Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

“Electrify everything” has become something of a calling card for the energy transition, and for good reason: We can cut the carbon emissions of our homes, our cars and so much more by simply swapping fossil fuels for electricity generated by renewable energy. 

But we may not be able to electrify everything. Certain essential but dirty industries, like cargo shipping and steelmaking, don’t lend themselves well to direct electrification, at least not with today’s technology. They’re too heavy, too hot or otherwise ill suited to run on electricity alone. 

To fully eliminate fossil fuels, then, we’ll need to complement clean electricity with some other carbon-free processes and energy sources. Clean hydrogen may well be the most overhyped solution to this existential problem. Here’s the tricky part: It may also be the most viable solution.

This is the paradox of clean hydrogen. The gas is either a silver bullet or a fatal flaw in decarbonization plans, depending on how it’s made, how it’s used — and who you ask. 

Right now, the vast majority of hydrogen is decidedly dirty. It’s produced using fossil gas in an emissions-intensive process called steam methane reforming. 

The lowest-carbon alternative is to make hydrogen with water and renewable electricity in a process known as electrolysis. You’ve probably heard of ​“green hydrogen”; this is it. Some entities, including several fossil fuel giants, argue that traditional ​“dirty” hydrogen can be made clean by adding carbon-capture technology into the mix. This is called ​“blue hydrogen,” and its status as a climate solution is both unproven and highly controversial. 

Green and blue hydrogen make up a vanishingly small amount of the hydrogen produced today. But that’s about to change, fast. 

If certain projections are to be trusted — though there are good reasons that they ought not to be — the world might be able to produce 90 million metric tons of low- or zero-carbon hydrogen by the end of this decade. That’s an amount roughly equivalent to the volume of dirty hydrogen currently produced each year and vastly more than today’s low-emissions hydrogen production capacity of around 1 million metric tons. 

Even achieving a fraction of a fraction of that goal — reaching, say, 10 million to 15 million metric tons by 2030, as longtime clean-energy analyst Michael Liebreich argues is far more realistic — would still mean the industry is on the precipice of exponential growth. 

But hydrogen hype has been around for decades, and lofty expectations for its future are not new. Liebreich identifies waves of exuberance about the fuel’s liberatory potential in the 1970s and in the late 1990s. Misguided futurists have been holding it up as the best way to fuel a passenger vehicle for years. And yet today, hydrogen is mostly relegated to snoozy applications like oil and gas refining and fertilizer production.

So what’s different about this latest wave of hype?

What’s new is that the U.S. government has opened up its bottomless pockets to clean hydrogen producers: The Inflation Reduction Act’s most lucrative subsidy may turn out to be the 45V tax credit, an uncapped incentive that some analysts expect to dish out hundreds of billions of dollars to hydrogen producers over the course of its existence. The Bipartisan Infrastructure Law also gives $7 billion to seven regional hubs that will produce low- and zero-carbon hydrogen.

Though these subsidies may not be enough to push clean hydrogen to the hype-fueled heights of the most optimistic forecasts, they are almost certainly enough to ensure the U.S. will start churning out a substantial amount of the gas by the end of the decade. 

And thanks to proposed rules from the administration, that output may actually be low-emissions. After a year of fierce lobbying from various industry factions, environmentalists and fossil fuel companies about how the government should define ​“clean hydrogen,” the Biden administration in December proposed strict stipulations that experts agree will incentivize the production of genuinely zero-carbon hydrogen. (This outcome was anything but a given.)

Should these proposed rules survive the latest round of pushback and become final rules, they could help the industry overcome long-standing criticism that ​“clean” hydrogen is a murky concept that could, at best, create accidental carbon emissions or, at worst, become a sort of Trojan horse through which fossil fuel companies can smuggle dirty hydrogen into the walls of the decarbonization movement. 

Even so, a second major criticism of the fuel would remain: While clean hydrogen can be used for many different purposes, it’s rarely the best option, for reasons of economic and energy efficiency. 

When electricity or batteries can do a job directly, they are almost always the cheaper and more practical carbon-free choice. Energy is lost at every step of the clean hydrogen production process, so using the fuel for any electrification-eligible task is a waste of not just energy but of renewable energy — a resource the world is in no position to be careless about dispensing. This is why heat pumps, electric vehicles and renewables are winning, and hydrogen fuel-cell passenger vehicles, hydrogen-powered boilers and hydrogen-burning power plants hardly exist. 

But when electrification can’t do the job — that’s when clean hydrogen can and should fill the gap. 

The most promising applications for the fuel are cargo shipping, long-haul aviation and steelmaking, tasks that are all difficult to accomplish with direct electrification. 

Convincing companies in these industries to switch to clean hydrogen is no simple thing. As it stands, they lack an urgent economic incentive to abandon the billions and billions of dollars worth of fossil-fuel-burning assets they already have. The Inflation Reduction Act’s clean hydrogen subsidies tackle one piece of this equation by making the fuel cheaper, but it doesn’t exactly pay for the costly factory retrofits and product redesigns required to switch to hydrogen-based operations.

Advocates are trying to fix this by pushing lawmakers to introduce policies that would make clean hydrogen more attractive to buyers, like a carbon tax or advance market commitments. In the meantime, all eyes are on the fertilizer industry as a potential anchor customer that can help kick-start the fledgling industry. Should the climate law succeed in making clean hydrogen cheaper than the fossil-fuel-based hydrogen fertilizer producers use by the tons today, then they will have a strong incentive to switch over — and clean hydrogen may finally prove itself to be a force for decarbonization. 

If the emerging clean hydrogen industry can manage to keep its product genuinely clean and sell it mostly to appropriate buyers, the fuel will play a meaningful role in the energy transition. If it does not, it will still play a meaningful role — only it will slow down the all-important sprint away from fossil fuels, rather than speed it up. 

We’re at the dawn of something important, either way. 

That’s why Canary Media is dedicating this week to covering the clean hydrogen industry taking shape in the U.S. and around the world. The fuel has a dubious past, present and possibly even future, but it might just be our best shot at solving some of the most vexing decarbonization problems. Canary’s stories throughout this week will focus on this dilemma, and the tightrope policymakers, industry players and climate advocates are walking to ensure that the emerging clean hydrogen economy is a boon to decarbonization efforts, not a bust. 

Verdagy manufactures an advanced AWE electrolyzer system that has superior performance to almost any system in the market — high current densities and the largest membranes leading to higher hydrogen production, high efficiencies leading to lower LCOH, and wide dynamic range and fast turndowns to seamlessly integrate with renewables. In addition to its Silicon Valley factory, Verdagy operates its R&D and highly automated commercial pilot plants in Moss Landing, California, where it continues to advance its cutting-edge technology.

The world is betting big on hydrogen, which might just be the best way to eliminate fossil fuels from essential industries like aviation and steelmaking. But for hydrogen to actually decarbonize anything, it needs to be more or less emissions-free — ​“clean,” if you like. 

Its availability also needs to dramatically increase. Today, clean hydrogen barely exists.

To be clear, the world does make a fair amount of hydrogen today. It’s just overwhelmingly dirty hydrogen, made using fossil fuels. Nearly all of the 95,000 kilotonnes of hydrogen produced each year comes from an emissions-intensive process called steam methane reforming, which uses fossil gas as its input. 

Truly clean hydrogen, on the other hand, is made by passing water through electrolyzers powered by renewable energy. In theory, lower-carbon ​“blue” hydrogen can also be produced by outfitting steam methane reformers with carbon-capture equipment, but this approach is relatively unproven and of dubious cleanliness.

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

Hydrogen may be the lightest element in the universe, but it could play a hefty role in decarbonizing the economy. 

If, that is, it’s produced and used with the climate in mind. Hydrogen is flexible: It can be made from coal, fossil gas or water and electricity. It can be used to fuel a car or make important chemicals like ammonia. The problem is that not all methods of production and end uses are good for the planet. 

Recent policy changes have made these concerns much more pressing. The U.S. aims to drive a massive scale-up from the scant supply of emissions-free hydrogen available today to 10 million metric tons annually by 2030. To succeed, the government is wielding the most generous hydrogen production subsidy in the world: a tax credit called 45V for its section of the tax code. 

Access to the incentive will require producers to prove their hydrogen emits little to no carbon pollution. But enforcement remains uncertain, and there’s little guidance to govern the other half of the hydrogen equation: its end uses. 

