Energy interests in Texas gamble on hydrogen
Energy companies and chambers of commerce are touting clean hydrogen as the key to Texas remaining the energy capital of the world, but the path is far from clear and success is equally uncertain.
Hydrogen is the most common element in the universe. It puts the hydro in hydrocarbons, oil and natural gas molecules that produce energy. When it comes to devices that are not easily powered by electricity — such as ships, aircraft and heavy equipment — hydrogen could be the best climate-friendly fuel.
“The 800-pound gorilla is cost,” Neeraj Bhat, head of hydrogen for electricity utility AES Clean Energy, told a panel at CERAWeek by S&P Global. “A big part of it is getting those first projects in the ground.”
Texas already generates more hydrogen than any other state, but producers use natural gas as a feedstock, burn fossil fuels to separate it and release carbon dioxide as a byproduct. Texas produces 2 million tons of hydrogen annually, releasing more than 10 kilograms of CO2 for every kilogram of hydrogen produced, the International Energy Agency reported.
There are methods for isolating hydrogen that release fewer emissions but are more expensive. The challenge is lowering the cost of generating clean hydrogen to levels that compete with other clean energy sources, such as renewable fuels and low-emission electricity.
The Department of Energy is funding the HyVelocity Hub, based in Houston, to develop clean hydrogen capabilities along the Gulf Coast. The earliest projects will develop blue hydrogen, which utilizes the existing natural gas-based process with equipment added to capture the carbon dioxide and inject it underground.
Blue hydrogen is the least expensive type of clean hydro
gen, but while the equipment can capture more than 90% of the exhaust CO2, it requires a lot of energy that can emit CO2. Some experts also doubt whether CO2 injected into old oil and gas wells will remain underground forever.
Proposed green hydrogen plants use electricity from wind and solar facilities to split water into hydrogen and oxygen molecules in a process called electrolysis. However, electrolyzers are expensive, and competition for renewable power is growing. Green hydrogen can cost more than double the price of blue hydrogen.
Lastly, pink hydrogen is made using electricity from nuclear power plants. Since energy is 85% of the input cost to produce clean hydrogen, cheaper nuclear electricity can make hydrogen less expensive.
Innovators up and down the supply chain are trying to bring down these costs, and entrepreneurs promise significant price drops in the years ahead. But other energy sources are also trying to drive down costs, and competition for clean electricity is growing.
The business plans behind many hydrogen projects assumed that wind and solar power would generate excess electricity and drive down prices. The growing need for data centers and artificial intelligence facilities, however, is expected to triple the U.S. demand for electricity.
Companies have also seen competition from other technologies narrow the prospective customer base for hydrogen. Lower-cost, higher-capacity batteries make more sense for cars and trucks, and small nuclear and geothermal projects will likely generate cheaper electricity than burning hydrogen in power plants.
Three sectors offer promise, though. Hydrogen makes sense for heavy vehicles, such as long-distance trucks and cargo ships, which must carry large quantities of fuel and travel between fixed locations.
Industrial facilities that require high heat, such as steelworks or cement kilns, could also use hydrogen to reduce their carbon footprints. Lastly, cleaning up the existing hydrogen supply chain would significantly lower greenhouse gas emissions.
The Biden administration has allocated $7 billion to develop hydrogen hubs nationwide to boost clean hydrogen production. An additional $1 billion will encourage customers to purchase clean hydrogen until the industry can bring prices in line with dirty hydrogen.
“Typically, the supply has to be there before demand occurs,” said David Crane, undersecretary for infrastructure at the Department of Energy. “This is a new energy commodity, so we have to work on the demand side.”
I understand why folks in the traditional energy industry are terrified by the transition to low-emission power. After decades of generating a stable return on investment on just a handful of technologies, this new world with dozens of alternatives and uncertain winners and losers must be unsettling.
The one unstoppable force in the universe, though, is change. We must evolve to avoid the worst effects of climate change, and if you are an innovator or entrepreneur, there is no more exciting time than now.