Maximizing the Climate Benefits of Hydrogen

The Environmental and Energy Study Institute (EESI) and the Environmental Defense Fund (EDF) invite you to view a briefing on the climate impacts of hydrogen and pathways for “getting it right.” Hydrogen has garnered significant attention from Congress, including funding for regional clean hydrogen hubs, the Department of Energy’s hydrogen Earthshot to accelerate clean energy breakthroughs, and the 45V hydrogen production tax credit.

These policies have the potential to leverage hundreds billions of dollars of hydrogen investment and decarbonize critical sectors of the economy, if done right. But poorly designed implementation risks squandering taxpayer resources, undermining climate progress, and discrediting the nascent clean hydrogen industry. Panelists described key policy considerations for maximizing hydrogen’s potential, including renewable electricity accounting frameworks for "green" hydrogen, how to account for upstream methane impacts of "blue" hydrogen, and the importance of minimizing hydrogen leakage.

Highlights

KEY TAKEAWAYS

The Inflation Reduction Act (IRA) (P.L. 117-169) incentivizes clean hydrogen production through the Section 45V tax credit. There is growing interest in using hydrogen fuel to decarbonize sectors that would otherwise be difficult to decarbonize, such as steel and concrete production.  All hydrogen is not the same. How it is produced and used matters in maximizing environmental benefits and minimizing greenhouse gas emissions and hydrogen leakage. When hydrogen is leaked, it warms the planet but differently than carbon dioxide. Rather than trapping heat directly, it influences atmospheric chemistry and allows for more greenhouse gases to form. It is important to have sensor technologies to understand hydrogen leakage. Companies, researchers, and decision makers should incorporate hydrogen into lifecycle assessments and climate accounting.

 

Rachel Fakhry, Policy Director, Emerging Technologies, Climate & Clean Energy Program, Natural Resources Defense Council (NRDC)

• The Inflation Reduction Act (IRA) (P.L. 117-169) incentivizes clean hydrogen production through the Section 45V tax credit.
• The Biden-Harris Administration will provide guidance on the implementation of this tax credit.
• The credit must be applied strategically to discourage dirty hydrogen production.
• Hydrogen fuel is already used in market applications, although these are usually niche applications. There is growing interest in using hydrogen fuel to decarbonize sectors that would otherwise be difficult to decarbonize, such as steel and concrete production.
• Electrolytic hydrogen uses water and renewable energy to separate hydrogen from H₂O.
• The 45V clean hydrogen tax credit is technology neutral. However, hydrogen must be at least 60 percent cleaner than today's hydrogen to begin to qualify for the credit, and the highest tax credit amount is only available for hydrogen that is 95 percent cleaner than today's hydrogen.
• The IRA text is clear that lifecycle greenhouse gas emissions include system-wide emissions, including direct emissions and indirect emissions.
• This credit is uncapped, so its cost will depend on deployment, and implementation could run through 2045.
• Calculating greenhouse gas emissions for a hydrogen project can be complicated. It is simpler for “behind the grid” projects, in which a hydrogen project is co-located with a renewable energy project that does not draw power from the grid. It becomes more complicated for grid-connected projects, especially when the operators are buying carbon credits, which are increasingly considered ineffective in actually reducing project greenhouse gas emissions.
• Because electrolysis is an electricity-intensive process, powering it with even small shares of fossil fuel-powered electricity would result in significant greenhouse gas emissions.
• Just producing hydrogen with water does not make it clean. The operator must be using clean electricity, which is why it is critical to have strict regulations on the electricity used.
• The three recommended guardrails for the hydrogen tax credit are new clean supply, hourly matching, and deliverability.
  • New clean supply means that a hydrogen project must be powered by a clean energy project not currently on the grid.
  • Hourly matching means a hydrogen project can only operate during the same hours that the procured new clean energy project operates.
  • Deliverability means the new clean energy project's electricity must be physically deliverable to the location of the hydrogen project.

David McCabe, Senior Scientist, Clean Air Task Force

• Upstream methane accounting will also be critical for environmentally-beneficial implementation of the 45V tax credit. Methane is 80 times more potent than carbon dioxide when it is released.
• Upstream methane emissions are a large part of the emissions profile of natural gas, and could be a large portion of hydrogen’s greenhouse gas emissions if the hydrogen is made using natural gas (as is now often the case).
• Upstream methane will be the largest source of lifecycle emissions for blue hydrogen (hydrogen produced from natural gas, with the resulting carbon captured and stored), so it is critical to account for it properly.
• Accounting needs to be done based on specific operators and specific operating regions, as national numbers will not be accurate.
• If the default upstream emissions estimate for 45V tax credits is set conservatively high, hydrogen producers will be incentivized to require gas suppliers to provide information on gas origin and associated emissions. In turn, this provides a market incentive for producers to reduce greenhouse gas emissions and document those reductions.