In the best-case scenario, the tax credit would incentivize producers to make hydrogen that’s truly emissions-free for industries that can’t decarbonize without it, like fertilizer manufacturing. But in the worst-case scenario, 45V would spur the production of ​“clean” hydrogen that actually increases emissions, at great taxpayer expense, to be squandered on applications that could more efficiently decarbonize without it, like home heating.

The climate promise and peril of hydrogen depend on how exactly this coming surge in production and procurement plays out.

The best and worst ways to make clean hydrogen

Globally, about 95 percent of hydrogen made today is done via a process known as steam methane reforming (SMR). In this approach, a producer heats water to form steam that’s then reacted with methane in fossil gas to generate pure hydrogen. Planet-warming carbon pollution is the byproduct. 

But there are ways to make hydrogen with low or no emissions. One method of producing so-called ​“green hydrogen” uses a device called an electrolyzer and carbon-free electricity to zap water and free hydrogen from oxygen. Another approach, producing so-called ​“blue hydrogen,” uses the traditional SMR process but captures and stores the carbon emissions that result. 

There’s no guarantee, however, that these two methods make clean hydrogen. The carbon footprint or intensity of green and blue hydrogen depends entirely on the nitty-gritty details of a given production plant, including where it sources its fuel from.

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

The U.S. now has the world’s most lucrative incentive for making clean hydrogen, a tool that should cause the production of the fuel to surge in the years to come. 

But what’s supply without demand? Or, to put it more plainly: Who’s going to buy all the cheap clean hydrogen the U.S. is gearing up to make?

It’s far from clear how the demand side of the clean hydrogen economy will evolve to match the millions of tons of supply set to be unleashed by the Inflation Reduction Act’s 45V production tax credits. Those credits could direct hundreds of billions of dollars toward electrolyzers powered by carbon-free electricity — and, potentially, fossil-gas-fed hydrogen facilities combined with carbon capture — over the coming decades. 

Clean hydrogen could eventually help decarbonize a host of industries, ranging from steelmaking to heavy-duty trucking. To serve its most immediate role in fighting climate change, however, low- or zero-carbon hydrogen must replace the roughly 95 million metric tons per year globally — and about 10 million metric tons per year in the U.S. — of dirty fossil-fuel-derived hydrogen already consumed for refining, fertilizer and chemicals production. 

That’s exactly where Ben Alingh, co-founder and CEO of Monarch Energy, sees the near-term future of the industry.

Monarch Energy has raised $25 million in equity financing from energy infrastructure developer and owner LS Power, which plans to invest up to $400 million in projects by Monarch. But while most of the hydrogen hubs across the country have identified a panoply of end uses for the hydrogen they plan to produce, Monarch is specifically focused on decarbonizing the existing $20 billion U.S. hydrogen production market. 

The company will focus its first efforts on the U.S. Gulf Coast, where the existing hydrogen industry is concentrated. That includes a $426 million facility in Ascension Parish, Louisiana to make green hydrogen for a wide range of industrial and chemical processes.

Alingh, who previously worked on renewable energy development at Ørsted and Enel Green Power, said Monarch has a 4.5-gigawatt pipeline of projects in development across the U.S. But the company’s outreach efforts to attract new users have been minimal: ​“We’re not spending a lot of time telling people why they should be using hydrogen if they aren’t using it already.” 

Monarch is not alone in focusing on existing hydrogen users. The industries using dirty hydrogen today are also among the world’s most heavily polluting, making them a key target for climate activists. Even environmental watchdogs who fear the influence of the fossil fuel industry in clean-hydrogen policy agree that today’s dirty hydrogen must be replaced with cleaner alternatives. 

But just because the approach is smart doesn’t mean it will be easy. It will take more than cheaper clean hydrogen to convince existing users to make the switch. They’ll need far more certainty of production at the quantities they need, delivered at the steady, uninterrupted paces required for their particular uses. And they’ll need the infrastructure — pipelines and storage facilities — to move clean hydrogen from where it’s made to where they use it. 

Outside of existing hydrogen production and consumption hubs like the U.S. Gulf Coast, these conditions don’t yet exist. And without them, it will be hard for the sky-high policymaker expectations and investment plans of the past few years to come to fruition. 

Convincing offtakers to get on board

Despite the massive new subsidies aimed at supercharging clean hydrogen production, some experts think a booming clean hydrogen economy is far off. The International Energy Agency has cut its growth forecasts for the industry significantly over the past year, as have a number of other industry analysts. 

Michael Liebreich, head of Liebreich Associates and co-founder of clean energy analysis firm BloombergNEF, recently highlighted the gap between government clean-hydrogen production targets and reality. BNEF has tracked 47 million metric tons of hydrogen production capacity that could ​“in theory” come online by 2030, he wrote. But of that, ​“just 1.5 million tons worth of projects have reached final investment decision or are already producing.” 

The key driver of this disconnect is the lack of offtake agreements — the contracts needed for developers to secure financing for projects. 

“Offtake is everything in this market,” Alingh said. ​“There’s no shortage of places you can physically make green hydrogen, at an attractive price, in a vacuum. The issue is, is there someone willing to pay you for it? And not just one time, but in a long-term contract with an investment-grade partner on the other side of that.” 

So far, just 7.9 million metric tons of clean hydrogen production has identified prospective buyers, per a November report from BNEF. Of that amount, binding contracts represent only 13 percent, or 1 million metric tons per year. Another 7 percent ​“are pre-contractual agreements with a solid chance of becoming binding contracts,” according to BNEF. The rest may or may not eventually become binding.

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

One of the most common analogies for clean hydrogen is that it’s like a Swiss Army knife for decarbonization — a handy tool that can kick dirty fossil fuel out of a number of different industries.

But just because a tool can be used doesn’t mean it should be used — especially if it’s a ​“second- or third-best clean energy solution” that displaces much better options at hand. 

That’s how Robin Gaster, a senior fellow at Washington, D.C. think tank Information Technology and Innovation Foundation, described the limits of clean hydrogen in a January report.

“The answer is finding actual use cases where hydrogen is the primary solution, not the third-best solution,” Gaster, who is also the president of data and analysis consultancy Incumetrics, told Canary Media. ​“I went through pretty much everything I could find that seemed like at least a half-baked case to show that we could get to significant hydrogen demand. And I struggled.” 

Gaster isn’t alone. A growing number of industry analysts are questioning whether hydrogen is viable for the applications where it’s often cited as a decarbonization solution, from long-haul trucking to replacing fossil gas in pipelines for heating buildings and generating power. 

And this group is increasingly worried that existing U.S. policy will push federally subsidized clean hydrogen into several of the industries where it makes neither economic nor environmental sense. That’s because current policies focused on making clean hydrogen cheaper aren’t matched with policies to drive its use in the industries where it actually can help replace fossil fuels.

The Inflation Reduction Act’s 45V tax credit will create a multibillion-dollar incentive for U.S.-based hydrogen producers to make low- and zero-carbon hydrogen. But unlike the European Union, the U.S. has few incentives — and no mandates — encouraging certain industries to buy clean hydrogen to reduce their climate impact. 

Instead, the chief federal policy on the demand side is a program created by 2021’s Bipartisan Infrastructure Law that will direct $7 billion toward ​“clean hydrogen hubs” — complexes of hydrogen production, transport, storage and end users. 

Some of the seven hubs selected in October by the Department of Energy do include plans to direct clean hydrogen toward industries with the greatest need for it, including fertilizer production, shipping and steelmaking. But far more of the focus at these hubs appears to be on developing clean-hydrogen markets in sectors where experts say it is likely to be a suboptimal — and potentially counterproductive — alternative to clean electricity. 

Where the hubs go wrong — and why it’s hard to get them right

Among all of the ways hydrogen can be used, there are a few use cases that experts consistently raise flags about. Those problematic applications are well represented in the U.S. hydrogen hubs. 

One of these red-flag applications is the use of hydrogen in existing fossil-gas pipelines for use in buildings or power plants, which many hubs include plans for. Gas and electric utilities across the country are eagerly testing this as an option to cut emissions without needing to abandon existing gas-burning infrastructure. 

But multiple analyses have shown that mixing hydrogen into gas pipelines wastes energy and is ineffective as a carbon mitigation strategy — at least without major investments in new pipelines and power plants. That money is better spent on alternatives such as renewable energy, batteries, heat pumps and long-duration energy storage.

