We need green hydrogen to clean up heavy industry. Who’s making it?

You can’t build something out of nothing, and this immutable fact poses a challenge for the essential heavy industries whose decarbonization plans depend on cleanly produced hydrogen.

The steel industry is betting on clean hydrogen to replace coal in the making of its key input, iron. Fertilizer suppliers want to replace fossil gas with hydrogen as the feedstock for synthesizing ammonia. Cement manufacturers hope to rely on hydrogen as a clean heat source. Chemical refineries already use fossil-derived hydrogen and need to clean it up to make their operations compatible with a livable planet.

As detailed in Canary Media’s The Tough Stuff series, the current best bets to decarbonize the building blocks of modern society depend on a steady supply of clean hydrogen readily accessible to industrial centers around the country. This simply does not exist today in the U.S.; in other countries, it’s only happening on a small scale.

“The projects in service now [globally] — we’re talking 10 megawatts, 20 megawatts,” said Claire Behar, chief commercial officer at an integrated green-hydrogen venture called Hy Stor. ​“We need to be breaking ground today with these gigawatt-scale projects in order to even come close to meeting our climate goals.”

The success of the industrial decarbonization project, then, requires not just reorienting massive incumbent industries around novel low-carbon processes, but simultaneously inventing a whole new clean-hydrogen supply chain capable of feeding these enormous beasts.

Hydrogen itself is not difficult to make. It’s already produced at scale using steam methane reforming, a highly carbon-emitting process. People have synthesized it without fossil fuels for over a century as a byproduct of the chlor-alkali process, used to make chlorine gas. Hydrogen can also be produced more directly through electrolysis, which involves running an electric current through water.

For hydrogen to be green, though, the electricity tapped for either of those last two processes needs to be verifiably carbon-free. Gold-standard green hydrogen would plug off-grid renewables straight into electrolyzers. If a producer runs electrolyzers from the grid and buys credits for renewable power equal to consumption, that process can actually emit more carbon than dirty methane-based production; this counterintuitive fact animates the debate on whether federal tax credits should require ​“time-matching” renewable generation with hydrogen production.

Other techniques can be clean without being ​“green.” Nuclear-powered electrolysis is not renewable but is carbon-free. Methane reforming that effectively catches its emissions forever technically could be carbon-free, though this remains to be proven both practically and financially.

Even if the industry were to embrace the highest standard of green hydrogen, there are plenty of hurdles to overcome. The vital hydrogen electrolyzer equipment itself is still maturing; it needs to improve in efficiency, production scale and cost, just like solar panels and batteries needed to a decade ago. And nobody has much experience hooking electrolyzers up into large-scale hydrogen production sites — the equivalent of turning a pile of solar panels into a functioning power plant.

To make green steel, cement and chemicals, then, the U.S. needs to figure out how to super-size carbon-free hydrogen production, posthaste. Several groups are already vying for position in this emerging, not-yet-extant market. Their plans will take U.S. green hydrogen production from zero to something in the coming year.

Legacy industrial gas providers — Air Liquide, Air Products, Linde, Messer — are scoping out green-hydrogen facilities to complement their existing carbon-based operations. Separately, cleantech innovators are applying lessons from the solar boom to green-hydrogen project development, in some cases bundling electrolyzers and clean electricity generation at the same site. Legacy oil and gas majors are talking about leveraging their immense engineering capabilities to produce hydrogen while capturing emissions from dirty methane-based processes.

Congress greased the wheels by passing the most enticing green-hydrogen production tax credits ever in the Inflation Reduction Act of 2022. If the unexpectedly public jockeying over the fine print on those tax credits is any indication, a lot of well-resourced corporations are itching to jump into the fray and collect those benefits. And earlier this month, President Biden announced the much-anticipated winners of $7 billion for seven regional hydrogen hubs, intended to jump-start the U.S. hydrogen economy by creating supply and demand in close proximity.

In other words, a hazy American green-hydrogen economy is starting to come into view. Here’s the uncertain path from the state of play today to a future with enough green hydrogen to clean up steel, cement and more.

Tending the green shoots of green hydrogen 

I spent weeks asking leading figures in the emerging green hydrogen industry where commercial-scale production is currently taking place in the U.S. The consensus was that it doesn’t exist — yet.

Some green-hydrogen production can be found nearby, though, at a hydro-powered facility in Bécancour, Quebec, owned by legacy industrial gas supplier Air Liquide. The plant debuted in 2021 as the largest green-hydrogen producer in the world: It contains all of 20 megawatts of proton exchange membrane electrolyzers supplied by Cummins. There are several different ways to produce clean hydrogen, but that type — PEM for short — has the most commercial momentum right now.

