations. Heavy-duty trucks that are driven 21 hours per day and industrial facilities present good opportunities to put green hydrogen to use. Green hydrogen is a promising carbon-free, mobile energy source that can supplement and complement electrification.

 

Dr. Sunita Satyapal, Director, U.S. Department of Energy Hydrogen and Fuel Cell Technologies Office

• U.S. energy consumption is still heavily reliant on fossil fuels. The Biden-Harris Administration has a goal to achieve economy-wide net-zero emissions by 2050 and an interim goal of a 50-52 percent reduction in emissions by 2030. The administration is also aiming for a completely carbon-free electric grid by 2035.
• The Justice40 initiative is designed to direct 40 percent of federal investment benefits to disadvantaged communities. People who have historically experienced energy and environmental injustice are a high priority for the Biden-Harris Administration and the Department of Energy (DOE).
• Hydrogen is one part of a comprehensive energy portfolio.
• The DOE Hydrogen Project is funding over 400 active projects for more than 200 companies and universities and 15 national labs. These funding awards range from a total of $100 million to $400 million per year.
• DOE’s top priorities are low-cost, clean hydrogen; low-cost, efficient, and safe hydrogen infrastructure; and at-scale end-use applications.
• DOE is focused on sectors that are difficult to decarbonize. Industrial fuel alone accounts for over 7 percent of global emissions. Heavy-duty transportation, especially long-haul trucks, and long-duration energy storage are also priorities.
• The United States produces over 10 million metric tons of hydrogen, mostly from natural gas. There is opportunity for significant growth. If the United States were to produce an additional 10 million metric tons of green hydrogen, it would require doubling today’s wind and solar deployment.
• The United States has thousands of fuel cells used for backup power, forklifts, proton exchange membrane (PEM) electrolyzers, fuel-cell buses, and fuel-cell cars.
• The United States has over 1,600 miles of hydrogen pipelines, three storage caverns, including the world's largest geological cavern in Texas, and a growing infrastructure for hydrogen.
• In June 2021, DOE launched the Energy Earthshots initiative with hydrogen as a top priority. Similar to the Moonshot initiative President John F. Kennedy created over half a century ago, these are bold, ambitious targets to galvanize the community and help meet our climate goals. The Hydrogen Shot goal is to reduce the price of clean hydrogen by 80 percent to $1 per kilogram (kg) by 2031. Hydrogen currently costs about $1.50/kg when derived from natural gas, but over $5/kg when made via electrolysis (the use of electricity to split water into hydrogen and oxygen) using renewable energy.
• At the Hydrogen Shot Summit, DOE asked about the greatest barriers to widespread hydrogen deployment in the United States. Cost was considered the largest barrier, but there are many others, including insufficient infrastructure and limited public awareness.
• The Infrastructure Investment and Jobs Act (P.L.117-58) allocates $9.5 billion specifically for clean hydrogen, including $1 billion for electrolysis research, development, and demonstration; $0.5 billion for research and development of clean hydrogen manufacturing and recycling; and $8 billion for at least four regional clean hydrogen hubs that would co-locate the production and use of hydrogen.
• Collaboration is important to advancing diversity, equity, and inclusion in the clean energy sector. Industry, governments, investors, and the environmental justice community must collaborate globally on this issue. DOE has a large and growing number of partnerships.
• DOE’s strategy is to accelerate R&D, to reduce costs, and to create long-term demonstrations and hydrogen hubs.

 

