US needs hydrogen to hit climate goals, but cost is $1.9 trillion: study for DOE

The cheapest path to net-zero emissions in the US will require a $1.9 trillion scale-up of hydrogen by 2050, at least three times greater than what the US is on track to invest, according to an April 23 study from the National Petroleum Council.

But eliminating greenhouse gas emissions without deploying low-carbon hydrogen could add between $160 billion and $260 billion to that bill, the National Petroleum Council (NPC) study found.

The lengthy analysis, commissioned by US Energy Secretary Jennifer Granholm, comes as the US government invests billions of dollars in grants and federal tax credits to encourage fossil fuel users to switch to "clean" hydrogen, produced using electricity or carbon capture technology. The US Energy Department set a goal in 2021 to lower the cost of clean hydrogen by 80% to $1 per kilogram in a decade.

"The challenge with all of this is that, long term, the math still doesn't work," said Austin Knight, vice president of hydrogen at Chevron Corp. and chair of the NPC's hydrogen study coordinating subcommittee.

Despite the federal investments, the study found that by 2050, both "blue" and "green" hydrogen will still cost more in the Gulf Coast region than their carbon-intensive alternatives.

"This is a bit sobering, given all of the effort that we have been putting into clean hydrogen," Granholm said in reaction to the NPC's findings.

Conclusions

The study, produced with the Massachusetts Institute of Technology Energy Initiative, drew on the expertise of 100 participating organizations mostly from outside the oil and gas industry, Knight said.

Under the current US policy trajectory, cumulative hydrogen investment will total just under $500 billion by 2050, the study found. But reaching net-zero emissions across the entire US economy will require a $1.9 trillion investment in the hydrogen value chain, almost all of which — $1.8 trillion — will be needed to develop green hydrogen.

Green hydrogen is produced using zero-carbon electricity to split water into hydrogen and oxygen. The low-carbon alternative is blue hydrogen, produced using natural gas with carbon capture technology to abate emissions.

For simplicity's sake, the study's estimates are based on the assumption that all electricity used to produce green hydrogen is "behind the meter," Knight said.

"It's not the only way it has to be implemented in reality," Knight said. The executive said the assumption explains the large estimated capital expenditure in green hydrogen relative to blue, which still makes up about a third of estimated hydrogen production in the study's net-zero scenario.

Green hydrogen requires "new infrastructure, new manufacturing capabilities," Knight said. "It's different than the natural gas and carbon capture pathway, where you're already building off of some foundational infrastructure elements that exist."

The "biggest thing that can be done to move the needle" on clean hydrogen deployment is to implement an economywide price on carbon, Knight said.

Given the challenges to achieving such a policy, the study's findings included recommendations for interim solutions, including increasing technology research and development and extending the 10-year lifespan of the current hydrogen production tax credit.

The report did not weigh in on how the US should measure the carbon intensity of green hydrogen — determining the eligibility of many hydrogen producers for federal subsidies — due to a lack of consensus among the study participants.