Wind, solar, and hydropower have long dominated the world of renewables, with many countries around the globe having adopted these technologies long ago. The U.S. and Europe both have a huge wind power capacity, while the potential for establishing large-scale solar energy and hydropower projects across the developing world is becoming clear. However, many nascent forms of renewable energy are still being overlooked. As the U.S. government, and other regional powers, pump huge amounts of funding into research and development to advance a variety of clean energy sources, it is important to understand the great potential of a varied, clean energy mix to power the green transition.
Is Hydrogen the Future of U.S Clean Energy?
Angela Wilkinson, the secretary general and CEO of the London-based World Energy Council, talked about the importance of more renewable-powered electrification in a recent panel discussion. Wilkinson explained, “We can’t let perfection be the enemy of the good in this, right? The reality is, to get renewables to scale we’re going to have to have other clean energy friends in the mix, we’re going to have to build multiple clean energy bridges.” She added, “We’re going to have to have hydrogen [doing the] lifting, we’re going to have to have gas with CCUS [carbon capture, utilization, and storage] lifting, we’re going to have to have grid strengthening going on.”
Wilkinson believes in the importance of green hydrogen for a long-term transition and gray and blue hydrogen as a mid-term bridge. Green hydrogen is produced using electrolysis to split oxygen and hydrogen, relying on renewable energy sources for power. In contrast, gray hydrogen is derived from natural gas using steam methane reformation. Similarly, but more environmentally friendly, is blue hydrogen, which is produced in the same way but using gas captured from other operations, such as from an oil field, using CCUS technology. While the long-term aim should be the widespread use of green hydrogen, using blue and grey hydrogen could help promote hydrogen as a major fuel source and decrease the global reliance on dirtier fossil fuels.
To date, most of the hydrogen being produced around the globe is of the gray or blue variety, but many countries are beginning to invest in major green hydrogen projects. Around 95% of the world’s hydrogen is derived from fossil fuels, with 6% of global natural gas and 2% of global coal going into hydrogen production. One of the main deterrents to producing green hydrogen is the cost involved. At present, green hydrogen is still much more expensive than gray and blue hydrogen production, by around 30%, due to the high cost of the technology required. But as more technological innovations are being seen worldwide in green hydrogen, experts expect the price of the clean energy source to fall over the coming decades.
In addition, new climate policies are supporting more research and development in hydrogen and helping to subsidize set-up and production costs. Tax credits for hydrogen from the Biden administration’s 2022 Inflation Reduction Act (IRA) are expected to drive down production prices, with subsidies potentially allowing green hydrogen to fall to below $0/kg by 2030. Any project that produces zero-emissions power can receive a production tax credit worth 1.5 cents/kWh, which can be added to the $3/kg credit for clean hydrogen. This will likely spur the adoption of green hydrogen in highly polluting heavy industries in the U.S.
The International Energy Agency (IEA) describes hydrogen as a “versatile energy carrier,” since it can be used for a diverse range of applications across several industries. The World Bank believes there has been a renewed wave of interest in hydrogen due to this versatility. It can be used for power generation, manufacturing processes in industries such as steelmaking and cement production, fuel cells for electric vehicles, heavy transport such as shipping, green ammonia production for fertilizers, cleaning products, refrigeration, and electricity grid stabilization.
The global demand for hydrogen reached estimated 87 million metric tons (MT) in 2020, a figure that is expected to increase to 500 to 680 million MT by 2050. And the 2020-2021 hydrogen market had a value of $130 billion, which is projected to rise by 9.2% annually between now and 2030. However, to ensure that green hydrogen capacity is developed in the U.S., the government and private sector must invest heavily in research and development to drive down production costs in the long term, to ensure that the industry does not have to rely on tax credits when the credits eventually come to an end in 2033.
The U.S. green hydrogen industry is expected to undergo a rapid expansion in the coming years, thanks largely to the versatility of the fuel, as well as major financial support from the government. As green hydrogen projects are being established, grey and blue hydrogen could be used as a less-polluting means to bridge the gap between fossil fuels and renewable alternatives. However, the government and private sector will have to invest heavily in research and development to drive down green hydrogen production costs for the long term, to attract companies to adopt green hydrogen power.
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