Climate Change Responses: Expect Big Things for Hydrogen?

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Expect big expansion in the use of clean hydrogen energy—that has been a periodic mantra in the climate change press for years. While commercial scale development continues to face serious technical and cost barriers, there now may be reason for optimism.

The use of hydrogen as an energy source is not new, but is limited. It accounts for about 2 percent of current energy use in the United States. To that end, expanding that use to positively affect climate change would require more than simply increasing the supply.

Until recently, hydrogen as a fuel has been primarily developed by steam reforming of a feedstock, with the carbon emissions dependent upon the feedstock. Typically, the feedstock would be natural gas, producing what is commonly referred to as "blue hydrogen" (if coal is the feedstock, "brown" hydrogen). Thus, while the use of hydrogen produces no carbon emissions, the production of the hydrogen itself typically results in significant carbon emissions, although the volume may be reduced through carbon capture.

Production of "green hydrogen" results in no carbon emissions because it uses renewable energy sources to split water molecules into oxygen and hydrogen. While that process produces no carbon emissions, its use had been limited by the fact that the process requires substantial energy in its own right, greatly increasing its cost of production in relation to feedstocks such as natural gas, particularly in the United States.

In Europe and in other locations with higher natural gas prices or abundant renewables, the use of renewables to produce green hydrogen can be more attractive. Major copper mining companies in Chile are also reportedly exploring the use of green hydrogen to replace diesel in forklifts, trucks and other equipment.1

The good news is that the technical issues associated with increased use of hydrogen fuel cells appear to be resolvable, potentially leading to greater use of hydrogen to replace diesel for buses and trucks, or to supplement or replace natural gas in utilities and industrial facilities. The Hydrogen and Fuel Cell Technology Office at the Department of Energy supports R&D for technology increasing hydrogen usage across transportation, industrial, and stationary power applications. However, the cost issues associated with increasing the supply of hydrogen from "green" sources remain as barriers to expansion of its use.

Green hydrogen may be at the point of solar and wind energy two or three decades ago, where strong financial incentives and a clear governmental focus will be necessary to allow those industries to reach a scale where costs rapidly drop to competitive levels. The Biden Administration is moving broadly to expand the use of renewable energy, which should reduce the cost disparities between hydrogen and other feedstocks but has not yet focused directly on the issue.

A recent announcement by a major transporter and user of natural gas illustrates the issues and some potential solutions. The company is considering use of hydrogen as a fuel source for a utility currently burning natural gas.

To offset the higher cost associated with hydrogen production, it is both seeking credits from Canadian government sources for carbon sequestration and storage similar to U.S. credits available under Section 45Q of the Internal Revenue Code, and looking into using excess electrical power from renewable sources during off-peak hours for green hydrogen production. It is also considering blending hydrogen with its natural gas to make a cleaner "blue hydrogen" mixture. This combination of strategies will have to offset the fact that the cost of renewable energy can be as much as six times that of natural gas.

The growth of "green hydrogen" by itself is no solution to climate change. However, just as carbon emissions do not arise from a single source, solutions will be multi-pronged. But the first, essential task is that carbon emissions be brought under control. No significant source can be ignored, and the substitution of green hydrogen for fossil fuels will be an important part of that effort.


FOOTNOTE

"Chart: Copper Mines Get Serious About Green Hydrogen," Environment & Energy Report, Bloomberg Law, 4.13.21

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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