And when it comes to burning hydrogen in power plants, the energy losses are so staggering that the process makes little economic sense. The exception here is using hydrogen for seasonal energy storage.

Even more hubs plan to direct hydrogen to fuel-cell-equipped trucks, cargo-handling vehicles, public transit and other vehicles. But the past decade has shown that EVs are the most cost-effective and energy-efficient alternative to fossil-fueled cars. Hydrogen might be preferable for longer-haul trucking and heavy-duty cargo vehicles, but rapidly advancing battery technology could eventually win there, too. 

With billions of taxpayer dollars now set to flow into the clean hydrogen sector, energy analysts and environmental watchdogs are worried that the money may be wasted on these applications. 

Hydrogen ​“can be a really useful potential solution in some sectors,” said Emily Kent, U.S. director for zero-carbon fuels at the nonprofit Clean Air Task Force. But it is also ​“not particularly effective in some other sectors where there might be better alternatives. And that hasn’t been…clearly communicated in a lot of the spaces where those conversations and decisions are being made.” 

In November, Clean Air Task Force published a report analyzing the prospects for clean hydrogen across a number of sectors. Its core takeaway is that ​“low-carbon hydrogen is best used in applications where there are simply no other good decarbonization options.” 

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

Airplanes and cargo ships guzzle staggering amounts of oil as they soar across the sky and ply the ocean, resulting in significant planet-warming emissions every year. Several low- and zero-carbon alternatives are emerging that could replace all that dirty petroleum. Making the switch, however, will require using staggering amounts of a different commodity: clean hydrogen.

Fuels derived from hydrogen — including e-methanol, ammonia and e-kerosene — are considered essential to decarbonizing the jets and freighters that carry heavy loads over long distances. Today’s batteries can’t provide enough power without weighing these giant vehicles down — that technology is better suited for cars, trucks, ferries and even smaller planes. Biofuels from crops and waste can fuel planes and ships, but the world probably can’t produce enough to meet all the future demand.

Hydrogen-based fuels, by contrast, pack more energy per volume than batteries or even hydrogen alone. And, unlike with biofuels, the ingredients needed to make these alternatives to petroleum are virtually unlimited.

As momentum grows to decarbonize the trickiest parts of the economy, the aviation and global shipping sectors are moving to turn this hydrogen-infused promise into a reality. No commercial jets and only a handful of cargo ships use so-called ​“e-fuels” today. But companies and governments worldwide are investing billions of dollars to develop new engines, fuel systems and safety protocols to support the rollout of cleaner-burning transportation fuels.

The big question is whether the fuels themselves will be available in sufficient quantities when ships and jets are ready for them.

“It has become clear that the only fuels that are actually sustainable long-term and scalable are going to be hydrogen-derived,” said Aoife O’Leary, founder and CEO of Opportunity Green, a U.K.-based organization.

“If you want to have that sustainable fuel, it really means building out this [supply] infrastructure now,” she said. For that reason, the environmental nonprofit launched a coalition last year with hydrogen-focused startups to advocate for policies and programs that boost H₂ use across the skies and seas.

To make e-fuels, clean (or ​“green”) hydrogen must first be produced with electrolyzers, which split water molecules into H₂ and oxygen. That hydrogen is then combined with other elements, such as nitrogen or carbon dioxide, through energy-intensive processes. In order to deliver the steepest emissions reductions, all of those steps must be powered by clean energy.

Today, however, nearly all the world’s hydrogen is produced from fossil gas using highly carbon-emitting methods. That means an enormous buildout of renewable energy and electrolyzer capacity is required to not only replace existing dirty hydrogen but also expand overall production to serve new customers, including ships and planes.

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

When a sleek new train rolls into Southern California later this year, it will be the first in the nation, and one of only a handful globally, to be running on hydrogen.

The four-car commuter train is slated to arrive in San Bernardino County this summer after completing testing at a federal facility in Colorado. Its electric motors are powered by a combination of batteries and fuel cells, the latter of which convert hydrogen into electricity — emitting only water vapor as they do, not the toxic pollution that diesel engines spew.

More hydrogen trains are soon to follow. Last year, the California Department of Transportation, or Caltrans, signed an $80 million contract for four sets of longer-distance models that will link cities in the Central Valley starting in 2027. Swiss company Stadler Rail, which has a manufacturing site in Salt Lake City, is making units for both projects.

“We think this is going to be one of the most promising technologies for typical [rail] corridors in California,” said Kyle Gradinger, assistant deputy director of rail transportation for Caltrans. 

The fuel-cell trains will be hitting the rails at a pivotal yet contentious time for hydrogen-powered transportation in California and beyond.

The Golden State has worked for decades to curb harmful tailpipe emissions from diesel- and gasoline-burning engines in its smog-choked cities — a push that’s being replicated in more than a dozen states. California has set increasingly stringent policies and invested billions of dollars over time to both spur development and drive adoption of ​“zero-emission” technologies for cars, buses, trucks, rail and heavy-duty cargo equipment.

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

Should our clean energy future rely more on electrons or on molecules? 

That’s the question at the core of the battle over clean hydrogen, a potential fossil-fuel substitute that burns without emitting carbon dioxide. 

Right now, the vast majority of the world’s energy comes from molecules — dirty ones. They’re the product of billions upon billions of gallons of fossil fuels, pumped, refined and transported each year via the trillions of dollars of infrastructure that forms the circulation system for the modern industrial economy. Today, that system is owned and operated for the profit of private and government-owned fossil fuel companies.

But there’s an alternative circulation system — the electric grid — that is inherently more efficient at delivering energy. It’s also the carrier of the clean electrons, generated from sun, wind, water and the earth’s heat, that are the heart of the energy transition. 

Much of the debate over clean hydrogen boils down to which of these two systems the world should prioritize in the fight to stop burning planet-warming fossil fuels. 

On the one side are the climate advocates, researchers, clean-energy analysts and a subset of hydrogen industry players arguing that the only way for clean hydrogen to help with the energy transition is if it’s made from carbon-free electricity and used for the tasks that clean electrons can’t currently handle, like long-haul aviation and fertilizer production. 

On the other are fossil fuel interests, as well as some energy experts skeptical of the potential for renewables to meet the world’s decarbonization needs. They argue that fossil gas is a perfectly fine feedstock for hydrogen, so long as carbon capture is involved. In their view, hydrogen molecules can and should compete with electrons in applications ranging from home heating to power generation, even when electrification is proven to be far more efficient.

From oil majors like Chevron to gas pipeline operators like TC Energy, fossil fuel companies play leading roles in the groups pushing governments to support a clean-hydrogen economy that prefers molecules over electrons, including for the clean hydrogen hubs seeking $7 billion in federal grants. So, too, do their cousins in a U.S. utility industry still highly reliant on gas, coal and oil.

Their vision includes repurposing and expanding existing fossil-fuel infrastructure to create and distribute clean hydrogen, adding carbon-capture equipment to dirty hydrogen production facilities to make ​“blue hydrogen,” and building pipeline and distribution networks to deliver that hydrogen far and wide. It also includes making as much clean hydrogen as possible, and encouraging its use in as many industries as possible, to drive down its costs.

And they’re spending tens of millions of dollars in an escalating lobbying effort to try and make this reality come true — a reality in which combustion and fossil fuel extraction remain much more central to society than is compatible with the needs of our warming planet.

But critics say this group’s arguments ignore hydrogen’s only real merit for the energy transition: to decarbonize the industries that can’t practically and cost-effectively do so with clean electricity alone. 

“Hydrogen is only a tool for decarbonization if it’s displacing fossil fuels,” said Julie McNamara, deputy policy director with the Union of Concerned Scientists. ​“For every unit of renewable electricity we have, we have to make that unit go as far as it can — and that’s almost always direct electrification.” 

This core conflict — molecules versus electrons, combustion versus circuitry — underlies almost every conflict now playing out in the federal agencies responsible for shaping U.S. hydrogen policy. And right now, clean-hydrogen skeptics fear existing policies are not structured to avoid directing hundreds of billions of dollars into a hydrogen infrastructure that saddles the country with more climate debt. 

The incentive to make hydrogen with molecules, not electrons 

There’s no doubt that fossil fuel companies want to retain the central role they hold in the U.S. energy economy today, said Pavel Molchanov, director and equity research analyst at Raymond James & Associates. The question is whether that desire can align with actually achieving the clean energy transition.