Alexa Thompson, U.S. Program Manager, Climate Aligned Industries, RMI

• Similar to fossil fuels, hydrogen combustion produces high temperatures. Whereas burning methane, natural gas, and coal forms carbon dioxide, burning hydrogen only produces water. Hydrogen is energy dense and can take part in chemical reactions, differentiating it from electricity.
• The current production of hydrogen from methane (as opposed to electrolysis) accounts for around 2 percent of U.S. total emissions.
• Clean hydrogen (made via electrolysis) has a special role in a net-zero emissions economy, because it is one of the only clean tools for applications that are hard to electrify—applications that require high temperatures, high energy density, or where hydrogen is needed as a chemical feedstock. Clean hydrogen is likely to be the primary decarbonization solution for applications that currently use hydrogen, like fertilizer production, oil refining, and chemical production. It will also be a key tool for replacing fossil fuels in heavy industry and transportation.
• Heavy industry and transport sectors such as steelmaking and metals production, maritime shipping, heavy-duty vehicles, and, in the longer term, aviation will require hydrogen to decarbonize. From these areas alone, four to six percent of U.S. emissions can be addressed with clean hydrogen.
• Direct electrification is preferable for most applications such as home and commercial heating. Direct electrification uses less energy overall and does not have the same conversion losses that hydrogen has. It is also a more complete decarbonization solution, whereas hydrogen is only a partial one.
• Hydrogen should only be used in certain sectors. The International Energy Agency's net-zero emission scenario shows that hydrogen is vital, but it plays a limited role. Hydrogen will account for about 10 percent of final energy consumption, according to this model.
• The different colors of hydrogen refer to its method of production:
  • Gray hydrogen is produced using natural gas and steam methane reforming. Greenhouse gas emissions associated with gray hydrogen range from about 10 to 12 kg of carbon dioxide per kilogram of hydrogen produced (kgCO2/kgH2).
  • Blue hydrogen uses nearly the same process but incorporates carbon capture. Blue hydrogen produces between three to nine kgCO2/kgH2. This range occurs because a specific capture rate is not required. Operating carbon capture projects achieve an average capture rate of less than 50 percent, so emission-reduction claims by blue hydrogen projects must be scrutinized and monitored closely.
  • For both gray and blue hydrogen, upstream methane leakage can contribute substantially to their emissions.
  • Green hydrogen uses renewable energy to electrolyze water molecules, splitting water into its separate components, hydrogen and oxygen. This method produces no operational emissions.
  • The electrolyzing process is energy intensive, so using a non-renewable source of electricity can significantly increase emissions. For example, an electrolyzer connected to the average U.S. grid will produce about 20 kgCO2/kgH2 or about double the emissions of gray hydrogen.
  • Green and blue hydrogen are often both considered clean, but the emissions of each are significantly different.
• It is important to get policy definitions and incentives right from the outset to promote the lowest cost, lowest emissions forms of hydrogen production.
• Green hydrogen is the only form of hydrogen production that is fully compatible with a net-zero emission energy future.
• Green hydrogen also has a long-term outlook to become the lowest cost method of production. Today, gray hydrogen in the United States costs around $1 to $1.50/kg. Blue hydrogen costs about $1.70 to $2.20/kg. Green hydrogen is about $5/kg today but can range anywhere between $3 to $7/kg.
• RMI hopes to achieve $2/kg green hydrogen by mid-decade and $1/kg by 2030. The $2/kg threshold is seen as an inflection point at which many end uses become economic, and the $1/kg threshold is where green hydrogen competes with or outcompetes gray hydrogen.
• While $1.50/kg is the benchmark for gray hydrogen in the United States, its price has skyrocketed following the Russian invasion of Ukraine due to its reliance on natural gas. BloombergNEF reported that the cost of gray hydrogen in Europe has reached $6.70/kg. It is unlikely that that price increase will be permanent, but it suggests that green hydrogen is better for energy security and resilience.
• Green hydrogen costs are heavily dependent on capital costs of both the electrolyzer and renewable energy. Both of these capital costs are expected to fall substantially, making steep green hydrogen cost reductions likely. For example, electric electrolyzers cost about $700/kilowatt (KW) today and are expected to drop to $200/KW in only a few years. As electrolyzer costs decline, operators can afford to move from a high-utilization profile, which is currently necessary to make returns on the electrolyzer, to a more variable, lower-utilization profile, which allows operators to capitalize on the lowest costs of renewable energy generation. The cost of renewable energy will also continue to fall.
• Since different locations have different renewable energy resources and different costs of storage, the costs of green hydrogen production will continue to vary by location. Today, we already see prices for green hydrogen production in West Texas at about $3/kg, but prices in California are about $5.05/kg. Prices are expected to converge to $3/kg in the near term, but location-based price differences will remain.
• The Infrastructure Investment and Jobs Act includes critical precedent-setting measures, like directing DOE to develop a clean hydrogen definition and a national clean hydrogen strategy. The law will provide funding for a first wave of infrastructure development, which is critically important.
• However, $8 billion is a drop in the ocean compared to a market that could potentially be as large as $100 billion per year by 2030. To realize this market growth, commercial viability of green hydrogen is needed.
• Federal and state policy is needed for the hydrogen economy to scale successfully. In particular, states have an important role to play in prioritizing end uses, integrating, planning, permitting, and handling regulations, standards, and certifications that verify emissions and ensure safety.
• States are interested in building hydrogen economies. About half of states have publicly announced they are interested in developing a hydrogen hub and receiving funding from DOE’s program. Several of these states are already developing policies and strategies, including California, Colorado, Illinois, New Mexico, New York, and Washington. California is a frontrunner with zero-emission vehicle targets that include heavy-duty vehicles. Hydrogen will be important in meeting this goal.
• These policies must be improved to direct hydrogen to appropriate uses and regulate production emissions. The precedent set at the federal level will be important for national hydrogen outcomes.
• Green Hydrogen Catapult is a private-sector coalition and the world's largest green hydrogen program. Its mission is to mobilize 80 gigawatts of green hydrogen production capacity by midyear 2026 and to simultaneously drive costs down to below $2/kg. The Green Hydrogen Catapult is taking a systems approach, recognizing that it must focus on product development, demand aggregation, policy development, marketing, and finance to meet these goals.
• Hydrogen is a powerful decarbonization tool, but we must get the basics right to enable the hydrogen economy to scale successfully. Success means that outcomes are equitable and inclusive, commercially viable, and sustainable over the long term.

