By Jamie Newell
From the September/October 2024 Issue
Hydrogen is rapidly establishing itself as a new emerging market in the U.S. and a key commodity in the global marketplace due to the increasing emphasis on decarbonization and expansion of clean energy initiatives involving the reduction of greenhouse gases. At a geopolitical level, many countries are actively working to replace their reliance on liquefied natural gas (LNG) with hydrogen as part of a broader strategy to transition to cleaner renewable energy sources.
Germany has ramped up hydrogen generation projects after viewing hydrogen as a key solution for energy security, especially after facing disruptions in LNG supplies due to the Russo-Ukrainian war and the U.S. pause on LNG exports stemming from the examination of domestic needs and shifting energy policies. Australia is also working to position itself as a significant player in the global hydrogen market, with ambitious plans to become a major exporter of green hydrogen, announcing numerous projects across the globe, where federal funding initiatives are driving the progress.
Some significant announcements contributing to the development of the hydrogen economy that have been made domestically within the past year have included Plastics Omnium’s hydrogen storage plant and Nel’s electrolyzer plant in Michigan, as well as Topsoe’s electrolyzer plant in Virginia. Additionally, Woodside Energy revealed plans for hydrogen generation in Oklahoma, Fortescue announced a hydrogen operation in Arizona, and DG Fuels recently announced a project in Nebraska, which also integrates hydrogen into sustainable aviation fuel.
Hydrogen has already played an existing role as an essential component across multiple industries that are driving increased interest and investment into clean energy technologies. These sectors include chemical production, refining, steel and cement manufacturing, electronics, glassmaking, food processing, aerospace, metal processing, and even pharmaceuticals. While these industries contribute to the early adoption of hydrogen as a feedstock in industrial applications, they also pave the way for its eventual use in passenger vehicles once the supporting infrastructure for fuel cell electric vehicles (FCEVs) is fully developed.
There are many ways to generate hydrogen, but the most common production methods are Steam Methane Reformation (SMR) and Electrolysis. SMR produces blue hydrogen using natural gas as a feedstock and involves Carbon Capture Utilization and Storage (CCUS) while electrolysis produces green hydrogen from demineralized water and power from a renewable source such as wind, solar, hydropower, or biomass. The difference between the two is their carbon intensity score. Green hydrogen is the most environmentally friendly option with the lowest carbon intensity score and is commonly referred to as the “clean hydrogen,” while blue hydrogen provides a lower-carbon alternative to conventional hydrogen but still has a higher carbon intensity compared to green.
There are also two different forms of hydrogen that consist of gaseous or liquified. Gaseous hydrogen is used primarily in fuel cells, industrial processes, and power generation where it can be delivered and stored relatively easily in this form. Liquified hydrogen is employed in applications requiring high-density storage and transport, such as long-distance shipping, locomotives, space exploration, and large-scale energy storage. Its compact form makes it ideal for these purposes where space and volume efficiency are critical.
Building U.S. Hydrogen Hubs
The U.S. Department of Energy has established seven hydrogen hubs nationwide to allocate funding for hydrogen initiatives, with California’s ARCHES hub laying the foundation for public transportation, heavy duty trucking, and port operations. Activity in the hydrogen sector is also extending across various other states, predominantly those with newly introduced tax incentives that support clean energy projects. As hydrogen generation projects advance into the site selection stage, many states and local communities are focusing on strategies to attract and support these developments, with some relying heavily on hub directors for guidance, while others are trying to understand where to begin.
Hydrogen projects often begin by establishing a partnership between a hydrogen production operation and a user of hydrogen, commonly referred to as the “offtaker.” Therefore, it is instrumental for states and communities to work directly with their manufacturing alliances in creating a platform for education and awareness of the many uses of hydrogen for industry, particularly the high heat industrial users. The biggest problem we face in the rapidly growing hydrogen economy is that many developers can produce hydrogen at a reasonable cost to take to market but have difficulty matching their supply to the actual demand. The states that are driving hydrogen projects to specific sites must understand the site conditions and opportunities for the type of hydrogen being generated and be able to identify offtakers located within the proximity of these sites as they play matchmaker during the recruitment stage of these projects.
Data center developers are also exploring the use of hydrogen in microgrids for many key reasons related to overall energy reliability, sustainability, and operational efficiency. With AI supercomputers on the rise that utilize three times the physical footprint of the infrastructure needed for managing the daily volume of Google searches, the development of localized microgrids surrounding data center campuses becomes even more vital to the success of these operations. Hydrogen plays a versatile role in microgrid projects, which also seek to achieve grid independence, as it offers benefits that range from power generation to energy storage while mitigating the issue of curtailment from other renewable energy systems.
While the hype surrounds Section 45V and 45Q of the Inflation Reduction Act, as these tax credits provide financial incentives directly related to the production and utilization of hydrogen and carbon capture, Section 48C also plays a significant role in promoting the use of hydrogen to industries involved. Supporting production and infrastructure development, the 48C tax credits can provide substantial amounts towards the purchase, construction, and installation of equipment used in hydrogen generation, storage, and distribution, while also contributing to the reduction of upfront capital costs for companies investing in these technologies.
While the results of the 2024 U.S. presidential election may ultimately determine the progression of green energy projects and where the capital investments in hydrogen will continue to deploy, one fact remains: Hydrogen is the future.
Newell is a Strategic Development Consultant with Eastward H2 based in rural North Carolina, providing location advisory services for hydrogen generation systems companies and other component part manufacturers involved in energy projects across the sustainability sector.
