Electric utilities are looking to green hydrogen as a tool to help alleviate over-congested grids and renewable energy curtailment. But what makes hydrogen “green?”
The U.S. Internal Revenue Service (IRS) will soon issue its much-anticipated guidance on what qualifies for the new green hydrogen tax credits in the Inflation Reduction Act (IRA) passed last year.
The law provides for up to $3 per kilogram of green hydrogen. The new law set a threshold of 0.45 kilograms of carbon dioxide emissions per kilogram of hydrogen, but we don’t know yet which power purchase agreement (PPA) contract structures will qualify.
The guidelines will focus on three key aspects of how the renewable energy for green hydrogen production is purchased:
- Time matching: Will it require hourly matching of renewable energy with hydrogen electrolyzers, as some environmental groups want? Or is annual averaging more realistic, since wind and solar production is seasonal and variable?
- Additionality: How do we define what constitutes “new” renewable energy generation and how critical is additionality to the overall hydrogen-decarbonization pathway? If a solar project was built last year, shouldn’t we still consider that generation new? What if a wind project is completed and connected to the grid, but supply frequently suffers from congestion and curtailment, leading to chronic wasted output? On an even more fundamental level: if the hydrogen is generated with any green source of energy…isn’t it therefore green?
- Regionality/Deliverability: How physically and electrically close does the source of renewable energy need to be to the electrolyzer? Transporting hydrogen can be a challenge. Some electrolyzers will operate where the hydrogen is needed, not necessarily where the required renewable energy is generated. Will it be enough for that renewable generation to operate on the same grid? Or will it need to occur more locally?
The trade association American Clean Power recently released an updated “Green Hydrogen Framework” that appears to offer a thoughtful and reasonable compromise, including on the critical time-matching element.
This framework would provide a phase-in period for time-matching—starting with annual matching for any project beginning construction before 2029 for the life of the tax credit, then switching to hourly matching for projects that begin construction after that.
The U.S. Chamber of Commerce and the Fuel Cell & Hydrogen Energy Association have argued that any proposals for hourly matching and additionality will stymie the industry and delay our progress toward reducing emissions.
The statutory deadline for publication of the guidelines is August 16, the one-year anniversary of President Biden signing the bill into law, so we’ll know soon.
How Should I Choose My Electrical Supply
To deploy green hydrogen solutions, we must ensure that enough renewable energy is available to produce the hydrogen. The amount of renewable energy required will depend on the scale of the project and the amount of hydrogen that needs to be produced.
In order for power to be considered “green,” it must come from renewable energy sources such as wind or solar power. Companies can connect to renewable energy resources directly to electrolyzers, or by connecting their electrolyzers to the grid and entering into virtual power purchase agreements with renewable energy providers.
Directly connecting electrolyzers to renewable energy generation is possible in some circumstances, but often requires transporting the hydrogen to the site where it is used. A virtual power purchase agreement offers a more efficient strategy in many cases, allowing you to plug directly into the grid and purchase electricity from renewable energy projects that deliver electricity to the same grid. This allows the production and storage of hydrogen exactly where it’s needed.
American Clean Power’s revised framework, if adopted by the IRS, would not allow existing sources of electricity to qualify. Under the principle of “additionality,” the electricity used to make green hydrogen would need to come from new developments.
The “regionality” principle in the expected rules will also affect your choices of renewable supply. Only sources delivering power to the electrical grid you are connecting to would qualify.
Which Electrolyzer Technology Should I Choose?
Two leading technologies currently produce green hydrogen at scale: alkaline water (ALK) electrolysis and proton exchange membrane (PEM) electrolysis. PEM electrolyzers have a higher capital cost but greater efficiency. Alkaline electrolysis is less capital-intensive and has a greater history of operations.
Upcoming technologies include solid oxide electrolysis cells and anion exchange membrane electrolysis. While still in research and development, both have the potential to achieve greater efficiency and lower costs in the future, as the industry continues to scale up.
How Do I Get Hydrogen to Where I Need It?
Hydrogen can be transported either in a gaseous state or a liquid state. Hydrogen is most economically transported as a liquid but the cost to liquefy hydrogen can be prohibitive. In the gaseous state hydrogen can be transported in tubular trailers or compressed and shipped via pipelines.
Hydrogen can be blended into existing natural gas pipelines in low concentrations. At regional “hydrogen hub” locations across the U.S., federal funding will support the development of new pipelines to transport 100% hydrogen.
Turning hydrogen into liquid organic hydrogen carriers offers another option for transporting it. These chemicals store large amounts of hydrogen at room temperature and standard atmospheric pressure and can be split back into pure hydrogen at the usage site if desired.
Each option is costly, so often the most efficient strategy may be to not transport the hydrogen at all, by producing green hydrogen on-site at the facility where it will be used.
—Kevin Lawlor is Senior Vice President, Technical Services at Ambient Fuels, a pure-play green hydrogen developer guiding heavy industry through the great green upgrade.