 

Rachel Fakhry, Senior Advocate, Climate & Clean Energy Program, Natural Resources Defense Council (NRDC)

• A preliminary modeling analysis by NRDC examines how the United States can achieve net-zero greenhouse gas emissions by 2050. Hydrogen growth in this model is dramatic and begins to take off in the 2030s, primarily in hard-to-electrify sectors. Leading up to this deployment, the United States should focus on laying a solid foundation through policy.
• Scaling up hydrogen should not be undertaken for the sake of hydrogen, but with a view toward supporting the most affordable, efficient, and safe transition to a clean economy.
• Hydrogen production processes are energy intensive. Without regulations and policies, production emits a significant amount of greenhouse gases. A study by Cornell and Stanford professors found that, absent climate regulation, blue hydrogen can produce more emissions than fossil fuels. Electrolysis-generated hydrogen that uses fossil fuel-based energy rather than renewable energy could produce more pollution and emissions than gray or blue hydrogen.
• Hydrogen is generally inefficient, especially compared to direct electrification. Hydrogen equipment and appliances also tend to be less efficient than electric appliances. About five times more renewable electricity is required to heat a home with hydrogen than with direct electrification. The use of hydrogen in applications better served by direct electrification would increase total energy demand significantly, adding even more pressure to decarbonization plans.
• These inappropriate applications could also significantly increase costs for consumers. The European Consumer Organisation’s comprehensive study evaluated the annual costs of heating homes using hydrogen across various countries in Europe and found that a heat pump is significantly cheaper than a hydrogen boiler. This study took into account climate and housing stock differences across Europe.
• Hydrogen leakage has potentially negative climate consequences. Hydrogen is an indirect greenhouse gas, meaning that hydrogen emissions do not directly warm the atmosphere, but instead increase the concentration of other greenhouse gases like methane, water vapor, and ozone, contributing to global warming.
• New peer-reviewed research by the Environmental Defense Fund found that hydrogen leakage impacts are greater than previously thought. As a small molecule, hydrogen can leak relatively easily into the atmosphere. We currently cannot measure hydrogen leakage to the granularity necessary. Currently, large leaks are measured for safety concerns as opposed to smaller leaks, but small leaks likely also have negative climate impacts.
• There is a narrow path forward that would enable us to scale hydrogen in a climate-aligned and no-regrets manner. Strict standards are needed to ensure that emissions are minimized to the extent possible. Steps needed include:
  • Devising rigorous methodology to account for greenhouse gas emissions that arise both at the site of hydrogen production and upstream of production. For blue hydrogen, methane leaks would significantly impact how clean it actually is. This accounting step is complicated.
  • Creating strict measurement, reporting, and verification protocols. The Environmental Protection Agency (EPA) must ensure that claims about greenhouse gas emissions of hydrogen are accurate.
  • Setting limits on hydrogen emissions. The lowest-emitting and the most climate-aligned energy resources are the ones that should be deployed. DOE and EPA are directed by the Infrastructure Investment and Jobs Act to develop a clean hydrogen standard, which is expected by as early as May 2022. States are also passing their own standards and have an important role to play.
  • Instead of providing incentives on the supply side, the focus should be on creating targeted demand centers, starting with a rigorous evaluation of hydrogen's highest-value applications such as existing highly-polluting hydrogen uses.
  • Focusing on hard-to-electrify applications. Steel and maritime shipping are close to being commercially ready for hydrogen use and need policy nudges to enable further investment.
  • Implementing public procurement standards that support hydrogen. As one of the largest purchasers of steel for public infrastructure projects, the federal government could set a procurement standard to purchase steel that uses hydrogen-based production processes to nudge the steel industry toward hydrogen use.
  • Establishing minimum standards for hydrogen users. For example, requiring a minimum share of ammonia to be green ammonia (produced with green hydrogen) by 2030, or a minimum share of maritime fuel oil to be green hydrogen-based fuel by 2030. A number of countries are considering this.
  • Investing in research, development, and demonstration (RD&D) is important. High-value applications for hydrogen are still not commercial, and their technology-readiness level varies. We need more RD&D to advance possibilities, especially given the necessary timeline.
• Pipelines have 30- to 40-year lifetimes and are capital intensive, so, once they are built, you are stuck with them for a while. There are still many uncertainties about the hydrogen market, including the locations of users and producers. Until the market has better clarity, building long-term infrastructure may not be logical. In addition, the cost of building new pipelines and the cost of repurposing gas pipelines is still uncertain.
• Until the proper tools to measure leakage and understand the types of materials and pipes that can minimize leakage are developed, it is prudent to be cautious and not to invest in infrastructure that could ultimately be climate damaging. One of the easiest, most effective, and safest approaches is to forego widespread infrastructure investment altogether, at least in the near term. Hydrogen hubs make sense where users and producers are in close proximity and significant transport infrastructure is not needed.
• There is a need for academia to produce more scientific, transparent assessments of the future hydrogen landscape and to assess the need, if any, for pipelines. For instance, the National Academy of Sciences said the hydrogen landscape is likely to develop on a regional scale, because hydrogen can be produced widely across various regions unlike oil and gas.
• It is critical that the hydrogen market be truly beneficial for society, for example by prioritizing labor and equity from the start and by engaging in robust and proactive outreach.
• Equity considerations about both health and labor surround hydrogen. Production and use patterns for hydrogen can produce high levels of air pollution. It is important to examine the issue from a health standpoint to ensure that there are rigorous health and safety standards in place.
• Higher labor standards can be achieved across the hydrogen value chain by creating good jobs and investing in training programs. These programs can focus on communities that will bear the brunt of a transition away from the fossil fuel industry, offering economic revitalization opportunities.

