“Hydrogen Economy” Proponents get a Boost from the Inflation Reduction Act

Brian McCowan, Zondits staff, 9/23/2022

Much of the energy news surrounding the Inflation Reduction Act (IRA) has focused on tax credits for electric vehicles (EVs), EV charging networks, solar energy, and the opening of both offshore and onshore federal lands for both wind and fossil fuel development. But the promise of “clean” hydrogen has not been left behind.

The IRA legislation introduces a 10-year credit for the production of clean hydrogen as a portion of the $369 billion appropriated for energy and climate initiatives. The value of the credit is scaled depending on the amount of carbon emissions released through its production. The maximum credit is available for the production of hydrogen with no carbon emissions, but some credits can be claimed as long as the production is cleaner than current standard practice. The Infrastructure Law that that was enacted earlier this year also supports the development of clean hydrogen with $8 billion in grants for the establishment of hydrogen hubs that support the research and development of hydrogen infrastructure.

So what is clean hydrogen? Today nearly all hydrogen is made using fossil fuels. Clean hydrogen is a term used to cover a range of methodologies for producing hydrogen with limited or no use of petroleum. One method, often referred to as “blue hydrogen” uses carbon capture and storage to limit the climate effects of fossil fuels used in the production of the hydrogen. Another method being piloted involves powering electrolysis with renewable energy sources such as wind and solar to produce hydrogen fuel by separating the hydrogen from oxygen in water (H₂O). This is commonly termed “green hydrogen.”

Months before the IRA was proposed, industry group the Hydrogen Council, predicted that between 60 and 80 percent of hydrogen production will be powered by renewables by 2050. The Council, together with their consultant The McKinsey Group, has further predicted that by that date, the hydrogen economy could generate about $3 trillion in annual revenue.

Hydrogen produces no carbon emissions whether it is burned or consumed in a fuel cell. And although it has a very high energy content per mass, energy industry experts do not see clean hydrogen as a direct competitor to solar and wind as much as an alternative fuel for applications difficult to address with those energy sources. Long haul trucking, rail transport, ocean shipping, steel manufacturing, and even aviation are held up as examples.

Hydrogen can also be burned to produce electricity in a turbine, similar to natural gas. According to Emily Kent, the U.S. director of zero-carbon fuels at the Clean Air Task Force, up to 20% hydrogen can be blended with natural gas burned in conventional natural gas turbines without needing to do any infrastructure changes.

The Hydrogen Council also anticipates that Hydrogen will play a major role in the storage of energy generated from wind and solar sources. Although battery technology is improving, the ability to store large amounts of energy for long periods of time is limited. In a recent interview Kent told CNBC “If you produce a ton of solar in the summer, and you want to store a bunch of it away for the winter, hydrogen can be stored for sort of that many months-long seasonal periods, and provide electricity back to the system when it’s needed.”

And clean hydrogen has yet another role in a clean economy: According to the Center on Global Energy Policy, approximately half of the hydrogen currently produced is used to produce fertilizer, ammonia, and a variety of products in the petrochemical industry. Transitioning this production to clean hydrogen, along with direct energy uses, would have a major positive climate impact.