The clean hydrogen energy economy was a dream. The climate bill could make it a reality this decade

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  • Hydrogen could help decarbonize some very large sectors of the economy that are otherwise a real challenge, such as long-distance trucking and iron and steel making.
  • But hydrogen has to be synthesized with zero carbon emissions, otherwise it is not a clean energy source.
  • A tax credit included in the Inflation Reduction Act gives hydrogen produced from renewable energy and nuclear power a maximum tax credit, $3 per kilogram.

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The tax credit in the Inflation Reduction Act could turbocharge the nascent clean hydrogen industry and turn it into a multitrillion-dollar business in the coming decades.

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The tax credit would encourage hydrogen producers to develop cleaner ways to synthesize hydrogen, which is used to make fertilizers and in other industrial processes. But it could also catalyze a whole new class of companies that want to use clean hydrogen as a replacement for fossil fuels in sectors such as shipping, aviation, heavy industry, and as a way to store and transport energy. Huh.

in present, 98 percent hydrogen made in a way that uses fossil fuels, according to Center for Global Energy Policy at Columbia University, But “all current hydrogen producers are looking to produce clean hydrogen,” explained Elina Teplinskyan attorney who acts as a spokesperson for atomic hydrogen initiativeA group working to advance the development of the atomic hydrogen industry.

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The legislation would make it more economically viable to use carbon capture and storage technology to reduce carbon emissions from hydrogen manufacturing. It will also open the door to a whole range of companies looking for clean ways to make hydrogen, and in some areas to use hydrogen as a replacement for fossil fuels.

By 2050, between 60 and 80 percent of hydrogen production will be powered by renewable energy, a . According to November report on the industry Published by the Hydrogen Council, an industry group in collaboration with McKinsey & Company (This prediction was published before the tax credits were passed.)

Such an industry transition would require enormous investments – from $7 trillion to $8 trillion by 2050. But at the same time, the hydrogen economy could generate nearly $3 trillion in annual revenue by that date, according to the Hydrogen Council and McKinsey reports.

What is hydrogen used for today, and how can it fight climate change?

According to the Center on Global Energy Policy, about half of the hydrogen currently produced is used to make fertilizers and ammonia, with the remainder used in petrochemical refineries or production. The push for clean hydrogen is driven by the need to decarbonize current processes and because the use cases for hydrogen are expanding.

Industrial applications, which meet almost all hydrogen demand today, will represent only 15% of total hydrogen demand by 2050, according to the Hydrogen Council/McKinsey report.

hydrogen The highest energy per mass of any fuel is and produces no carbon emissions when it is burned or converted into electricity in a fuel cell. Entrepreneurs and advocates believe that hydrogen could be useful for some very large sectors of the economy such as long-distance trucking and for decarbonizing industrial processes including iron and steel, shipping marine cargo and aviation.

“If it weren’t for climate change, we probably wouldn’t be expanding to all these new use cases for hydrogen”, Emily CantoUS Director of Zero Carbon Fuels Clean Air Task Force, a global climate non-profit organizationtold CNBC.

The largest end uses for hydrogen by 2050 are expected to be for mobility, including heavy trucking, long-haul flights and container ships, according to the Hydrogen Council/McKinsey report. In these cases, hydrogen a. will generate electricity through fuel cellIn which hydrogen atoms and oxygen atoms are combined in an electrochemical reaction to generate electricity, heat, and water.

Current electric battery-powered vehicles cannot meet this need because batteries that can store enough energy to travel long distances would be too heavy and take too long to recharge, Kent explained. A hydrogen tank and fuel cell weighs less, takes up less space and has the same refueling time as gas or diesel.

“It’s possible that big breakthroughs and batteries or something will change things. But as it stands today, there’s no good solution,” Kent told CNBC.

Like natural gas, hydrogen can also be burned to generate electricity in a turbine. According to Kent, currently, up to 20% of hydrogen can be mixed with natural gas burned in conventional natural gas turbines, without requiring any infrastructure changes.

“For higher blends of hydrogen or pure hydrogen, we will need adjustments to the turbines and infrastructure,” Kent told CNBC. “There are companies that are working on 100% hydrogen-ready infrastructure, where pure hydrogen can be burned in a turbine to generate electricity.”

Hydrogen could be a way to store energy, which is going to be important as renewables such as wind and solar are scaled up and deployed across the country. Wind and solar power don’t work when the wind doesn’t blow or the sun doesn’t shine, and so the energy must be stored in some way to be able to provide continuous, reliable energy. In the meantime, battery technology is being scaled up, but batteries are not yet at their development point where they can store enough energy long enough to make enough backup for a fully renewable grid.

“If you produce a ton of solar in the summer, and you want to put a bunch of it away for the winter, the hydrogen can be stored for a seasonal period of several months, and power back to the system when needed. provides,” Kent said.