Hydrogen operatives quantify production capacity by how much electricity the electrolyzers consume. The 20-megawatt Bécancour plant takes in that much hydropower from Quebec’s utility and pumps out 8 metric tons of hydrogen a day, which the company liquefies and ships to customers in the Eastern U.S. and Canada.

“It may be the largest [plant] operating today, but lots of bigger ones are coming,” said Dave Edwards, Air Liquide’s officially designated ​“advocate for hydrogen energy.”

A 20-megawatt solar plant, or a 20-megawatt grid battery, seemed large once. This facility will soon be outclassed by a wave of increasingly potent hydrogen factories, some of which are already under construction. But it offers a few insights about how hydrogen producers can grow their capacity.

According to Edwards, the key questions to ask when planning a hydrogen production site are, ​“What energy is available to produce the hydrogen, who are the offtakers, and what do they need?”

To ensure greenness, Air Liquide opted to locate the facility in Quebec’s famous hub of renewable hydropower. The gold standard for green hydrogen will always be producing the invisible gas straight from a dedicated carbon-free power source, one that ideally delivers 24/7, allowing maximum runtime for the facility. Hydropower can check all of these boxes, as can geothermal and nuclear. Producers banking on cheap wind and solar will need to figure out how to get the most out of that inexpensive but intermittent supply.

As for the offtakers, producing in Quebec allowed Air Liquide to market green hydrogen to customers on the East Coast. The company previously produced out west for the early hydrogen market in California, which threw generous subsidies at the fuel. But demand has finally emerged in the East, and it’s best to localize hydrogen distribution within 500 to 1,000 miles of customers, according to Edwards.

To be clear, nobody in North America is buying green hydrogen today for steel or cement manufacturing. Startups and incumbents in those industries still have to figure out how to make green steel at scale, secure buyers, and then prepare those techniques for mass investment. For now, the minimal demand for clean hydrogen comes from customers who can actually use it.

“We see transportation as one of the first early adopters of this new low-carbon molecule,” Edwards noted.

That means Toyota Mirai sedans, heavy-duty trucks, and in the case of green-hydrogen startup Plug Power, a fleet of fuel-cell-powered forklifts for use inside warehouses and distribution centers. Vehicles need hydrogen in liquid form to keep their fuel cells running. Limited though it is, this liquid-hydrogen market provides a foothold for green-hydrogen companies to build out their electrolyzer capacity.

Riding forklifts to a green hydrogen payday

Right now, a common perception is that green hydrogen can’t compete on cost against dirty hydrogen, which is produced by ​“reforming” methane. The Department of Energy wants to reduce the cost of hydrogen made with renewables from around $5 per kilogram today to $1 per kilogram by 2031 by improving electrolyzers and ramping up cheaper clean energy. The federal incentives of up to $3 per kilogram of clean hydrogen included in the IRA were designed to close the cost gap while green-hydrogen production matures.

That cost reduction is vital to long-term, widespread adoption of carbon-free hydrogen. But the fact is even now green producers don’t have to compete with that scary-cheap $1 per kilogram fossil hydrogen. If they’re selling liquid hydrogen for vehicles, they just need to beat out diesel, or the specialty liquid-hydrogen market, where prices have been inflated for a long time.

The legacy liquid-hydrogen market is dominated by a handful of industrial gas companies. Production grew in the 1950s to supply NASA with rocket fuel; then intercontinental ballistic missiles and a smattering of niche industrial uses kept these facilities in business. Hardly anyone outside these incumbents even has access to equipment capable of liquefying hydrogen, which involves chilling the substance remarkably close to absolute zero, the point at which molecular motion grinds to a halt.

Consequently, customers cannot simply buy liquid hydrogen on an open market; they must sign a deal directly with one of the few incumbents, which wield considerable leverage. These arrangements typically lock in customers for extended periods of time. Legacy producers in the U.S. were charging upward of $10 per kilogram for liquid hydrogen this year, according to an August earnings report from Plug Power.

“There is really no price, there is no market, there is no index,” said Mark Hutchinson, CEO of Australian green hydrogen company Fortescue Energy, in a recent virtual event with Plug Power. In other words, it’s up to hydrogen entrepreneurs to turn this specialty product into a readily available commodity.

Publicly traded company Plug Power ran right into this problem when it signed a landmark deal in 2017 to supply Amazon warehouses with hydrogen-powered forklifts, which promised more uptime and better performance than existing battery-powered models. Soon afterward, Plug Power executives determined that making their own liquid hydrogen would save money for the company and its customers.

