The case against the US government’s big ​‘blue hydrogen’ bet

Can a ​“clean hydrogen hub” spend hundreds of millions of dollars turning fossil gas into hydrogen and still be considered clean?

That’s the question that environmental groups and community activists are asking about the $7 billion in federal funding set to flow to hydrogen hub projects across the country. The hubs are meant to kick-start U.S. production of low- and zero-carbon hydrogen, an alternative fuel that could replace planet-warming fossil fuels in industries from heavy transportation to steelmaking.

Of the seven public-private consortiums selected to compete for this funding by the Biden administration on Friday, five plan significant investments in ​“blue hydrogen,” the practice of making hydrogen from fossil gas but capturing and storing the carbon emissions from the process. Today, almost all of the roughly 10 million metric tons of hydrogen produced in the U.S. per year is so-called ​“gray hydrogen,” which is made with fossil gas and no carbon capture, and used for refining as well as fertilizer and other chemicals production.

But a growing number of climate and clean energy groups say that blue hydrogen is no climate solution. In fact, they warn that expanding the use of fossil gas to make hydrogen is likely to increase, rather than decrease, greenhouse gas emissions. They also fear that investments in blue hydrogen could lock in reliance on fossil fuel infrastructure to the detriment of building out clean electricity.

These groups say that ​“green hydrogen” — using zero-carbon electricity to split water into hydrogen and oxygen via electrolysis — is the only climate-friendly way to produce the fuel. The 2021 Bipartisan Infrastructure Law, which created the hydrogen hub program, did require at least one hub to produce ​“blue hydrogen.” But clean-energy advocates say the administration is funneling too much funding toward that approach. The Biden administration’s guidance on the hydrogen hubs notes that roughly two-thirds of total project investment is ​“associated with green (electrolysis-based) production within the hubs.”

“Hydrogen can be a clean energy solution, or it can drive us deeper into the climate crisis and hurt communities,” Jill Tauber, vice president of litigation for climate and energy at nonprofit legal group Earthjustice, said in a Friday statement. ​“Hydrogen produced from fossil fuels is not a solution — whatever the color.”

The fossil fuel companies that form the core membership of the biggest hydrogen lobbying groups — and are key partners for several hydrogen hubs to receive federal funding — disagree. Karen Harbert, CEO of the American Gas Association trade group, called Friday’s hydrogen hub announcement ​“a monumental step for all of us who care about decreasing emissions swiftly and affordably,” and said that “[n]atural gas utilities are committed to exploring all options for emissions reduction.”

But to blue-hydrogen skeptics, the fossil fuel industry’s words are belied by the data.

“They still claim, sometimes, that blue hydrogen is low-emissions or zero-emissions,” said Robert Howarth, professor of ecology and environmental biology at Cornell University. But there isn’t ​“anything in the peer-reviewed literature to support those claims at all.”

Why blue hydrogen can be worse than burning gas 

After spending several years searching for evidence, Howarth teamed up with Mark Z. Jacobson, a professor of civil and environmental engineering at Stanford University, to conduct their own research. The results, published in August 2021, indicate that in almost all cases, blue hydrogen ends up emitting more greenhouse gases compared to simply burning fossil gas directly for heating and industrial processes.

Several factors contribute to this counterintuitive result, Howarth said. The first is that wells, pipelines, compressor stations and other gas-delivery infrastructure leak methane, the primary component of fossil gas. Methane is a relatively short-lived but powerful greenhouse gas, with more than 80 times the global warming impact of carbon dioxide over a 20-year period.

“You can’t use natural gas without fugitive methane,” Howarth said. ​“It may not be a huge amount, but it has a huge climate impact.”

Howarth and Jacobson assumed that 3.5 percent of fossil gas used to make hydrogen is leaked — higher than what’s reported by the oil and gas industry and tracked by the U.S. Environmental Protection Agency, but in line with recent third-party analysis from satellite and aerial monitoring. They also considered emissions from the energy needed to drive the gray-hydrogen steam methane reformation (SMR) process, which is usually generated with fossil gas in today’s hydrogen facilities, as well as the energy needed to operate carbon capture equipment.

These emissions largely erased the climate benefits of capturing carbon from SMR plants, yielding only a 9 percent to 12 percent reduction in CO₂ equivalent emissions compared to unabated gray hydrogen production, the analysis found.