 

Dr. Bryan Pivovar, Senior Research Fellow, National Renewable Energy Laboratory (NREL)

• At NREL, the 2010s is seen as the decade of wind and solar, and the 2020s is expected to be the decade of hydrogen.
• NREL has been involved in early-stage research to help evolve and limit the risks of hydrogen technologies, and to understand how hydrogen can be made, moved, stored, and used more efficiently.
• Hydrogen can be used directly as a fuel through fuel cells or combustion, used with carbon dioxide to upgrade it into synthetic fuels, and used to upgrade things like crude oil and biomass. Hydrogen can also be used in green ammonia and metals production.
• About six percent of all greenhouse gas emissions can be reduced or eliminated with hydrogen when hydrogen is used in the hard-to-electrify sectors of industry and heavy-duty transportation.
• NREL has examined the different levels of demand hydrogen would have at different price points for different sectors. There is greater demand for ammonia, refining fuel, and biofuels. The next level of demand is for metals. Seasonal energy storage and heating are much lower in value due to electrification possibilities.
• R&D needs are still significant. Fuel cells have evolved from a research project to something actually viable for road transportation. Now, there is a focus on the heavy-duty vehicle market. NREL is part of the Million Mile Fuel Cell Truck Consortium working on this. There are R&D needs on green ammonia, green steel, and hydrogen burners and turbines.
• Hydrogen prices are dominated by storage and distribution costs. These infrastructure needs are a major obstacle and require an investment on the trillion-dollar order of magnitude.
• Like natural gas, hydrogen is a gaseous chemical energy carrier. However, natural gas has a half-trillion-dollar infrastructure that allows it to be distributed economically.
• The difference between chemical energy carriers and electrical energy carriers is how expensive it is to move energy over distance. Liquids are the most economic transport of energy available over a thousand-mile scale.
• There are some limitations in the materials that can be used to transport hydrogen and safety concerns. However, electrical wires themselves are much less efficient and economical at moving energy. They have no capacity for energy storage. Hydrogen can make the energy system more resilient.
• Hydrogen from Next-generation Electrolyzers of Water (H2NEW) is a consortium of nine national labs and three universities working to advance hydrogen-making from electrolysis. Electrolysis has the most competitive economics in the long term and allows for a balance of renewable energy generation and demand in ways that other hydrogen generation methods do not.
• Low-temperature electrolysis aligns with the intermittency of the energy system (hydrogen can be produced when electricity costs are lower). High-temperature electrolysis offers increased efficiency but does not necessarily align with the intermittency of electricity generation now or that of renewables in the future.
• Current hydrogen costs are about $3 to $7/kg. Enablers for lower-cost hydrogen (i.e., low-cost electricity, high electrical efficiency, low-cost capital expense, low-cost manufacturing processes) can help reduce costs from about $3.50 down to a $2 range, which is the 2026 target. Beyond that, the focus will be on taking advantage of variable electricity costs, cheaper electricity, and capital cost reductions to achieve $1/kg.

