SEMAFOR by Tim McDonnell 3/14/2023
The hottest commodity here at CERAWeek in Houston, the world’s biggest oil and gas conference, isn’t a fossil fuel.
“All anyone wants to talk about is hydrogen,” Jeff Gustavson, president of Chevron New Energies, told me. “Its promise in the decades to come is massive.”
Hydrogen gas has been touted by dozens of energy executives and government officials as a low- or zero-carbon panacea to replace oil and gas in heavy-duty vehicles and industrial facilities that can’t run directly on batteries or renewable electricity. But its viability as a genuine climate solution now rests not with oil executives or engineers, but in the hands of Internal Revenue Service bureaucrats, who are expected to make a multi-billion-dollar decision by this summer about how to administer a lucrative new tax credit embedded in the Inflation Reduction Act.
Tim's viewThe U.S. Treasury Department may need to choose between climate integrity today and a high-stakes gamble that the hydrogen industry can decarbonize in the future. At its core is a debate over what “green” hydrogen really is.
The maximum value of the new tax credit, $3 per kilogram, is available only for hydrogen with the lowest possible carbon footprint. In theory, this should apply to hydrogen manufactured through “green electrolysis,” in which renewable electricity is used to separate hydrogen molecules from water. Up to now, nearly all hydrogen is instead “gray” or “blue” — derived from natural gas, a process that could negate its climate benefit: Under the IRA this would qualify for a much lower credit.
Deciding which projects qualify as green is less straightforward than it may seem. Imagine a producer plugs an electrolyzer into the grid, and buys certificates from a wind or solar farm to show that the hydrogen was made using clean power. That clean power is now unavailable to other users, which may cause the grid operator to ramp up a fossil fuel power plant to compensate. Should that count against the hydrogen’s carbon footprint?
More:
https://www.semafor.com/article/03/10/2023/the-irs-is-about-to-decide-whether-green-hydrogen-is-a-pipe-dream