Ilissa Ocko, Senior Climate Scientist II and Barbra Streisand Chair of Environmental Studies, Environmental Defense Fund

• Hydrogen is a leak-prone gas and has near-term climate effects.
• Hydrogen is the smallest element and therefore can easily escape the infrastructure built for it.
• Hydrogen warms the planet differently than carbon dioxide. Rather than trapping heat directly, it influences atmospheric chemistry and allows for more greenhouse gases to form.
• One fourth of molecular hydrogen (H₂) in the atmosphere is oxidized by the hydroxyl radical (OH). This reduces the hydroxyl radical available to react with methane, allowing the methane, with its potent greenhouse gas effect, to stay in the atmosphere for a longer period of time.
• The production of atomic hydrogen allows for ground-level ozone to be created, which poses an air quality problem, and ozone is also a short-term greenhouse gas.
• Water vapor created by hydrogen reactions in the upper atmosphere also acts as a greenhouse gas and traps heat in the atmosphere.
• Scientists do not know how much hydrogen is emitted into the atmosphere. As of now, this is not a large issue because hydrogen remains a niche industry with few societal effects, but as hydrogen production and use are scaled up, more leaks could pose major climate problems.
• Hydrogen is often intentionally emitted by industry through venting and purging, and there are cases where it is unintentionally emitted. Intentional venting may provide an opportunity to reduce hydrogen emissions, since the industry can stop venting in many cases.
• It is important to have sensor technologies to understand hydrogen leakage.
• If the United States replaced fossil fuels with hydrogen in transportation and industrial sectors, it is estimated that 11 kilograms of carbon dioxide emissions would be avoided for every kilogram of hydrogen used.
• When looking at the worst-case scenario for blue hydrogen leaks, there are considerable climate impacts, including a possibility that the climate would be just as damaged—or more so—than if fossil fuels were used directly.
• The best-case leakage rates for blue hydrogen are still nowhere close to climate neutral.
• With green, electrolytic hydrogen (generated from water using clean energy), the best-case leakage rates are nearly climate neutral, but the more hydrogen that is leaked, the fewer the benefits.
• Minimizing emissions through actions like figuring out how to minimize venting and purging is essential. In the past, venting hydrogen has been seen as benign, so knowing that it is damaging is important.
• The hydrogen industry can also learn from natural gas leakage. The industry can set up hydrogen emission programs akin to the methane programs of natural gas plants.
• Companies, researchers, and decision makers should incorporate hydrogen into lifecycle assessments and climate accounting. The hydrogen challenge also calls for looking at climate change over a shorter time frame, as the 100-year time frame is not the best way of examining impacts.

Morgan Rote, Director of U.S. Climate, Environmental Defense Fund

• Hydrogen is exciting as an option to decarbonize otherwise difficult to decarbonize sectors.
• All hydrogen is not the same. How it is produced and used matters in maximizing environmental benefits and minimizing greenhouse gas emissions and hydrogen leakage.
• The implementation details of the 45V tax credit, which the Department of the Treasury is still developing, need to ensure good use of taxpayer investments in the development of hydrogen.
• The Regional Clean Hydrogen Hubs Program was funded by the Infrastructure Investment and Jobs Act (P.L. 117-58) in 2021. It is an opportunity to demonstrate hydrogen technology in different settings and applications, but also a good opportunity to examine the benefits hydrogen can offer communities. Community engagement is key to the success of this program.
• The Department of Energy (DOE) has existing programs to highlight hydrogen power, such as the Energy Earthshots program. DOE hosted the 2023 Annual Merit Review and Peer Evaluation Meeting for its hydrogen program in June 2023.
• If the 45V tax credit is implemented without sufficient guardrails, it could increase grid carbon emissions by hundreds of tons of carbon dioxide per year, because hydrogen is an energy-intensive product.
• Companies need to develop plans for robust hydrogen emission mitigation so that they deal with unintentional emissions. Many mitigation methods are no-cost methods. As we get more precision in measuring unintentional hydrogen leaks, companies should incorporate such measurements into their hydrogen emission mitigation methods.
• Clean hydrogen can be advanced with more DOE funding for high-precision sensors and more research on hydrogen leakage.
• Taking steps now will maximize benefits, make use of taxpayer dollars efficiently, and avoid the need to retrofit in the future.