What’s more, the energy used to convert fossil gas to hydrogen and capture the carbon emissions increases the emissions impact of every unit of blue hydrogen compared to the comparable unit of fossil gas it might replace for heating and industrial purposes, which make up a significant portion of the end uses being considered by many clean hydrogen hubs. Due to this extra energy and emissions impact, burning blue hydrogen for these purposes is about 20 percent more emissions-intensive than simply burning fossil gas to begin with, the analysis found.

Even if the assumed methane leakage from upstream fossil-gas infrastructure in the researchers’ models was reduced to about 1.5 percent — roughly the current estimate from EPA — the use of blue hydrogen only reduced greenhouse gas emissions by 18 to 25 percent compared to making gray hydrogen, and the emissions associated with burning it for fuel remained greater than sticking with fossil gas, according to the report.

“I would love to see some way to reduce the greenhouse gas footprint of hydrogen,” Howarth said — although he prefers to see it applied primarily to replacing gray hydrogen, rather than being used for less efficient applications such as heating or transportation. ​“But the hydrogen should be coming from renewable energy.”

Similar data points from other research underscore the tough road that blue hydrogen production will face in lowering its greenhouse gas emissions impact. A February report from the Energy Futures Initiative, a nonprofit research group run by former Energy Secretary Ernest Moniz, states that the average ​“life-cycle emissions” of blue-hydrogen production — a measure that includes leakage from gas wells and pipelines as well as gas used to power hydrogen production and carbon capture — add up to more than a third of the typical emissions from gray-hydrogen production and are ​“often out of control of the production facility.” 

The tricky details in measuring the climate-change impact of ​“clean” hydrogen

It’s important to note that not all blue hydrogen projects will necessarily be operating under the conditions used to inform Howarth and Jacobson’s report. Nor is making green hydrogen from electricity and water necessarily a lower-carbon option. In fact, using grid power generated by coal or fossil gas plants can yield a ​“green” hydrogen output with a greater carbon-intensity than gray hydrogen, according to multiple analyses — a fact that’s led to a strident debate over how the federal government should implement a lucrative hydrogen production tax credit created by the Inflation Reduction Act to prevent that outcome.

“The carbon-intensity of any particular hydrogen pathway is very dependent on the individual project-level decision making,” said Emily Kent, U.S. director of zero-carbon fuels at the Clean Air Task Force, a nonprofit environmental organization. ​“For a blue hydrogen facility, that’s going to depend on carbon capture rates, the upstream methane leaks,” and the carbon footprint of the electricity used to power its carbon capture equipment, she said. 

The organization has also worked with government and private-sector members of several hydrogen hub projects, including those in the Midwest, Gulf Coast and Appalachian regions that have blue hydrogen as a significant portion of their plans. Its analysis has found that in some cases, blue hydrogen can remain below the emissions thresholds that have been proposed by the U.S. Department of Energy to define clean hydrogen for the purposes of the hydrogen hub program.

“But like any other pathway, that’s not to say that all blue hydrogen will meet that threshold,” she said.

Unfortunately, it’s hard to know how the blue hydrogen projects being planned at clean hydrogen hubs will stack up since they’ve shared very little detailed information. Most of the nearly 80 groups competing for the $7 billion in federal funding have kept their plans confidential in the runup to last week’s final selection.

Over the past year, environmental justice groups say they’ve been locked out of discussions among state government agencies, the oil and gas companies, utilities and other companies involved in crafting the hub proposals.

Those concerns are reflected in letters to the DOE from community groups in Indiana, one of the states included in the MachH2 Hydrogen Hub consortium, citing concerns about air and water pollution and environmental degradation from projects pursued without consultation with communities.

Another letter from groups in Pennsylvania and Ohio warned that the Appalachian Regional Clean Hydrogen Hub (ARCH2) — a fossil-gas-heavy proposal favored by U.S. Senator Joe Manchin, the West Virginia Democrat whose vote was critical to passing the Bipartisan Infrastructure Law — risked sinking money into ​“irremediably uneconomic applications, resulting in higher prices, utility bills, and taxes with little or no net economic benefit.”

The Ohio River Valley Institute, one of the groups signing the letter, has proposed an alternative plan focused on investments in wind and solar power and energy efficiency that it says will be less costly and risky than pursuing carbon capture that’s ​“unproven at scale.”

Today, only two steam methane reformation hydrogen plants in North America have installed carbon-capture equipment — a facility in Alberta, Canada operated by oil company Shell and a facility serving a Valero oil refinery in Port Arthur, Texas operated by industrial gas company Air Products. The latter project was among the 11 carbon-capture projects that received a combined $1.1 billion in DOE funding during the Obama administration — and one of only two of those projects that weren’t eventually canceled or shuttered.

