Clean hydrogen is the perfect solution for our energy needs. If God created a magic bullet, it would be the molecule H2.
Pure hydrogen is obviously carbon-free. And producing hydrogen from wind and sun allows us to store energy without resorting to expensive batteries. Hydrogen fuel cells can generate power on demand with only water as a byproduct. Hydrogen can run heavy equipment, like forklifts and cranes. It’s a perfect mobility solution, for cars in the near-term, but also eventually planes and trains.
One part of the plan is improved technology, but the basic concept of an electrolyzer that splits water into hydrogen and oxygen has been around for 200 years.
As with all clean technologies there is always a downside. In the case of clean hydrogen, the rub is that it’s enormously expensive to produce. For the Biden administration and many in Congress on both sides of the aisle, making clean hydrogen the cheapest form of readily storable, transportable clean energy—and cheaper even than hydrogen made from natural gas—is its chief energy goal. This is why the Inflation Reduction Act (IRA) includes a tax credit that is specifically designed to create these economies of scale.
The IRA’s Section 45V Hydrogen Production Tax Credit is straightforward: Companies producing clean hydrogen qualify for the tax credit as long as they can show that they bought, on an annual basis, megawatt hours of renewable electricity that match the number of megawatt hours they used to produce the hydrogen.
Yet there are some who want to hold clean hydrogen to an impossible “hourly matching” standard that undermines the intent of Congress in a new tax credit designed to promote hydrogen.
This is because hourly matching is estimated to significantly increase the cost of green hydrogen production, essentially ensuring the failure of the production tax credit (PTC) to make green hydrogen cost competitive with other forms of hydrogen. Hourly matching means a green hydrogen project must buy time-correlated renewables during periods of under-generation, which typically ensures higher prices and drives up the cost to create green hydrogen.
At any time, if no time-correlated renewables are available, the green hydrogen project may curtail its electrolyzer, resulting in long idle times. That would mean hydrogen production equipment would be underutilized, curtailing its cost efficiency. If a green hydrogen production facility can only produce during hours when wind and solar are available, the low utilization rate will dramatically increase the price of the hydrogen produced.
Eliminating hourly matching would likely result in the construction of giant electrolyzers across the United States. Indeed, electric companies across the country have announced their intention to start building as soon as they can. In other words, an annual matching standard is the way to go and hourly matching must be scrapped.
Why is there a push for hourly matching?
The argument is that clean hydrogen made from clean electricity—as Congress requires—would draw renewable energy off the grid, and drive up demand for non-renewable electricity made from fossil fuels. Thus, in the near-term, building out clean hydrogen capacity at scale might drive up carbon emissions until the available supply of wind and solar power increases to catch up with demand from hydrogen producers. But the long-term benefits of decarbonization from the rapid deployment of hydrogen could be much greater. Until there is more hydrogen around, it will be much harder to replace oil and gas as transportation and industrial fuels.
Perhaps the single most important thing about hydrogen is that it can do what no other clean energy can do, which is to replace fossil fuels like gas and coal to produce industrial process heat for applications like making steel. There are many hard-to-decarbonize industrial applications such as making glass or baking bricks: Electricity alone won’t do the job, but hydrogen combustion will.
Just as the cost of wind and solar equipment produced in China has come down because of those tax credits, the hydrogen production tax credit would support new industrial capacity in the United States. There is an urgent race to develop this technology at scale in the U.S., before we also buy it from China.