 

Q&A

 

Q: What considerations are important for building out hydrogen infrastructure? What is the potential for the funding and programs that were provided for in the Infrastructure Investment and Jobs Act?

Thompson:

• Distribution and storage infrastructure makes up much of the levelized cost of hydrogen. For early hydrogen projects, there will be an effort to minimize this cost by co-locating production and use.
• A HYBRIT green steel project in Sweden uses co-location of production and end use.
• The exception is existing hydrogen transport infrastructure. For example, Texas already has a significant set of hydrogen pipelines. Early projects do not necessarily require a full distribution network, but they may need storage components.
• Over time, the need for regional infrastructure, in particular, will emerge. The costs and specific complexities of building large-scale, multi-state infrastructure may take many years to develop.
• The potential of the Infrastructure Investment and Jobs Act will depend on the other policy mechanisms that emerge. For example, tax credits in the House-passed Build Back Better Act (H.R.5376) could subsidize the costs of production.
• If we do not see additional incentives at the federal or state levels, funding from the hydrogen hubs program will be directed towards simply trying to achieve commercial viability for production and end uses.

Fakhry:

• Many new applications for hydrogen are novel, such as a steel plant that uses hydrogen or a bunkering facility for ammonia. Testing and piloting of various infrastructure is necessary. More understanding is needed, and the hydrogen hubs initiative could be illuminating in this regard.
• The extent to which we need transport infrastructure is unknown. It could be at the regional or national level. Research on hydrogen leakage is needed. The first round of hydrogen projects should be co-located with end uses, until we can build out knowledge around transport infrastructure.

Pivovar:

• Co-location of production and demand is challenging. There are only a couple sites where this is currently possible. Generally, replacing gray hydrogen in the reforming process or in the ammonia generation process is a current opportunity ready for green hydrogen. The economic transport of hydrogen is most concerning to me.

 

Q: What are other countries doing to deploy green hydrogen that the United States could learn from? Are there applications being used elsewhere that we should consider?

Thompson:

• The first wave of hydrogen projects will require an immense amount of coordination with both public-sector agencies and private companies. The HYBRIT green steel project in Sweden was the result of multi-year collaboration between multiple private-sector companies that were responsible for different parts of the value chain. It included an iron ore miner, a steel maker, an electricity utility, and Volvo as the end user. Swedish government agencies worked to build the business case for the project. We can expect a similar model of collaboration in the United States and around the world.
• The next wave of projects will be easier, more commercial, and more rapid. One mechanism for incentivizing production is centered around price discovery and efficient subsidization. For example, in the United Kingdom, the exact level of cost subsidization is negotiated for each project to ensure efficient use of public dollars and a viable business case for the project. Similarly, Germany and other countries are using a reverse auction process in which contracts are awarded to the projects that need the lowest subsidy. That would be a complex mechanism to implement in the United States, but it is going to help industries overseas grow rapidly and efficiently.

Fakhry:

• Two of the biggest steel companies in Europe now have a significant commitment to start using hydrogen technology commercially before the end of the decade.
• The Port of Rotterdam is moving aggressively towards decarbonizing maritime shipping using hydrogen.

Pivovar:

• Ports and heavy-duty shipping are both important areas in which the United States could learn from other countries.

 

Q: What is the biggest opportunity in terms of unlocking green hydrogen?

Pivovar:

• Market certainty is important. There has been no shortage of being able to raise funds in the hydrogen space.

 

Fakhry:

• Targeted policies can help develop markets. Targeted policies towards hard-to-electrify sectors are important to getting this transition right.

Thompson:

• Cost is the number one factor. We must overcome the current cost premium for green hydrogen.
• Policy has a crucial role to play this decade in bringing the cost premium down to a certain extent. The federal government can also provide early market commitments through public procurement to catalyze market development while paying a slight premium to get the best projects off the ground.

 

Compiled by S. Grace Parker and edited for clarity and length. This is not a transcript.