“Oil and gas companies are obviously making lots of money from their traditional fossil-fuel operations, but they are not opposed to renewable energy substitutes in and of themselves,” he said. ​“What oil and gas companies emphatically do not want is competition from energy sources, renewable or otherwise, that the companies are unable to manage themselves.” 

Some oil companies and utilities want to build and own large-scale solar and wind farms, for example, but they fight against rooftop and community solar policies that allow independent developers and utility customers to compete with them. The same desire for control characterizes their approach to clean hydrogen.

Some analysts argue that fossil fuel companies’ interest in producing clean hydrogen isn’t a bad thing: These firms have access to trillions of dollars in capital, and the energy transition needs ​“billion-dollar kinds of projects — which is exactly what the big oil companies are good at doing,” Molchanov said.

But it’s unclear if policies that support those investments will encourage these companies to shift away from today’s planet-warming business practices — or provide them with a greenwashed permission slip to continue extracting fossil fuels. 

“Oil majors need to transition as quickly as possible,” added Jaron Goddard, an attorney in the energy and climate solutions practice of law firm Wilson Sonsini Goodrich & Rosati. ​“I ask myself what role hydrogen can play in reducing oil majors’ emissions, both practically and from a cultural-shift perspective.”

For the most part, oil and gas companies have focused their clean-hydrogen ambitions on blue hydrogen — an approach environmental activists and climate and energy analysts are highly skeptical of.

Today, five of the seven hydrogen hubs set to receive a total of $7 billion in federal grants from 2021’s Bipartisan Infrastructure Law include some plans to make blue hydrogen and also burn hydrogen in power plants. Karen Harbert, CEO of the American Gas Association trade group, has claimed a central role for her industry in these projects, saying, ​“No matter the source for the hydrogen, one thing is certain: Natural gas utilities will be critical players in driving this exciting opportunity for further decarbonization.” 

There’s good reason for industries that exist to produce, transport and sell fossil gas to emphasize this potential, said Robin Gaster, president of data and analysis consultancy Incumetrics. These companies are ​“interested in blue hydrogen as sort of an insurance policy,” he said. ​“It would give them a business to slip into if people got serious about climate change and decided to regulate fossil fuels seriously.” 

“If that happened, blue hydrogen would be an alternative,” said Gaster, who, as a senior fellow at Washington, D.C. think tank Information Technology and Innovation Foundation, wrote a recent report critical of the current clean-hydrogen policy. ​“And it helps them to develop new technologies that their existing assets can use.” 

Right now, it appears that the Biden administration’s guidance on the Inflation Reduction Act’s 45V hydrogen production tax credit — the world’s most lucrative incentive for making clean hydrogen — will not be viable for blue-hydrogen producers. The emissions associated with the fossil gas delivery network, and the challenges of capturing enough carbon, will likely put the most valuable subsidies out of reach, experts say. 

But another tax credit for carbon-capture projects, called 45Q, could offer significant federal support for blue-hydrogen facilities that, on net, put more planet-warming emissions into the atmosphere than they help offset, according to analysis from environmental watchdogs. 

In a worst-case scenario, the 45Q credit could create a perverse incentive for companies to build new coal-based hydrogen production facilities that are dirtier than today’s gas-based methods in order to increase the amount of carbon they can earn tax credits for capturing, warned Anika Juhn, data visualization analyst with the Institute for Energy Economics and Financial Analysis. 

These tax credits ​“represent a huge reservoir of funding for blue hydrogen that will cost taxpayers tens of billions of dollars, while still contributing to global warming,” Juhn said.

“Green hydrogen” made from carbon-free electricity, electrolyzers and water is the method that environmental groups, energy analysts and a significant number of companies planning to invest in the hydrogen economy consider the best, and perhaps the only reliable, way to make truly clean hydrogen today. 

But, as it stands, that approach faces a very real threat: ​“Incumbents with lots of capital [and] the ability to claim a tax credit under 45Q [could]…get into the market reasonably early and claim a decarbonized product,” said Patrick Molloy, a manager with the Climate-Aligned Industries Program at RMI. (Canary Media is an independent affiliate of RMI.)

Molecules versus electrons — and pipelines versus power lines 

Hydrogen might be crucial to removing fossil fuels from a number of essential processes. But the list is limited, and key activities performed by utilities today — heating and power generation — don’t make the cut. 

“You don’t really need hydrogen everywhere. It should be more like regional networks to deliver to those use cases where you can’t really do electrification,” said Cihang Yuan, a senior program officer at the environmental nonprofit World Wildlife Fund who works with industrial companies that want to decarbonize their operations. 

That’s why Yuan doesn’t foresee clean hydrogen becoming ​“something like natural gas, where we have pipelines everywhere. I have my reservations about that, and I think some in the industry would agree with this.” 

Not everyone agrees with Yuan on this point, however. In fact, fossil fuel companies and gas utilities have a strong interest in making the hydrogen infrastructure of tomorrow look like the fossil gas infrastructure of today. 

A growing number of U.S. utilities are experimenting with blending hydrogen into existing fossil-gas pipelines to lower emissions. But a significant body of evidence indicates that the carbon-cutting benefits of this approach are minimal compared to the costs required to make hydrogen and to retrofit pipelines and gas-burning infrastructure.

The first challenge is a difficult one to overcome: the laws of thermodynamics. The most efficient hydrogen electrolyzers today lose about 25 to 30 percent of the energy value of the electricity they use. Similar losses occur when converting fossil gas to hydrogen, and blue hydrogen facilities must also use energy to capture carbon emissions. Converting hydrogen back into useful energy by burning it for heat or power generation brings its own losses.

Hydrogen has about a third of the energy density of methane, the primary ingredient of fossil gas. A blend of 20 percent hydrogen and 80 percent methane yields only a 6 percent reduction in overall carbon dioxide emissions for end users of the blended gas. And 20 percent may be the upper limit of what existing gas networks can use without needing to replace pipes, compressor stations and other equipment at significant expense, according to research from DOE’s HyBlend initiative.

Creating dedicated hydrogen-only pipelines can overcome these problems — but at the price of embedding a costly new infrastructure that could sap the resources available to pursue electrification alternatives. 

Still, fossil fuel interests continue to push this plan. And utilities in particular, especially those in the more than half of U.S. states with decarbonization mandates, often ​“have no choice but to look at every conceivable model of decarbonization as quickly as possible,” Raymond James’ Molchanov said.

The risk of clean hydrogen in fossil-gas pipelines

That brings us to the key concern environmental groups have with hydrogen in gas pipelines: the risk that it could offer utilities and producers a reason to continue to expand and invest in the energy delivery network for molecules, which offers little to no long-term promise of being useful in a low-carbon future. 

Hydrogen may not be competitive with renewable energy in environmental or economic terms. But it could be a lifeline for utilities facing a future in which the fossil fuels they have invested heavily in must dramatically decline in use over the next few decades. 

Most regulated U.S. utilities earn a guaranteed rate of return on the capital investments they make in infrastructure such as pipelines, passing the cost on to customers in the form of increases on their utility bills. Many can also pass along the variable costs of the fuel they purchase. But most utilities can’t own and earn the same returns on clean energy projects, which discourages such investments. 

That incentive system, along with a heavy dose of institutional inertia, goes a long way to explain the push to use hydrogen for suboptimal applications. Add subsidized clean hydrogen to the mix, and the appeal becomes even clearer. 

A November report from the Electric Power Research Institute, a nonprofit organization largely funded by U.S. electric utilities, indicated that clean-hydrogen tax credits create ​“a large enough incentive to compete with natural gas for power generation, despite roundtrip losses.” 

It also found that ​“45V-induced hydrogen demand is largely for electric generation and blending into existing natural gas pipelines, which are flexible demands that can be reversed if incentives change after tax credits expire.” 

In other words, gas utilities could take on excess cheap, clean hydrogen and pass it on to power plants and other customers without having to take on the same costly investment decisions that other industries must make to convert to clean hydrogen as a fuel or feedstock, and then revert to fossil gas if those hydrogen costs go up again. 

That could be seen as something of a pressure-release valve for the clean hydrogen industry as it matures — a near-term way to find lower-value customers until the higher-value users of hydrogen can gain more confidence in its long-term economics to make the switch. 

