CERAWEEK: Some industry members are not deterred by hydrogen's 'green premium'

Federal government and private sector stakeholders must move quickly to design a process to ramp up demand for hydrogen before the fiscal year ends Sept. 30, experts said March 19at the CERAWeek energy conference by S&P Global in Houston.

During a panel discussion entitled "From Hubs to Demand Support: Catalyzing the American hydrogen market," David Crane, US Department of Energy undersecretary for infrastructure, described the bipartisan Infrastructure Investment and Jobs Act of 2021, which allocated $9.5 billion to fund regional hydrogen hubs, as "the most inspired pieces of legislation ever passed and signed into law to get us on the path to energy transition."

"Fortunately for us ... it actually charged the Department of Energy with standing up the hydrogen economy, and as anyone who's been around the energy industry for a very long time knows, energy at the end of the day comes down to a very basic supply-and-demand business," Crane said.

Aside from helping kick-start seven regional hydrogen hubs for production across the US, the legislation allocated about $800 million to building demand for hydrogen, and "demand for clean hydrogen just doesn't occur overnight."

"So, the purpose of the Hydrogen Demand Initiative was to smooth that transition, because we hear there's a lot of people interested in consuming clean hydrogen, but there's probably more people interested in going second, rather than going first," Crane said. "So, this is a way of helping make sure that the hydrogen in production has a home in the early going."

Replacing diesel 'a big win'

Hydrogen offers an opportunity to decarbonize heavy transportation and industry requiring high temperatures, Crane said.

"If we use green hydrogen to replace diesel in big trucks, I mean, that's just such a big win, that I think the whole hydrogen complex is a big step forward towards decarbonizing the whole economy," Crane said.

But Ernest Moniz, president and CEO of the Energy Futures Initiative and former US secretary of energy, described the IIJA's $800 million to build a hydrogen demand economy as "a little amount of money" in comparison with scale of the challenge.

Established in 2017, the Energy Futures Initiative is a nonprofit designed to address "the challenges and opportunities associated with the move to a clean energy economy," EFI says on its website. Among its publications is a recent report entitled "The US Hydrogen Demand Action Plan."

"Capital is available for things that people want to buy, but I would say I think there's a bit more, that when people need to buy things, there needs to be a prospect that they can buy them over 20 years to make projects available to get past investment communities," Moniz said. "We don't see unavailability of capital as being the principal problem. The problem is making the investments better and bankable."

Bankability implies that "there's a certain stability, a certain management of market risk, because other energy prices certainly can be very volatile and could change the relative attractiveness of something like hydrogen," Moniz said.

A looming deadline

Establishing confidence in the bankability of such projects entails developing "processes by the end of the fiscal year, which means Sept. 30," Moniz said.

"That's not very far -- six months, and so we're going to have a lot of dialogue," Moniz said. "We're going to have to listen hard and fast to be able to convert that into proposed methodologies, really by the summer so that we can converge by the end of the fiscal year."

The DOE's Crane said, "I think it's important to emphasize how little has been decided about how hydrogen demand will work at this point."

Nevertheless, the DOE's commitment to build hydrogen demand "shows that the United States government is going to do what it takes to make hydrogen happen ... but we know it's not a smooth path."

"We are going to try and tackle every issue that stands between hydrogen and the commercial realization of hydrogen," Crane said.

Citing the various types of hydrogen production, ranging from gray hydrogen produced by cracking fossil fuels to green hydrogen produced renewable electrolysis of water into hydrogen and oxygen, Crane said, "We want to see the entire colors of the rainbow blossom and be successful."