Q&A

 

Q: What are the benefits of aiming for “24/7” clean energy for hydrogen projects specifically versus directing efforts towards decarbonizing the dirtiest parts of the grids more broadly to reduce emissions overall?

Fakhry

• There are two approaches. Hourly matching is when all energy used in an hour is matched by renewable energy produced that same hour. This is the approach Google is taking to reduce emissions at their data centers, which need to run all the time.
• The second approach is “emissionality.” The idea of emissionality is to clean up the grid where it is the dirtiest even if that is not geographically close to the physical location of your electricity usage.
• Electrolyzers do not have to run all the time like data centers, they can run 70-80 percent of the time and be cost effective, so achieving hourly matching for a hydrogen facility is far easier than it would be for a data center.
• NRDC has examined emissionality to see if it makes sense for hydrogen, but it is ineffective. The low-cost wind and solar projects that the emissionality approach would lead a company to invest in will be built anyway, so with this line of thinking, it is not actually offsetting anything.

 

Q: What are your thoughts about using existing pipelines to transport hydrogen and what possibilities and potentials for leaks exist?

Ocko

• There are certain solutions that would allow for this, such as blending hydrogen with natural gas. The existing system was built for a specific molecule, methane. Hydrogen is smaller and far more reactive. For example, it could react with the pipeline metal. It is also not very dense, which means you have to push far more hydrogen through the pipeline for the same energy output.
• Another potential risk is that H₂ could dissociate into atomic hydrogen (H) and corrode the steel, cracking or fracturing it. Existing pipelines can carry up to 20 percent blends of hydrogen into methane, but this only reduces emissions by 6-7 percent.
• Hydrogen can escape 3 times as fast through existing pipelines than methane. Industries have used a study that suggests natural gas and hydrogen leak at the same rate. This is a misconstrued study that looked at a specific case study where conditions allowed for that, but more broadly, hydrogen would definitely leak more.
• Pipelines would need to be heavily retrofitted and redesigned to achieve pure hydrogen transport through existing pipelines. The easiest fix is to produce hydrogen near the places you want to use it.

McCabe

• It is not viable to just convert infrastructure—the same compressor will not work, for example. The infrastructure will need to be reengineered.
• Hydrogen has been envisioned for a specific purpose—use in hard-to-decarbonize sectors—so it is hard to see why some pipelines would work for that purpose, since their placement is designed for natural gas transport specifically.

 

Q: What is being done to make hydrogen viable, cost-effective and energy efficient?

Ocko

• EDF published a study on the energy efficiency of hydrogen and compared hydrogen with direct electrification. We can power vehicles and heat homes far more effectively with direct electricity. Hydrogen should not be treated as the end-all-be-all alternative to fossil fuels. It could sometimes be the solution to fossil fuels, but in other cases it will not be.

Rote

• DOE has several grant programs to improve the energy efficiency of various parts of the hydrogen process. Grants encourage innovation in ways that production tax credits do not. There are some uses for hydrogen that we do not have alternatives for, like steel reacting agents and chemical agents. In those cases, the best option is to decarbonize through hydrogen despite the energy inefficiency.

Fakhry

• Subsidies can drive innovation. The 45V tax credit needs to be planned right, and if it is, it will send market signals to companies to design intelligent, flexible grid assets. The design of the credit is very important because if there are not sufficient guardrails, hydrogen will be produced even where it is not low carbon.
• The uses where we need hydrogen the most are the energy-inefficient ones. The technology is not necessarily ready for the most important uses quite yet.

McCabe

• Cost has dropped dramatically. Innovation will be there, and blue hydrogen is probably going to be an early mover, but the right guidelines are needed to clean up its upstream emissions.

 

Q: It sounds like economically, hourly matching is only possible if the other two pillars, new clean supply and deliverability, are in use. Where do you think we are in terms of achieving the feasibility of the other pillars?

Fakhry

• The good and bad thing about clean hydrogen is you can produce it anywhere where there are renewable energy sources.
• Electrolytic hydrogen is still expensive, but hopefully, tax credits can improve that.
• Costs will come down quickly, especially as more hydrogen is deployed. Deployment will start where there are more ideal conditions, then the market will open up quickly, and tax credits will hopefully help that.

 

Compiled by Parthav Easwar and Isabella Millet and edited for clarity and length. This is not a transcript.