But it could also be seen as a warning, said Sara Gersen, a senior attorney in the Clean Energy Program at nonprofit group Earthjustice. Unless policymakers act to prevent it, misuse of clean hydrogen tax credits could allow fossil gas providers to subsidize new and existing pipeline costs for decades without laying a path for the users of that gas to switch to sustainable decarbonization options once that subsidization ends. 

“The sector where I think the biggest danger is is in the utilities sector,” Gersen said. Utilities may ​“latch on to hydrogen as an excuse not just to maintain their existing pipeline systems that need to be retired from a cost perspective, but expand their pipelines…and produce more wealth for their shareholders.” 

The risk of diverting clean electricity for green hydrogen

This threat is present even when the hydrogen utilities use is green, critics warn. 

In fact, it’s potentially even more concerning because it ​“could swallow more renewables to displace less fossil fuels, because the process of making green hydrogen is so energy-intensive,” Sasan Saadat, a senior research and policy analyst for Earthjustice, said during an August webinar hosted by The Climate Center, a California-based nonprofit. ​“How much fossil fuel we displace with each given megawatt of renewable energy matters.” 

The costs of that diversion also matter, said David Cebon, a professor of mechanical engineering at Cambridge University. 

Choosing electricity instead of hydrogen for decarbonization ​“will use way less energy and waste way less money in government subsidies,” he said during the August webinar. Conversely, ​“anyone who thinks that they can power their economy with hydrogen and compete with any other economy that’s running on electricity…will drive their economy into the ground.”

It’s hard to compare the costs of decarbonizing an entire economy via alternative pathways. But the Electric Power Research Institute’s November report found ​“very high fiscal outlays” per unit of emissions reduction driven by the 45V tax credits, even under a strict emissions-accounting regime like the one being proposed by the Biden administration. Those emissions-reduction costs are ​“approximately an order of magnitude higher than the implied abatement costs” from other alternatives such as expanding carbon-free electricity generation and boosting low-emissions transportation. 

To be clear, EPRI’s report did highlight that clean-hydrogen policy has goals beyond driving the cheapest possible short-term emissions reductions, such as ​“encouraging technological change and providing operational experience for hydrogen production, transport, storage, and use,” which will be important for industries that need hydrogen to decarbonize in later decades. 

But Cebon worries that the push for clean-hydrogen subsidies will drive investments far in excess of those needed to enable these longer-term decarbonization goals — an outcome he thinks would be disastrous on multiple levels. 

“Hydrogen must only be used when there are no alternatives, for fertilizer, for plastics, for glass, maybe for steel,” he said. But proposals from utilities and fossil fuel interests to push clean hydrogen as an alternative where direct electrification is preferable, he warned, ​“is inefficient, will increase costs, will increase fuel poverty and will damage economies.” 

Verdagy manufactures an advanced AWE electrolyzer system that has superior performance to almost any system in the market — high current densities and the largest membranes leading to higher hydrogen production, high efficiencies leading to lower LCOH, and wide dynamic range and fast turndowns to seamlessly integrate with renewables. In addition to its Silicon Valley factory, Verdagy operates its R&D and highly automated commercial pilot plants in Moss Landing, California, where it continues to advance its cutting-edge technology.

HOUSTON — The scraggly grasses and standing water at the Spindletop oil field, near Beaumont in east Texas, don’t immediately suggest the site of a world-changing energy breakthrough. But there, one morning in 1901, workers released a gusher of oil over 100 feet high, turning Texas into a global capital of fossil-fuel extraction.

That coastal landscape soon drew a frenzied boomtown of oil rigs, and they sucked out the ancient fuel that had pooled around the subterranean salt dome. Eventually, the oil dried up, and the industry left for opportunities elsewhere. Now, 4,000 feet below Spindletop, the same geologic salt formation houses the molecule spurring the latest Gulf Coast energy boom: hydrogen.

Unlike with oil, people put the hydrogen there. Spindletop’s salt dome is just one node in a network of hydrogen production, pipelines and underground storage that stretches across Texas and the Gulf region — a kind of sub-industry serving the better-known petrochemical sector. In response to more stringent air-quality regulations in the 1990s, refiners needed more hydrogen to desulfurize their fuels. They also needed it to ​“crack” heavy hydrocarbons. 

Cleaning up tailpipe exhaust created problems for the climate: Traditional hydrogen production essentially cooks methane with steam and vents the resulting carbon dioxide into the atmosphere. It has become one of the largest industrial greenhouse gas emitters in a region infamous for industrial emissions. 

But these days, everyone from ExxonMobil to pure-play renewable developers is vying to turn Houston into a global center for low-carbon hydrogen. Methane-based hydrogen producers are looking to add carbon-capture devices and sequester emissions underground. Others plan to funnel solar and wind power directly into electrolyzers, producing hydrogen without any fossil fuels.

Cleaning up hydrogen could position the Gulf at the center of efforts to decarbonize a range of dirty industries — think shipping, long-distance trucking and carbon-intensive industrial processes. The Biden administration has enacted an unprecedented tax credit to lower the premium for ​“clean” hydrogen and invested $7 billion across seven regional hubs to jump-start production, distribution and use of the clean molecule. Houston’s HyVelocity Hub won a chunk of that change last fall, and it is negotiating final terms with the Department of Energy.

Thus far, though, clean-hydrogen production scarcely exists, and it remains far from achieving industrial scale. Climate advocates hotly contest what should even qualify as ​“clean” hydrogen and how exactly this resource should be used to best serve the economywide transition from fossil fuels.

Nevertheless, if I had to bet on where clean hydrogen takes off first, my money’s on the Gulf Coast. 

“There’s been a hydrogen economy here for a very long time, whereas some of the other hubs are essentially building it from scratch,” said Alan Alexander, a Houston-based partner at law firm Vinson & Elkins specializing in hydrogen deals.

Over two weeks traversing the region this winter, I saw others were putting their money on Houston, too. 

“There’s a lot of interest and a lot of developers chasing projects,” said Brett Perlman, CEO of the Center for Houston’s Future. The nonprofit, which helped coordinate Houston’s winning hub proposal, had tallied 35 hydrogen production projects in the region as of six months ago. ​“Maybe some of them are doing it to address climate change,” but they also want to make a return on their investment, Perlman noted. 

Perlman witnessed the dawn of the competitive ERCOT electricity markets as a Texas utility regulator, and he recognizes something in the air now that’s reminiscent of those days. Two decades after opening up the grid to entrepreneurial development, Texas has built more renewables than any other state.

That urge for profit could do for hydrogen what it did for renewables, but hydrogen’s climate calculus is not so clear-cut as, say, pushing coal out of the power market. If Exxon and Chevron want to turn fossil fuels into a ​“clean” product, much of which goes to refining other fossil fuels, is that really advancing the transition to clean energy?

It’s already clear, though, that the Gulf hydrogen boom will merge the fossil fuel and clean energy industries in fundamentally new ways. The clean hydrogen economy needs skilled workers to install pipelines, drill storage caverns and handle pressurized gases. A just transition requires a realistic pathway for energy workers to shift to decarbonization; hydrogen could deliver on that promise. 

Critics call hydrogen a distraction, a boondoggle, a rearguard action by fossil-fuel interests. But developers I spoke to who actually build wind and solar are coming to view hydrogen as a force to unleash untold quantities of renewable generation in the near future. And they’re confident that the falling arc of renewable and electrolyzer costs ultimately will make their clean hydrogen cheaper than a product that requires tinkering with capture equipment and sequestering carbon in perpetuity. 

If they are right, the Gulf Coast will be reshaped by a new fuel, one that reduces carbon emissions rather than increasing them.

The Gulf is already a hydrogen hub — it just isn’t clean yet

To understand how hydrogen could be produced cleanly at scale, I needed to see how it’s made currently.

I drove east along Houston’s industrial shipping channel, past tanks and tubes and towers, refineries that stretch like cities unto themselves. Billowing smokestacks augmented the low gray clouds pelting rain on the freeway. 

I plowed through the spray from 18-wheelers and exited the highway into coastal flatlands, scanning for the logo of a 120-year-old French company that’s become a central player in the U.S. hydrogen market. After passing through a series of gates, I alighted at Air Liquide’s La Porte steam methane reforming facility, one of the company’s largest in the world when completed in 2011.