Cleanly produced hydrogen is also called a. It is believed instead of coking coal A significant part of the process in the production of steel, a heavy-emissions industry considered a real challenge to decarbonize. And as the Hydrogen Council/McKinsey report, clean hydrogen will be needed for industrial processes that require particularly high-grade heat, temperatures above 752 degrees Fahrenheit, such as cement plants, glassmaking and aluminum remelting. .

What is clean hydrogen?

hydrogen is the most abundant element in the universe, but here on earth, It exists only in compound forms With other elements – especially with oxygen as part of water. Separating hydrogen from other atoms requires industrial processes and energy.

in present, China is the largest producer of hydrogenAccording to the Center for Strategic and International Studies (CSIS), A bipartisan, non-profit policy research organization, According to CSIS, 60 percent of the hydrogen that China makes comes from using coal and about 25 percent from using natural gas. Outside China, the largest hydrogen producers are industrial gas companies such as linde And air productsAccording to Teplinsky.

According to the Center on Global Energy, 76 percent of hydrogen produced globally and 95% of that produced in the US is steam methane reforming, in which a source of methane, like natural gas, reacts with steam at very high temperatures. . Policy. Natural gas emits greenhouse gases when burned, and also from the so-called runaway methane leak As it is taken out and carried.

Globally, 22% (and 4% in the US) of coal is made with a process called gasification, where the coal reacts with oxygen and steam under hot temperatures and high pressures.

Some companies are working to capture carbon dioxide emissions from these processes and store it in underground tanks. Hydrogen formed in this way is sometimes called “blue hydrogen”.

More promisingly from an emissions standpoint, an electrolyzer could be used to split a water molecule into hydrogen and oxygen, and could be powered from almost any energy source – including zero such as solar or wind. -contains emission sources, known as “green”. Hydrogen.”

Today, two percent hydrogen is made globally and one percent in the US from electrolysers.

Nuclear power can also be used to power hydrogen synthesis with almost no additional CO2 emissions (this is sometimes called “pink hydrogen”, but the nomenclature varies). As a bonus, the steam and heat produced as a byproduct of nuclear power can be used in a high-temperature electrolysis process, which is much more efficient. And with advanced nuclear reactors in development that also operate at much hotter temperatures than conventional nuclear reactors, hydrogen can be produced in a thermo-chemical water-splitting process that does not use an electrolyzer.

Because most of the cost of producing hydrogen with electrolysis is the cost of the electricity that goes into it, making hydrogen with nuclear power and steam “can actually be a tremendous contribution to reducing the cost of clean hydrogen production,” Teplinsky noted. told CNBC.

The cost of producing hydrogen from these different methods varies greatly and varies depending on input costs such as natural gas and the source of electricity. Because of the Russian war in Ukraine and climate change, these input costs themselves are swinging. a report good Published by Nonpartisan Nonprofit resources for the future In December 2020, a kilogram of hydrogen made from steam methane cost between $1 and $2 (including the cost of some carbon capture). Hydrogen made from electrolysis powered by wind and solar power was between $3 and $7 per kilogram.

That’s where the tax credit comes in.

How does the new bill help?

The tax credit in an IRA is available for 10 years and depends on how clean the hydrogen production is. If hydrogen is produced without releasing any carbon emissions, the tax credit is subject to a maximum of $3 per kilogram of hydrogen produced. This is then reduced proportionately depending on the amount of emissions released, as long as it is less than current production techniques.

If hydrogen is produced with some carbon emissions, but less is emitted by current production techniques, the tax credit is incrementally smaller, proportional to the reduction in emissions.

The tax credit is “an absolute game-changer”, Akshay Honnati, the leader of EY’s sustainability tax division for the United States told CNBC. “There was no incentive to make hydrogen clean. It costs to make hydrogen clean,” Honatti said. “There is now a credit available for anyone to be able to make that additional level of investment and justify that level of investment to their stakeholders and shareholders.”

Teplinsky said the $3 per kilogram credit makes atomic hydrogen highly competitive with hydrogen produced from fossil fuels. The US Department of Energy has one goal, one of its Energy Earthshots InitiativeTo reduce the cost of clean hydrogen by $1 per kilogram in a decade.

For many of these growing use cases for clean hydrogen, the tax credits included in the climate bill are going to give companies a chance to enter the market to make clean hydrogen without losing money. “They can go back to their shareholders, and they can say, ‘Look, we can do this financially — today. We don’t have to anticipate losses for the next five years to enter this market. . We can actually enter. This and whether it be economic, or at least a broken project in the near future,'” Teplinsky said.

Bipartisan infrastructure law passed in November also US includes $8 billion to develop regional clean hydrogen hub, Between the two laws, the US should be able to develop a clean hydrogen economy in seven to eight years, Teplinsky said.

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