‘Massive emissions ramifications’: Forthcoming hydrogen policy stirs intense debate

Future guidance from the Treasury Department that could have a major impact on climate change has sparked heated debate in Washington.

The guidance seeks to take advantage of the favorable tax credits offered by inflation and establish rules for the hydrogen energy industry that could reduce emissions from hard-to-reduce sectors such as the steel, cement and chemical industries. become. reduction method.

But climate change activists say the policy could be a disaster for a warming planet if it gives the industry too much freedom over where it gets its power to make hydrogen.

Lena Moffitt, executive director of climate advocacy group Evergreen, said future guidance “will be a key determinant of the availability of truly clean hydrogen in the country, which will have a significant impact on emissions.” ‘ said.

The Democratic Climate, Tax, and Health Bill provides tax credits for low-carbon hydrogen energy. This type of energy is produced by using low-carbon energy to power an electrolyser and passing an electric current through the water to separate it into hydrogen and oxygen..

Hydrogen is seen as a way to reduce emissions from hard-to-decarbonize sectors such as steel, the chemical industry, and long-distance transportation, among other uses.

But the extent of hydrogen’s climate benefits may be determined by Treasury guidance due by mid-August, and what hydrogen producers need to do to qualify. Rules may be established as to whether

environmental advocate pointed to Discovered research set strict rules How the industry sources low-carbon electricity can provide significant benefits in reducing emissions. They say hydrogen could compete with other power users on the grid for clean power when regulations are relaxed, increasing power demand and indirectly increasing fossil fuel use. He expressed concern that this is possible..

One analysis by a consulting firm Advanced energy researchFor example, it was found that 250 to 640 million tons of carbon dioxide would be avoided by 2032 if the Treasury Department set stringent requirements. This corresponds to emissions from 67 to 171 coal-fired power plants in one year.

Meanwhile, some industry insiders argue that policies favored by the climate movement could stifle the nascent hydrogen industry.

Shannon Angielski, chairman of the Clean Hydrogen Future Coalition, which advocates promoting the development of hydrogen energy, said the immediate goal of the guideline is to “launch and scale this clean hydrogen industry on very realistic rules. It should be “to be able to do it.” ”

Members of this group include gas, hydrogen, renewable and nuclear energy producers, as well as oil companies and utilities.

Proponents on this side of the ledger, pointed out the results of the analysis He said a tougher stance by the Treasury on key provisions of the guidelines would “ultimately hinder the economic competitiveness and adoption” of green hydrogen. A similar analysis by research and consulting firm Wood Mackenzie found that emissions could rise “marginally” if the ministry adopted a more moderate stance.

The tax credits included in the Control Inflation Act themselves are seen as a big boost for both hydrogen energy in general and hydrogen produced from low-carbon sources in particular, said Bloomberg NEF hydrogen analyst Adishia Basham. is called a “game changer”.

“For the domestic market, hydrogen will need some kind of policy support to compete with existing fossil fuels in most use cases,” Basham said without credit, adding: The United States is in a position to become a potential hydrogen exporter.

However, it is not yet clear what hydrogen producers must do to qualify. One of the main points of contention is whether hydrogen can be considered “clean” if it uses energy already on the grid, or whether it should be powered from new sources.

Climate advocates warn that if hydrogen production depletes the low-carbon electrons already in the grid, it could increase overall electricity demand and increase the use of fossil fuels.

Meanwhile, the hydrogen industry has expressed concerns about how long it will take to get new carbon-free power generation up and running.

Other questions in the discussion include where the clean energy to power hydrogen production should come from and how often energy usage should be matched with clean power sources. .

Climate advocates believe that electrolysers should essentially run on clean power all the time, and that electricity usage should be matched hourly to clean energy sources, and that power should be co-located with hydrogen plants. It claims that it should be supplied from

Industry, on the other hand, favors a system that allows hydrogen producers to use all the electricity available on the grid as long as they purchase the same amount of clean electricity annually.

Frank Wallach, president and CEO of the Fuel Cells and Hydrogen Energy Association, said there are practical barriers to hourly matching, including the lack of universal availability. rice field.

“Right now, there are measurements and market indications that hourly matching is available, but there are clear market signals and pricing to go to a broker and actually get hourly matching renewable energy credits. “Until time matching is actually available from a range of brokers, applying hourly matching is a kind of scenario and theoretical to get competitive pricing,” he said. I was.

Environmental groups say all three policies they are pushing are important to making hydrogen’s future climate-friendly.

Rachel Fakhri, Emerging Technology Policy Director at the Natural Resources Defense Council, said, “These are the things we’re doing to keep the very power-hungry asset of the electrolyzer from adding to grid emissions. is the best guardrail system that must be ensured.”

“If we remove one… what we know from the analysis looking at the impact on the power sector and the economy is that the system would be severely compromised,” Fakhri added. “They all have to work together.”

Meanwhile, there may be at least some congressional support for the Treasury Department to take a more lenient approach in future guidance. The Senate Appropriations Committee recently approved the amendment “The Treasury Department is considering imposing additional limits and restrictions on eligibility for the Clean Hydrogen Production Tax Credit,” said Sen. Joe Manchin (D. Virginia) on the funding bill. expressed concern.

A Treasury spokesman declined to comment before the guidance was announced.

Some have argued for a position they claim as a middle ground in the discussion. For example, the Clean Power Association of America, which represents renewable energy companies, needs to put in place a window where “first mover” projects can get more relaxed requirements to match their annual electricity usage and equivalent purchases. but otherwise you have to buy electricity. Beyond 2029, more strict hourly matching will be required on the ground.

The group’s chief advocacy officer, JC Sandberg, said the group had “too many initial regulations that prevented the industry from reaching its full potential” and “too little regulation” that would hinder emissions reductions. too much,” he said. .

Hydrogen energy could also play an important role in the future of power generation currently being done in natural gas plants, thanks to the Environmental Protection Agency (EPA).

New EPA rules require some gas plants to reduce emissions in ways that include the possibility of co-firing hydrogen and gas to reduce the amount of fossil fuels burned, and hydrogen production. can have an even greater impact on emissions associated with

Evergreen’s Moffitt said the EPA’s rule resulted in “if the hydrogen that enters the market subsidized by public climate funds is foul, it could significantly undermine the impact of power plant carbon standards.” has potential,” he said.