Is clean hydrogen a climate solution? Depends how it’s made — and used

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

Hydrogen may be the lightest element in the universe, but it could play a hefty role in decarbonizing the economy.

If, that is, it’s produced and used with the climate in mind. Hydrogen is flexible: It can be made from coal, fossil gas or water and electricity. It can be used to fuel a car or make important chemicals like ammonia. The problem is that not all methods of production and end uses are good for the planet.

Recent policy changes have made these concerns much more pressing. The U.S. aims to drive a massive scale-up from the scant supply of emissions-free hydrogen available today to 10 million metric tons annually by 2030. To succeed, the government is wielding the most generous hydrogen production subsidy in the world: a tax credit called 45V for its section of the tax code.

Access to the incentive will require producers to prove their hydrogen emits little to no carbon pollution. But enforcement remains uncertain, and there’s little guidance to govern the other half of the hydrogen equation: its end uses.

In the best-case scenario, the tax credit would incentivize producers to make hydrogen that’s truly emissions-free for industries that can’t decarbonize without it, like fertilizer manufacturing. But in the worst-case scenario, 45V would spur the production of ​“clean” hydrogen that actually increases emissions, at great taxpayer expense, to be squandered on applications that could more efficiently decarbonize without it, like home heating.

The climate promise and peril of hydrogen depend on how exactly this coming surge in production and procurement plays out.

The best and worst ways to make clean hydrogen

Globally, about 95 percent of hydrogen made today is done via a process known as steam methane reforming (SMR). In this approach, a producer heats water to form steam that’s then reacted with methane in fossil gas to generate pure hydrogen. Planet-warming carbon pollution is the byproduct.

But there are ways to make hydrogen with low or no emissions. One method of producing so-called ​“green hydrogen” uses a device called an electrolyzer and carbon-free electricity to zap water and free hydrogen from oxygen. Another approach, producing so-called ​“blue hydrogen,” uses the traditional SMR process but captures and stores the carbon emissions that result.

There’s no guarantee, however, that these two methods make clean hydrogen. The carbon footprint or intensity of green and blue hydrogen depends entirely on the nitty-gritty details of a given production plant, including where it sources its fuel from.

Electrolysis could be acutely carbon-polluting if producers are allowed to claim on paper that they’re ​“using” solar and wind power — when they’re actually drawing power from coal and gas plants. Plugging an electrolyzer into the average U.S. grid would produce hydrogen that’s roughly twice as carbon-intensive as traditional dirty hydrogen that’s made from fossil gas using SMR.

What’s worse, a green hydrogen production plant can eat as much energy as a medium-sized city, so if producers aren’t also adding new clean power sources, experts expect the massively increased demand would likely push grid operators to fire up dirty power plants to fill the gap.

Powering electrolyzers with onsite renewable energy is squeaky clean: Hydrogen made this way is expected to emit less than 0.45 kilograms of CO₂ per kilogram of H₂ produced, which would qualify for the highest level of the federal tax credit: $3 per kilogram of H₂.

But hydrogen producers using electrolysis that don’t build their own wind and solar farms will need to follow strict guidelines around the electricity they buy from the grid if they want their hydrogen to be clean enough to qualify for U.S. subsidies.

In December, the Biden administration proposed rules for the subsidies that aim to make producers mimic, as closely as possible, pulling power directly from renewable sources.

First, clean power has to be added to the grid specifically to supply the electrolyzer. Second, it has to be able to physically flow through the grid’s web of wires to reach the electrolyzer. And finally, by 2028, the power has to be generated in the same hour that the electrolyzer uses it.

Producers could potentially make clean hydrogen from fossil gas by using carbon capture and storage tech. But two issues complicate this route, according to Tessa Weiss, a senior associate in the Climate-Aligned Industries group at climate think tank RMI. (Canary Media is an independent affiliate of RMI.)

The first problem is that fossil gas leaks, from the well where it’s extracted all the way to where it’s delivered. That’s harmful because methane in fossil gas has more than 80 times the warming potential of CO₂ over a 20-year period. The second roadblock is that current carbon-capture rates aren’t anywhere close to levels producers would need to achieve to qualify for the IRA tax credit.

“We’ve yet to see capture rates reach over 60 percent,” Weiss said. But to ​“even think about” achieving the clean-hydrogen label, producers would really need capture rates of 80 percent and above.

The best and worst ways to use clean hydrogen

Leaders have likened hydrogen to a proverbial Swiss Army knife that’s able to decarbonize virtually everything, from steelmaking and chemicals to grid power and transportation.

But these use cases aren’t equally good ideas — though hydrogen pushers will tell you otherwise, explained Michael Liebreich, one of the world’s preeminent experts on hydrogen, chair of Liebreich Associates and founder of BloombergNEF.

Harking back to the Swiss Army knife analogy, you only use the tool when there’s nothing better around, Liebreich said. ​“I use mine to open a bottle of wine on a camping trip. But that doesn’t mean that I then use it to cut my kids’ hair.”

Large swaths of the economy will be able to decarbonize without clean hydrogen because they’ll have access to cheaper, safer and more convenient alternatives, such as electric power or bio-based fuels, according to Liebreich.

Some of the best uses for clean hydrogen will be in fertilizer production, oil refining and chemical manufacturing. These industries already rely on (currently dirty) hydrogen as a feedstock, and their workers ​“have got all the skills” needed to safely work with hydrogen, Liebreich said. So swapping in the clean stuff there makes way more sense than, say, putting it in city buses.

Another high priority for hydrogen use is in steelmaking because it can displace the coking coal used to reduce iron ore to make steel’s key ingredient: pure iron. (Efforts to electrify that process exist too, though.)

Derivatives of hydrogen, such as ammonia and methanol, will also make sense for cases when electrification isn’t competitive or technically feasible. These include maritime shipping and jet aviation — forms of transportation that can be too massive and trek too far for today’s lithium-ion batteries to handle. Biofuels are also likely to play a role in these industries, according to Liebreich.

What about the worst ways to use clean hydrogen? These include heating buildings, fueling cars and providing the grid power that’s not stored first. Tech already exists that’s far more efficient at heating homes than hydrogen is: heat pumps. Electric vehicles are expected to keep growing globally, while hydrogen fuel-cell cars are on the road to nowhere. And because roughly 70 percent of the energy is lost in conversion steps, it’s much more efficient to use clean electricity directly rather than convert it into a middleman fuel that’s then immediately burned for power.

By contrast, making hydrogen from excess clean power and storing it for weeks or months would be valuable, Liebreich told Canary Media. Stored hydrogen would help build out solar and wind power by providing a resilient reserve when these intermittent sources aren’t available.

Liebreich predicts that by 2040 we’ll see clean hydrogen matched to the sectors that it can decarbonize most easily. And the worst use cases will be pushed to the fringe because they’re economically uncompetitive. He’s admittedly pessimistic ​“about whether we will do things in the right order.” But he’s confident that ​“we’ll end up at the right place.”

Verdagy manufactures an advanced AWE electrolyzer system that has superior performance to almost any system in the market — high current densities and the largest membranes leading to higher hydrogen production, high efficiencies leading to lower LCOH, and wide dynamic range and fast turndowns to seamlessly integrate with renewables. In addition to its Silicon Valley factory, Verdagy operates its R&D and highly automated commercial pilot plants in Moss Landing, California, where it continues to advance its cutting-edge technology.