Given this track record of carbon capture, and the fact that Shell’s Alberta plant has only achieved carbon-capture rates of just under 80 percent, it’s far from clear that this new wave of blue hydrogen projects can achieve the DOE’s target carbon capture rate of 94.5 percent, said David Schlissel, director of resource planning analysis for the Institute for Energy Economics and Financial Analysis.

“The DOE is running around saying they’ll capture 95 percent, 98 percent,” he said. The nonprofit climate group has criticized the federal government’s method of assessing the carbon impacts of blue hydrogen, which it says fails to capture key variables including methane leakage, the effects of ​“downstream” emissions associated with hydrogen storage, transport and utilization, and ​“overly optimistic assumptions about the effectiveness of carbon capture processes.”

Climate impacts versus economics 

Nor is it clear that blue hydrogen can be cost-competitive against green hydrogen in the long run, Howarth pointed out. Renewable energy, the single largest factor in the cost of green hydrogen, has become far less expensive over the past decade and is expected to continue to become cheaper, although supply-chain disruptions and rising interest rates have somewhat interrupted that downward trajectory in the past year.

The cost of blue hydrogen, by contrast, is reliant on fossil-gas supplies that are subject to unpredictable and significant price spikes — most recently due to the global energy disruptions following Russia’s invasion of Ukraine — and the uncertain costs associated with carbon capture.

“Green hydrogen is already becoming cost-competitive with blue hydrogen — and in a few years, it will be even cheaper because the price of natural gas is going up and the price of renewables is going down,” he said.

And yet, while the majority of clean-hydrogen developers today are pursuing green hydrogen, the fossil fuel industry appears committed to enormous blue hydrogen investments.

According to February’s report from Energy Futures Initiative, about 70 percent of recently announced clean hydrogen projects center on green hydrogen, while only 20 percent are pursuing blue hydrogen. (Other forms of hydrogen under development include ​“pink hydrogen” made via electrolysis using nuclear power and ​“turquoise hydrogen” made via high-temperature pyrolysis of methane.)

But the scale of blue hydrogen projects eclipses that of the more numerous but smaller green hydrogen projects, accounting for 95 percent of the total production capacity, as the following graphic illustrates. 

While most of these projects are in the very early stages of development, this indicates the scale of the fossil fuel industry’s ambitions for expanding the use of fossil gas to serve the hydrogen market.

Both blue and green hydrogen cost more than gray hydrogen today. The Inflation Reduction Act introduced the 45V hydrogen production tax credit that could offer a high enough premium for low-carbon or zero-carbon hydrogen to bring it within competitive reach of gray hydrogen, but it will require hydrogen producers to meet certain carbon-emissions targets to receive the highest value.

But blue hydrogen projects could skip this credit and instead go for the 45Q tax credit, which offers up to $85 per metric ton of carbon captured from point-source emitters such as hydrogen production facilities. That credit is tied to how much carbon dioxide is captured at a site, not the life-cycle emissions-intensity analyses like those that govern the value of the hydrogen produced for the 45V credit.

Meanwhile, the hydrogen hubs program itself requires only that projects funded by it ​“demonstrably aid the achievement” of DOE’s clean-hydrogen production goals, rather than adhere to any emissions standards that may be set by the government’s pending guidance on how the 45V tax credit will be administered.

To be clear, the hydrogen hubs represent very early-stage efforts. DOE will have years to review each hub’s plans and may decide not to fund those it determines are unsuited for large-scale commercialization.

Still, DOE forecasts that the hubs could produce about 3 million metric tons per year of the 10 million metric tons of annual clean-hydrogen production the Biden administration hopes to bring online by 2030. The long-term implications of blue hydrogen beating out green hydrogen for the lion’s share of that 10 million metric tons of production could be dire for the country’s climate goals, according to a recent analysis by decarbonization think tank RMI. (Canary Media is an independent affiliate of RMI.)

That analysis compared a future in which blue hydrogen dominates the market, with 7 million metric tons of production compared to 3 million metric tons of green hydrogen, versus one in which green hydrogen wins out and those proportions are reversed. It found that the blue-hydrogen-dominated future could double the emissions over the lifetime of the projects — a difference of 410 million metric tons, or about one-twelfth of the nearly 5,000 million metric tons of U.S. energy-related CO₂ emissions in 2022.

It’s not clear how the pathways chosen by individual hydrogen hubs might play a role in driving these broader market dynamics. But RMI’s report warns against policies that might lead to the ​“lock-in of gas-based hydrogen pathways if those projects dominate the early market.”