Rich Fenza, the company’s director of operations for Gulf Coast hydrogen production and pipeline network, met me in the control center. On the wall of the snack room, I spotted a framed photograph of Energy Secretary Jennifer Granholm, who visited on her first official trip out of Washington, D.C. Fenza showed me around, pointing out where methane flows in from the natural-gas network and gets scrubbed of any residual sulfur before it rushes into the reformer.

That multistory insulated metal box holds 400 catalyst tubes at a temperature of 2,000 degrees Fahrenheit. Methane and steam flush through pipes until the heat and pressure split them into hydrogen gas, carbon dioxide and carbon monoxide. The carbon dioxide flies away; the hydrogen goes through a pressure swing absorber that purifies it, before a compressor squeezes it into a bright red pipeline and on to the petrochemical kingdoms of Texas City, Port Arthur, Freeport.

The whole agglomeration of tanks, tubes and reformer, collectively called a train, fits in a space not much bigger than a football field. 

Scroll down to watch the video.

If you asked Michael Liebreich about the state of clean hydrogen policies in the U.S. and European Union, he wouldn’t say it’s a complete boondoggle — just ​“an almost complete boondoggle.”

That’s the stark diagnosis that emerged during an hour-long conversation Canary Media hosted this week with Liebreich and Jesse Jenkins, two experts on clean energy.

Liebreich, the chair of Liebreich Associates, founder of BloombergNEF and a noted hydrogen skeptic, believes that only about 10 percent of the tens of millions of tons per year of clean hydrogen production goals in the U.S., Europe and Asia can possibly be met by 2030. He also believes that this might well be ​“the right amount” of volume to suit near-term needs. 

Clean hydrogen is desperately needed over the coming decades to decarbonize key industries from shipping to steelmaking. But it plays only a marginal role in the world’s near-term climate imperative, he said — deploying as much renewable electricity as possible to displace fossil fuels from the power grid, from buildings and from transportation.

Still, Liebreich and Jenkins — the head of Princeton’s Zero Lab and a key contributor to energy models that have demonstrated the risks of clean-hydrogen policies causing more climate harm than good — also agreed that governments must act now to set the stage for clean hydrogen to become a useful zero-carbon fuel and chemical feedstock over the long term. 

“I shouldn’t say we don’t want to do this at all. I think it’s the right time to be doing it,” Jenkins said. ​“But we need to be continually refining the trajectory from here to make sure it has the biggest impact.” 

Below are the highlights and key takeaways from our conversation — you can watch the event recording below. 

Ensuring that ​“clean” hydrogen is truly clean

The first step to making clean hydrogen work is to make sure its production doesn’t cause more greenhouse gas emissions than it prevents. ​“If we want to make it a clean fuel, we have to produce it in a clean way,” Jenkins said. 

He co-authored a 2022 study that provided one of the earliest warnings of the potential emissions-increasing impact of the 45V tax credit — the Inflation Reduction Act program that offers up to $3 per kilogram for hydrogen produced with minimal associated greenhouse gas emissions. 

That incentive is ​“meant to kick-start this green hydrogen industry,” he said — specifically, making hydrogen with electrolyzers powered by clean electricity cost-competitive with hydrogen made with fossil fuels. 

But Jenkins’ work and a number of successive studies have shown that only the lowest-carbon electricity, delivered directly on an hour-by-hour basis and provided by newly built renewable resources that aren’t being diverted from supplying clean power for the grid at large, can deliver that outcome. 

This work has informed the so-called ​“three-pillars” rules that have been adopted as EU policy and proposed as U.S. clean hydrogen policy, despite the objections of many hydrogen industry groups, fossil fuel companies and utilities. 

“We’ve got to make sure that the three-pillars rules are implemented soundly so that only clean electricity is used to produce hydrogen,” Jenkins said — a call that’s echoed by other climate activists and hydrogen producers as the U.S. Treasury Department solicits comments to its proposed rules for the 45V tax credit in the coming months. 

Getting clean hydrogen where it’s needed

Making clean hydrogen that’s truly clean isn’t the only challenge, however, Liebreich warned. There’s also the need to ensure that clean hydrogen is directed toward the industries that need it to decarbonize — and not toward those for which it could be a costly distraction. 

Liebreich pointed to his oft-cited ​“hydrogen ladder” chart to distinguish one category from the other. At the top are refineries, ammonia and fertilizer factories, methanol and other chemicals producers, and other industries that currently use roughly 100 million metric tons of fossil-fuel-based hydrogen each year, accounting for ​“about 2.5 percent of global emissions,” he said. ​“That’s real, and it’s a real challenge.” 

He also highlighted clean hydrogen’s potential to displace the metallurgical coal used in primary steel production, which accounts for roughly 8 percent of global carbon emissions. Unlike the grid, buildings and ground transportation, steelmaking lacks a clear path to electrification as a near-term option — hence the potential role for hydrogen. 

“I think what we’ve got to do is focus on that 100 million tonnes and a few other use cases where hydrogen is so valuable, it does something that’s so difficult to do using direct electrification,” he said. 

But existing policies in the U.S. focus not on the end uses of clean hydrogen, but rather on making the fuel cheaper. This is a problem because these policies don’t account for all the other costs associated with using hydrogen, he said. 

“You’ve got to move it to somewhere useful. You’ve probably got to store it, buffer it, compress it,” he said. ​“All of these things are expensive, and they’re expensive in a way which doesn’t yield the sorts of cost reductions that we’ve seen in solar and, to a certain extent, in wind and batteries.”

Another challenge is that the industries best suited to use clean hydrogen to decarbonize will require the biggest investments to be able to use it, Jenkins said. He cited steelmaking, which ​“is the top of the list in terms of emissions[-reduction] potential, but it’s one of the most expensive to convert.”

“That’s not going to work unless we bridge that gap with demand-side policy or incentives for steel producers to make the capital expenditures and switch over the design of their plants,” he added.

Without those demand-side policies in place, clean-hydrogen production subsidies run the risk of creating perverse outcomes, Liebreich said. Jenkins agreed, noting that the key goal of the 45V tax credit, which is available for 10 years from the start of production to any project that commences construction before the end of 2032, is to ​“get a lot of experience building and operating these projects, and that will drive down the cost for electrolyzers and hydrogen production.”

But if the costs do plummet, the full $3-per-kilogram tax credit for clean hydrogen will end up being less of a necessity for making clean hydrogen cost-competitive and more of an incentive to make as much of it as possible, whether or not there are cost- and climate-effective ways to use it, he said. 

“I spent a lot of time talking to Senate Finance Committee staff about this before the IRA passed,” he said. ​“You should not use the same set dollar value to get that industry started as you’re going to pay them a decade from now when they’ve scaled up because the cost is going to fall.” That advice did not make it into law, he said — ​“and so I do worry that by the end of that period, it will make sense simply to produce hydrogen and flare it or make a subsidy farm.” 

Why hydrogen hubs are central — and where current plans are lacking

So if clean hydrogen shouldn’t be widely distributed and used for broad decarbonization, how should it be used? The answer, Liebreich said, is to concentrate clean hydrogen production and the industries that need it to decarbonize in close proximity — a concept known as ​“hydrogen hubs.” 

Liebreich pointed again to his ​“hydrogen ladder” chart: ​“You look at fertilizer, you look at the petrochemicals industry, hydrocracking, and you look at the next row down…[at] long-duration [energy] storage or aviation fuels or shipping fuels,” he said. ​“They’re all things that happen in industrial clusters.” 

That concept has informed the core U.S. demand-side clean hydrogen policy — the $8 billion in grants for clean hydrogen hubs created by 2021’s Bipartisan Infrastructure Law. But the way that program has played out so far gives Liebreich and Jenkins little confidence that it will succeed. 

The goal is laudable, Jenkins said — to ​“try to connect all the dots” of clean hydrogen production, transport, storage and use. ​“If you can build up economies of scale in one place, that could really help kick-start a hydrogen economy in that location.” 

But the U.S. Department of Energy’s October decision to designate seven different consortiums across the U.S. as eligible for receiving a share of a collective $7 billion of grant funding to develop hydrogen hubs runs the risk of diluting that potential, he said. 

“It’s basically created an expectation in every region in the country that they should be producing hydrogen in the near term,” he said. ​“There are parts of this country that are better to produce hydrogen in than others right now. And if you’re going to try to use that limited pool of money to kind of kick-start these use cases, I wish that they would have been a bit more targeted.” 