Three years ago, Plug Power acquired an existing hydrogen plant in Charleston, Tennessee, which now yields 10 tons a day using the well-established chlor-alkali process. The hydrogen emerges through a pipe from a neighboring chemical plant as a byproduct of making chlorine gas, and Plug liquefies it. Plug also acquired a PEM electrolyzer company called Giner ELX, giving it the intellectual property to generate green hydrogen for itself.

From there, Plug ​“dove into building full plants,” said Brenor Brophy, vice president of project development at Plug Power. First up is a 40-megawatt PEM electrolyzer plant in Georgia, expected online later this year, which will double the capacity of the current world leader, the Air Liquide plant in Quebec. Plug is constructing a chlor-alkali facility in Louisiana and PEM electrolysis facilities in New York and Texas that will bring a whole new level of size: 120 megawatts in Texas and 200 in New York. Company leadership told shareholders they will produce 500 tons a day of liquid green hydrogen by 2025, roughly double the current U.S. market for the liquefied product.

“Nobody is actually building plants except Plug,” Brophy said. ​“We now have a very good idea what it costs to build a green hydrogen plant.”

This isn’t just an American phenomenon: At its corporate symposium in October, Plug leaders announced they are going to supply Fortescue with 550 megawatts of electrolyzers for its Gibson Island development in Australia, and the companies plan to invest in each others’ hydrogen production sites in the U.S. and elsewhere.

Air Liquide, for its part, hasn’t announced any specific plans to construct U.S. green hydrogen plants. But Edwards, the company’s advocate for green hydrogen, described a flurry of planning and development underway, with many companies holding back on announcements while the Department of Energy is still deliberating on its much-anticipated hydrogen hub grants. Air Liquide is involved in six of the seven hubs that DOE picked on October 13 to receive a collective $7 billion.

Gaseous expansion

Groups like Air Liquide and Plug Power hope to scale green hydrogen by selling it in liquid form to propel clean vehicles. The benefit of that approach is that customers are buying clean hydrogen for vehicles today — success does not depend on a nonexistent market springing to life.

But the big, still theoretical, industrial users — makers of low-carbon steel, cement, chemicals — need gaseous hydrogen to decarbonize their processes. A different set of entrepreneurs is betting that if they get to work building green-hydrogen gas production now, industrial customers will materialize to buy it.

Developing hydrogen production can look a lot like developing competitive renewables projects, said Jacob Susman, a longtime wind developer who launched hydrogen company Ambient Fuels in 2021. You need to ​“pick a spot on the map where it makes sense,” then invest money to gain rights to the land and file for permits and grid connection. Once the key ingredients are secure, you can attract customers, and that’s when you spend the big dollars to build out the site.

Ambient hasn’t completed any hydrogen production projects yet, but in May it raised $250 million from climatetech financier Generate Capital to support its buildout. Susman’s earliest projects could start producing in 2026, and the sector should reach ​“escape velocity” in 2028, he added.

Hy Stor, a company developing an integrated green-hydrogen production and storage facility, is working to deliver green-hydrogen gas in 2026 to industrial customers that will set up shop in the company’s 70,000-acre complex in coastal Mississippi. Now it just needs to move as fast as possible to build sufficient hydrogen production in time.

“We’re really going from zero to 180 miles per hour,” said Hy Stor CCO Claire Behar. ​“We are going to be on the gigawatt scale. We will be the largest.”

Behar declined to specify who exactly the industrial customers are, or whose electrolyzers the firm will install to produce the hydrogen. But she did say the company is breaking ground early next year on the renewables installations that will power electrolysis, and the salt domes that will store the gaseous hydrogen thousands of feet below ground.

Speed dictates Hy Stor’s design choices. Simply waiting for permission to interconnect a major renewable power plant to the grid could blow the 2026 deadline, so Hy Stor is building a mix of off-grid wind, solar and geothermal generation at the site that will pump power directly into the facility’s electrolyzers. Given the tight turnaround, Hy Stor will focus on mature alkaline electrolyzers as well as PEM electrolyzers for carbon-free hydrogen. The company plans to stow the gas in 10 purpose-built underground salt domes and sell it to customers that build facilities in the new industrial park to make things like green steel and fertilizer.

Hy Stor is far from alone in moving quickly to raise America’s green-hydrogen production capacity. Would-be green steelmakers don’t need to bank on a new supply chain magically appearing. Rather, they need the new crop of hydrogen developers to secure land and electrolyzers, line up clean power — and get building as soon as possible.

This article has been updated to correct an earlier description of Hy Stor’s hydrogen production plans.