There’s an intense debate about to define the emissions generated from hydrogen production. The emissions matter because only “green” hydrogen will be eligible for what some have estimated is up to $100 billion in production subsidies. I have to admit I was skeptical when I first heard the three pillars of “green” hydrogen:
The electricity used in making hydrogen needs to be generated in the same hour as it’s used/credited for producing hydrogen.
The electricity used in making hydrogen needs to be generated locally to the hydrogen plant.
And, the electricity used in making the hydrogen needs to be from new renewable resources, capacity have come online since the IRA passed.
Even though smart people feel strongly that the three pillars are necessary, fulfilling all three of these feels onerous. In particular, I wanted to believe that clean energy generated at the same time, in the same place as the hydrogen is green hydrogen. But I’m now convinced the other way: that renewable generation could make the grid look green at any particular hour, while the energy that was dispatched to meet the big hydrogen load is actually from a far away gas plant.
The embedded emissions from a hydrogen electrolyzer (which makes hydrogen from electricity) look something like this:
In this formula, 50 kWh will generate 1 kg of hydrogen using an average electrolyzer. At an emissions rate of .4 kg of CO2 for every kWh, that means 20 kg of CO2 were emitted to generate that 1 kg of hydrogen. As we’ll see, .4 kg CO2 per kWh equates to a fairly efficient gas plant emissions level.
The IRA tax credits for hydrogen production start at $0.60 per kg of hydrogen produced if you can achieve less than 4 kg of CO2 emissions for every kg of hydrogen produced. But the real prize is a subsidy of $3 per kg if emissions fall below 0.45 kg of CO2 for every kg of hydrogen.
In this post I’ll step through an example from recent days in the California CAISO grid and use that to imagine how the tax credit might work. California has been generating buzz for setting solar generation records. According to Gridstatus, renewables’ generation hit records on April 17th at 22.8 GW. Here’s what the CAISO grid looked like on April 17th:
There’s a huge midday peak in solar, and a lot of wind steady around 5 GW. But the second biggest generation technology in the middle of the day is natural gas, which is generating over 5 GW throughout the day. There’s been an active thread on energy Twitter about why this happening. It could be Resource Adequacy rules in CAISO, transmission congestion, how gas plants ramp up, incentives for exports, or maybe something else. It feels important to figure out, but isn’t the point of this post.
At each point in time, the emissions from the grid are the sum of the emissions from each technology. And each technology emits CO2 at a certain average rate per kWh of energy produced. Renewables obviously emit zero CO2 per kWh of energy produced. In California in 2021, gas power plants emitted 0.44 kg of C02 per kWh of energy produced, according to EIA. All of the other CO2-emitting technologies are rounding errors compared to the gas generation.
From this, we can calculate the emissions of the grid at any interval. In the peak renewable generation periods of the day, the grid is emitting about 0.1 kg of CO2 for every kWh of energy produced. With an average electrolyzer using 50 kWh to produce 1 kg of hydrogen, that means during these few hours in the morning, hydrogen producers could make hydrogen at about 5 kg of CO2 emissions for every kg of hydrogen produced. This isn’t enough for even the lowest level production subsidy.
It’s important to note here that even though a hydrogen producer wouldn’t get any subsidies during this day using the grid-wide emissions, they come close, and it’s entirely due to renewables driving down the average. Remember, gas is emitting at 0.44 kg CO2 per kWh but is weighted downwards by the renewables.
But this is the grid-wide average. One of the requirements of this subsidy would be the energy is produced “locally”, though I haven’t heard specific proposals about how how that would be defined. If you divide up a grid like CAISO you are almost certain to find some regions that are doing most of the renewable production compared to others. So it’s easy to imagine that two of the three “pillars” to achieve this subsidy — clean energy at a certain hour, in a certain place — are easily achieved.
The big problem is what type of generation comes online to meet demand when we’ve added hydrogen electrolyzers. Even if a producer can find a location with clean energy in that hour, at that location, the electrolyzer adds loads to the entire grid. So a new electrolyzer adds demand, and the only dispatchable technology to meet the demand — even in the middle of the day — is a gas plant.
It feels onerous at first glance. It feels like if we want to kickstart hydrogen production and maybe have it as long duration storage, we need to be making it easy, not difficult, to get these subsidies. But that’s wrong. The point of the subsidies is to incentivize green hydrogen, and anything other than the three pillars will subsidize dirty hydrogen.