Another problem with DOE’s decision, he said, was that it proposes funding ​“blue hydrogen” — hydrogen made from fossil gas combined with carbon capture — at up to five of the seven hubs it selected. Many energy and environmental analysts believe that blue-hydrogen projects won’t be able to capture a high enough proportion of the greenhouse gases they emit to produce genuinely low-carbon hydrogen. 

Jenkins suggested that the DOE could still refocus its hydrogen hub funding on regions that combine ​“really good-quality, low-carbon resources” — that is, ample access to low-cost wind and solar power — with industries that can use clean hydrogen to the greatest effect. Other sources of funding, such as $6 billion in industrial decarbonization grants from the Bipartisan Infrastructure Law that DOE is expected to award in the coming weeks, could also be directed toward steelmakers, fertilizer producers and other facilities to start using the hydrogen coming from hubs. 

“We probably should have at least one large-scale DRI — direct reduction of iron — with hydrogen project, which is a pathway to decarbonize steel in the U.S.,” he said. It helps that major steel buyers have said they’ll pay extra for low- to zero-carbon steel, Jenkins pointed out. Similar investments could help overcome cost barriers to converting fertilizer production — one of the biggest global users of dirty hydrogen to make ammonia — to using clean hydrogen or ammonia, he said. 

“If we were doing those things, I’d be pretty happy with the direction we’re going,” he said.

Canary Media thanks Verdagy for its support of the Clean Hydrogen series.

Utilities want to burn clean hydrogen in gas plants to unlock a reliable, carbon-free electricity system. But a lot of climate hawks have different words for hydrogen as a power-plant fuel: a colossal waste of money, a dangerous distraction, greenwashing par excellence and ​“a crime against thermodynamics.”

Elsewhere this week, Canary Media has covered efforts to make large-scale clean hydrogen production a material reality. While that supply works its way into existence, other people are figuring out what to actually do with the hydrogen. Power companies’ interest in this molecule stems from a simple proposition: If you burn hydrogen, you make electricity without carbon emissions. Short of a long-awaited nuclear renaissance, hydrogen could be the best option for carbon-free power at times when the sun isn’t shining, the wind is slack, and your batteries have discharged their stores. 

Utilities might eventually be able to rely on novel long-duration batteries, advanced geothermal, gas plants with effective carbon capture, small modular nuclear, and even a late-stage revival of big old-school nuclear. Or clean hydrogen, tucked away in salt caverns for the big peak hours of the year when other clean power plants can’t produce enough. No clear winner has emerged for this category. 

“Every utility should be thinking about how they’re going to meet demand as their grid shifts toward more intermittent resources and what sorts of clean, firm power they have in their mix,” said Emily Kent, U.S. director for zero-carbon fuels at the Clean Air Task Force. ​“We don’t know what technologies will be available in the future, but for now it’s a gap that hydrogen could help fill.”

But burning clean hydrogen can take many forms, many of which don’t look so appealing. Several utilities are exploring hydrogen combustion by mixing small amounts into the fossil-gas supply at existing plants. This produces very marginal greenhouse gas reductions at considerable cost. For now, the industry just needs to kick the tires on hydrogen combustion to know how to do it safely and efficiently in the future. 

“We need to test starting up [and] shutting down, and to validate that systems and controls and best practices can be documented and repeated,” said Jeffery Preece, who oversees hydrogen research at EPRI, the largely utility-funded nonprofit research institute for the electricity sector. ​“There’s a lot of fundamentals we haven’t quite documented that we think will be necessary.”

The ambitions don’t stop with a 5% hydrogen blend. Several utilities have described large new gas-plant projects as ​“cleaner” options because they have the theoretical capacity to one day burn hydrogen. This fuel substitution isn’t happening anytime soon — for now, utilities have no way to obtain enough clean hydrogen for substantial operations. But plans for large-scale hydrogen combustion concern climate analysts because it is a roundabout, expensive and energetically wasteful way to turn clean electrons back into clean electrons, especially when there are so many more efficient and cost-effective alternatives for clean power generation.

“If hydrogen is going to play a long-duration energy storage role, it’s really small,” Kent said. ​“You don’t need a huge buildout of hydrogen for power plants to play that role.” Significant hydrogen combustion for round-the-clock baseload power ​“is probably not an appropriate path,” she added. 

Vague promises about far-off hydrogen capabilities could also lend a green halo to fossil fuel infrastructure that may never actually use clean hydrogen to generate power.

Can you just burn hydrogen in a fossil gas plant?

Today’s fleet of gas turbines — the largest electricity source in the U.S., thanks to the shale revolution — can burn hydrogen. But both practical and legal reasons limit the amount.

Natural gas is basically methane; hydrogen is much less energy-dense, so you need to burn more of it to get the same amount of energy output. That necessitates bigger valves, pipes and nozzles to deliver higher volumes of gas. Hydrogen also burns hotter than methane, which produces more NO_x, a regulated air pollutant that needs to be mitigated. 

Long Ridge Energy Terminal, an independent power producer on Ohio’s riparian border with West Virginia, claimed in 2022 that it was the first large combined-cycle plant in the U.S. to blend hydrogen into its fuel mix. Large corporate customers were asking for carbon-free electricity in the hours that renewables weren’t supplying the regional PJM wholesale markets, said the plant’s program manager, Mark Barry. The plant owners decided to use their own money to test if hydrogen power could meet that demand for clean energy at specific times.

Long Ridge bought truckloads of hydrogen from a nearby chlor-alkali plant, which produces the gas as a byproduct. Then the 485-megawatt plant successfully combusted a mix of 5% hydrogen, the maximum that the Ohio Power Siting Board allowed it to do, Barry noted. If they got the appropriate permissions, the plant could push to the 20% level with the current turbine by adding more catalysts to absorb the added NO_x emissions. Beyond that, Long Ridge needs to wait a few years for a new generation of GE combustors to raise the hydrogen blend to the 50% level, and then ultimately further on to the 100% level. 

“The technical capability is there,” Barry said. ​“We would have no issue with round-the-clock operation — with [hydrogen] supply at a good price.”

A 230-megawatt Siemens Energy engine at Constellation’s Hillabee plant in Alabama hit a 38% hydrogen threshold last May, ​“with only minor modifications” to existing equipment. That test succeeded in ​“nearly doubling the previous blending record for similar generators,” per a company spokesperson. The carbon-reduction outcome was less impressive, given the lower energy density per volume of gas: Carbon emissions fell by just 15.6% compared to running solely on natural gas.

Some specialized turbines have indeed burned 100% hydrogen. Siemens Energy, one of the top global turbine manufacturers, successfully burned a pure hydrogen stream at a generator in Saillat-sur-Vienne, France last October. But that was a small industrial unit, generating roughly 14 megawatts. GE, too, is fast-tracking full hydrogen capabilities for its smaller gas turbines to complement wind and solar farms, said Jeremee Wetherby, carbon solutions leader at the turbine manufacturer; small turbines have the added benefit of not needing as much hydrogen.

Down the road, GE and Siemens Energy have both pledged to make all their new turbines capable of burning 100% hydrogen by 2030. 

In short, technical and regulatory constraints prevent large power plants from burning more than a low-level blend of hydrogen with gas today. But the turbine industry is working to make standard turbine models ready to handle a pure stream of hydrogen. Finding that supply is the next major barrier to this purported clean energy solution.

Hydrogen won’t work for power plants until there’s a radically larger supply

Right now, U.S. clean hydrogen production has advanced slightly beyond zero. But there’s nowhere near enough to supply a fleet of power plants continuously. GE’s Wetherby estimates that the hydrogen needed to run a 1-gigawatt combined-cycle plant, the workhorse of the large gas fleet, would gobble up about 2% of global hydrogen production today. 

EPRI has worked on several real-world tests of hydrogen-fired power plants. The longest test ran for eight whole hours, the time it took to consume all the gas delivered to the site by tube trailer.

Even if a power plant lucked into a hydrogen pipeline hookup, current costs make it bonkers to burn. For comparison to gas, Wetherby calculated that renewable hydrogen selling for $3 to $4 per kilogram equates to about $20 per million Btu. Natural gas at Henry Hub goes for less than $3 per MMBtu right now. Long Ridge actually extracts its own gas on-site, straight from the Marcellus Shale; clean hydrogen wouldn’t compete with its homegrown supply until it gets down to 25 cents per kilogram, way beyond the Department of Energy’s wildest dreams.

