The clean hydrogen paradox

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

“Electrify everything” has become something of a calling card for the energy transition, and for good reason: We can cut the carbon emissions of our homes, our cars and so much more by simply swapping fossil fuels for electricity generated by renewable energy.

But we may not be able to electrify everything. Certain essential but dirty industries, like cargo shipping and steelmaking, don’t lend themselves well to direct electrification, at least not with today’s technology. They’re too heavy, too hot or otherwise ill suited to run on electricity alone.

To fully eliminate fossil fuels, then, we’ll need to complement clean electricity with some other carbon-free processes and energy sources. Clean hydrogen may well be the most overhyped solution to this existential problem. Here’s the tricky part: It may also be the most viable solution.

This is the paradox of clean hydrogen. The gas is either a silver bullet or a fatal flaw in decarbonization plans, depending on how it’s made, how it’s used — and who you ask. 

Right now, the vast majority of hydrogen is decidedly dirty. It’s produced using fossil gas in an emissions-intensive process called steam methane reforming.

The lowest-carbon alternative is to make hydrogen with water and renewable electricity in a process known as electrolysis. You’ve probably heard of ​“green hydrogen”; this is it. Some entities, including several fossil fuel giants, argue that traditional ​“dirty” hydrogen can be made clean by adding carbon-capture technology into the mix. This is called ​“blue hydrogen,” and its status as a climate solution is both unproven and highly controversial.

Green and blue hydrogen make up a vanishingly small amount of the hydrogen produced today. But that’s about to change, fast.

If certain projections are to be trusted — though there are good reasons that they ought not to be — the world might be able to produce 90 million metric tons of low- or zero-carbon hydrogen by the end of this decade. That’s an amount roughly equivalent to the volume of dirty hydrogen currently produced each year and vastly more than today’s low-emissions hydrogen production capacity of around 1 million metric tons.

Even achieving a fraction of a fraction of that goal — reaching, say, 10 million to 15 million metric tons by 2030, as longtime clean-energy analyst Michael Liebreich argues is far more realistic — would still mean the industry is on the precipice of exponential growth.

But hydrogen hype has been around for decades, and lofty expectations for its future are not new. Liebreich identifies waves of exuberance about the fuel’s liberatory potential in the 1970s and in the late 1990s. Misguided futurists have been holding it up as the best way to fuel a passenger vehicle for years. And yet today, hydrogen is mostly relegated to snoozy applications like oil and gas refining and fertilizer production.

So what’s different about this latest wave of hype?

What’s new is that the U.S. government has opened up its bottomless pockets to clean hydrogen producers: The Inflation Reduction Act’s most lucrative subsidy may turn out to be the 45V tax credit, an uncapped incentive that some analysts expect to dish out hundreds of billions of dollars to hydrogen producers over the course of its existence. The Bipartisan Infrastructure Law also gives $7 billion to seven regional hubs that will produce low- and zero-carbon hydrogen.

Though these subsidies may not be enough to push clean hydrogen to the hype-fueled heights of the most optimistic forecasts, they are almost certainly enough to ensure the U.S. will start churning out a substantial amount of the gas by the end of the decade.

And thanks to proposed rules from the administration, that output may actually be low-emissions. After a year of fierce lobbying from various industry factions, environmentalists and fossil fuel companies about how the government should define ​“clean hydrogen,” the Biden administration in December proposed strict stipulations that experts agree will incentivize the production of genuinely zero-carbon hydrogen. (This outcome was anything but a given.)

Should these proposed rules survive the latest round of pushback and become final rules, they could help the industry overcome long-standing criticism that ​“clean” hydrogen is a murky concept that could, at best, create accidental carbon emissions or, at worst, become a sort of Trojan horse through which fossil fuel companies can smuggle dirty hydrogen into the walls of the decarbonization movement.

Even so, a second major criticism of the fuel would remain: While clean hydrogen can be used for many different purposes, it’s rarely the best option, for reasons of economic and energy efficiency.

When electricity or batteries can do a job directly, they are almost always the cheaper and more practical carbon-free choice. Energy is lost at every step of the clean hydrogen production process, so using the fuel for any electrification-eligible task is a waste of not just energy but of renewable energy — a resource the world is in no position to be careless about dispensing. This is why heat pumps, electric vehicles and renewables are winning, and hydrogen fuel-cell passenger vehicles, hydrogen-powered boilers and hydrogen-burning power plants hardly exist.

But when electrification can’t do the job — that’s when clean hydrogen can and should fill the gap. 

The most promising applications for the fuel are cargo shipping, long-haul aviation and steelmaking, tasks that are all difficult to accomplish with direct electrification.

Convincing companies in these industries to switch to clean hydrogen is no simple thing. As it stands, they lack an urgent economic incentive to abandon the billions and billions of dollars worth of fossil-fuel-burning assets they already have. The Inflation Reduction Act’s clean hydrogen subsidies tackle one piece of this equation by making the fuel cheaper, but it doesn’t exactly pay for the costly factory retrofits and product redesigns required to switch to hydrogen-based operations.

Advocates are trying to fix this by pushing lawmakers to introduce policies that would make clean hydrogen more attractive to buyers, like a carbon tax or advance market commitments. In the meantime, all eyes are on the fertilizer industry as a potential anchor customer that can help kick-start the fledgling industry. Should the climate law succeed in making clean hydrogen cheaper than the fossil-fuel-based hydrogen fertilizer producers use by the tons today, then they will have a strong incentive to switch over — and clean hydrogen may finally prove itself to be a force for decarbonization.

If the emerging clean hydrogen industry can manage to keep its product genuinely clean and sell it mostly to appropriate buyers, the fuel will play a meaningful role in the energy transition. If it does not, it will still play a meaningful role — only it will slow down the all-important sprint away from fossil fuels, rather than speed it up.

We’re at the dawn of something important, either way.

That’s why Canary Media is dedicating this week to covering the clean hydrogen industry taking shape in the U.S. and around the world. The fuel has a dubious past, present and possibly even future, but it might just be our best shot at solving some of the most vexing decarbonization problems. Canary’s stories throughout this week will focus on this dilemma, and the tightrope policymakers, industry players and climate advocates are walking to ensure that the emerging clean hydrogen economy is a boon to decarbonization efforts, not a bust. 

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.