“This is all going to fundamentally come down to economics,” said GE’s Wetherby. ​“Today, the cost of hydrogen is really high, so it fits well in a peaking application where the demand and price for power is really high.”

In other words, even if a turbine installed today technically could burn 100% hydrogen around the clock, the costs would be outrageous. Scarcity dominates clean hydrogen supply currently, and will for the foreseeable future. That alone should curb any excessive desire to burn huge amounts of the stuff anytime soon. But if a jurisdiction needed more peak capacity to avoid seasonal outages and had serious climate policies in place preventing it from adding more fossil gas capacity, a hydrogen peaker could make sense when the right turbine product is available.

In the longer term, the key variable is how cheap and abundant clean hydrogen becomes. Some renewables evangelists I’ve interviewed see great things ahead: The cost of renewable-powered electrolysis will plummet just like the costs of wind, solar and batteries did in recent decades; this will make renewable hydrogen cheaper than any fuels humanity has ever seen, in their view. If you predict that the renewables success story will play out again in clean hydrogen, then it should assuage anxiety over rationing hydrogen to only the most worthy of causes. 

Assuming markets price hydrogen efficiently (more on that in a moment), abundant hydrogen combustion in power plants would be a trailing indicator that the clean hydrogen revolution has really arrived. But if there’s not enough clean hydrogen to meet demand, power plant owners may find themselves competing with green steel producers and clean fertilizer factories for the stuff.

Cutting through the hype for clean hydrogen power plants

The complication to that assumption about efficient markets is that monopoly utilities enjoy certain protections from market forces that private competitors like Long Ridge do not. 

Namely, regulated utilities pass on the costs of their power plant investments to their captive customers, while taking a markup for their guaranteed profits. They also typically pass along fuel costs to customers. The upshot: Customers and regulators need to keep an eye out for utilities that want to burn reckless amounts of expensive hydrogen anytime soon or claim a green premium for a plant that isn’t really reducing emissions. 

Excessive hydrogen fuel costs are worrisome, but so is a utility touting a gas-plant investment as a clean energy advance because of its hydrogen compatibility without saying when — and to what extent — carbon-free fuel will actually enter the mix.

“When we are looking into what a utility is doing, we would want to see specific commitments to hydrogen blends,” said Kent, from Clean Air Task Force. Kicking around in the 5% range achieves ​“pretty insignificant” emissions reductions; a clear timeline to reaching high blends by specific dates shows a utility is serious about carbon-cutting. 

Another criterion sounds silly to say but can’t be overlooked: A serious clean hydrogen power plant needs a dedicated supply of clean hydrogen. Otherwise, it’s just an unusually expensive gas plant. 

The more enterprising utilities aren’t waiting around for someone else to grab those sweet hydrogen production tax credits. Florida Power & Light installed 25 megawatts of solar-powered electrolyzers at its Cavendish hydrogen test site in Florida. It plans to burn that clean hydrogen in a 5% blend at an existing gas turbine nearby. Self-producing means the utility knows it’s clean and can control the pace of deliveries. If self-supply isn’t possible, there are enough hungry hydrogen developers searching for creditworthy anchor customers that you’d have to try hard not to land a supply deal — especially on the Gulf Coast.

In contrast, lacking a clear plan for hydrogen supply creates problems. 

For instance, Entergy Texas proposed to install a big new Mitsubishi turbine capable of burning 30% hydrogen on day one, for an added cost of $91 million. The 1,215-megawatt combined-cycle plant is now under construction near Bridge City, and I’d seen Entergy Texas CEO Eliecer Viamontes praise it as ​“strategically located near hydrogen producers, pipeline, storage and off-takers to leverage this important source of clean and reliable energy in the future.” This looked like a big test case for the viability of large-scale hydrogen power plants.

I reached out to ask where the plant would source its hydrogen, how carbon-intensive it would be and when the plant anticipates reaching high levels of hydrogen combustion.

Entergy did not have answers to share on those questions. It turns out that when Texas regulators approved the gas plant, they did not grant the hydrogen request, and their neutral statement of facts reads more like a dis track: 

• “Entergy did not conduct any economic or cost-benefit analysis of the Orange County station’s hydrogen component.”
• “Entergy did not produce any forecasts for the price of hydrogen on a dollar per thousand cubic feet or million British thermal unit basis.”
• “Entergy did not meet its burden to prove the improvement of service or lowering of cost to consumers.”

That rebuke prevented Entergy from charging the costs of a deeply uncertain hydrogen project to its customers. In a statement to Canary Media, though, the company framed the regulator’s decision more hopefully, saying that the rejection ​“preserves the opportunity for Entergy Texas to make upgrades that would unlock the turbines’ off-the-shelf capability to co-fire up to 30% hydrogen by volume in the future.”

The trouble is, a latent ability to unlock future capabilities doesn’t keep the lights on, nor does it avoid any amount of carbon dioxide emissions.

Verdagy manufactures an advanced AWE electrolyzer system that has superior performance to almost any system in the market — high current densities and the largest membranes leading to higher hydrogen production, high efficiencies leading to lower LCOH, and wide dynamic range and fast turndowns to seamlessly integrate with renewables. In addition to its Silicon Valley factory, Verdagy operates its R&D and highly automated commercial pilot plants in Moss Landing, California, where it continues to advance its cutting-edge technology.

Canary Media’s chart of the week translates crucial data about the clean energy transition into a visual format.

Whether you believe green hydrogen to be fundamental to the clean energy transition or dismiss it as an overhyped technology, one thing is for certain — more of it is coming.

But where will most of this green hydrogen be produced? Besides China’s enormous lead, the answer is a bit all over the map. According to the International Energy Agency’s hydrogen projects database, these are the top 15 countries with the most green hydrogen capacity that’s operational or under construction or has secured committed financing.

China is currently the world’s largest consumer and producer of hydrogen. Most of the hydrogen it makes today is fossil-fuel-based, but the country has big plans to scale up its green hydrogen production and use the fuel to decarbonize sectors like steel and chemicals production. 

Saudi Arabia is next on the list, thanks to the fact that it’s currently building the world’s largest green hydrogen project. A joint venture between ACWA Power, Air Products and Neom, the huge facility will include ​“up to 4 gigawatts of solar and wind energy to produce up to 600 tonnes” of green hydrogen per day. That would mean the facility will be capable of producing over 200 kilotonnes of green hydrogen per year if it operates every day. For context, the largest existing green-hydrogen facility, in China’s Xinjiang region, has a capacity of just over 44 kilotonnes per year. 

Sweden, which opened its largest electrolyzer facility last year, is up next, and fellow European Union members Germany and France also make the top 10. The EU has plans to ​“produce 10 million tonnes and import 10 million tonnes” of ​“renewable hydrogen” by 2030, and it has set ambitious targets to boost hydrogen use in industry and transport, positioning itself as a leader in demand-side policy incentives, which are lacking elsewhere. 

The United States is just behind Sweden on green hydrogen plans. Thanks to the 2022 Inflation Reduction Act, which includes the world’s most generous clean hydrogen subsidies, the country is expected to see a wave of new investment in green hydrogen production. 

The United Kingdom, which has its own set of support measures for clean hydrogen, rounds out the top five countries.

In total, the world produces just 180 kilotonnes of electrolysis-based hydrogen per year right now. But that number could reach more than 14,000 kilotonnes by 2030 if all projects currently under construction become operational — and that’s not even counting the hundreds more that have been announced but don’t have investment or permitting yet.

Hydrogen may be our best hope for decarbonizing heavy industry and long-haul transportation — if it’s produced in ways that do not release greenhouse gases into the atmosphere. Right now, though, most of the hydrogen that’s made in the U.S. is emissions-intensive. 

Canary Media recently dove deep into the promise and the pitfalls of hydrogen as a tool for decarbonization for our series The Dawn of the Clean Hydrogen Economy. I also joined The Weather Channel’s climate-focused show Pattrn to talk about my reporting on the Gulf Coast clean hydrogen boom.

Hosts Jordan Steele and Stephanie Abrams and I discussed how to make cleaner hydrogen, why the heart of the American fossil-fuel industry is poised to excel at it and who will get to use this clean energy product.

Watch the video below.