➤ The need to balance variable renewable resources and reliably decarbonize energy systems is driving new interest in hydrogen.

➤ Near-term hydrogen generation and storage projects in Texas and Utah could offer potential pathways for carbon-free energy systems.

➤ Tax incentives, deployment targets and utility commitments will be key commercialization drivers.

S&P Global Market Intelligence spoke with Paul Browning, CEO of Mitsubishi Power Americas Inc., an affiliate of Japan's Mitsubishi Heavy Industries Ltd. and an emerging supplier of hydrogen generation and storage technologies, and Paul Hinnenkamp, COO at utility Entergy Corp., in a joint interview on the future of hydrogen. The companies are exploring hydrogen and battery storage projects throughout Entergy's four-state service territory in Arkansas, Louisiana, Mississippi and Texas.

This interview has been edited for length and clarity.

S&P Global Market Intelligence: There is a lot of talk about hydrogen these days. What is behind the resurgence of interest?

Paul Browning: We now have utilities with enough renewables on their grids that they have a real need for long-duration storage. On top of that, some of the decarbonization targets that utilities like Entergy are making, that's also new. That combination of having real market signals that the grid needs storage, through renewable energy curtailments and duck-curve energy pricing, as well as the commitments by major utilities to decarbonize their power grids, is new and is really driving the interest in hydrogen.

Paul Hinnenkamp: As intermittent renewables get built out, the inherent risk of blackouts is very real and it speaks to the need for flexible capacity you can count on, i.e., gas turbines. If we look at our commitment of net-zero carbon emissions in 2050, the path to get there with that capacity is green hydrogen. It's real today as an opportunity for us.

How real, how big is this opportunity?

Hinnenkamp: We just finished two large combined-cycle plants, and a third in Texas is nearing completion. We would be looking at those, as well as any new ones, to convert to hydrogen. I think the potential is significant, not only to convert new and existing generation assets to hydrogen. It's the potential for storage, both battery and hydrogen. It's the potential for electrolysis facilities, powered either by renewables or baseload nuclear. We have laid out, conceptually, what it will take to get to our 2050 target with this hydrogen effort. It's not an overnight solution. It will take time and it will take work, but it's certainly a path we see as very viable, very achievable.

Browning: The three projects that we've already worked on together are about 1 GW each, and a new project in Texas is about 1.2 GW. So we're not talking about small, demonstration kind of projects. We're talking about major utility-scale storage and power generation. Also, we have a strategy to decarbonize the entire Western Interconnect, based on the Intermountain project in Delta, Utah, with the Los Angeles Department of Water and Power. These are game-changing projects that have wide implications for achieving the net-zero carbon targets in different parts of the U.S. and around the world. We are in the early stages of a multidecade rollout of hydrogen that's really going to be, I believe, the linchpin that helps us achieve not just the power-sector decarbonization targets but the rest of our uses of carbon-emitting fuels as well.

What is the role of the existing hydrogen infrastructure overlapping with Entergy's service area in southeast Texas?

Hinnenkamp: There is a lot of opportunity with that infrastructure. In fact, we own storage caverns in that area, and we have started exploring how to store hydrogen in one of those caverns, and there is existing hydrogen pipeline infrastructure in that area. For the Orange County Power Station, for example, which we have proposed in the Sabine area of Texas, we've started talking to hydrogen providers about providing hydrogen to that asset. We would initially go 30% hydrogen, 70% natural gas upon commercial operation in 2026, and we would design it upfront to get to 100% hydrogen at some point. So, we would start there, and then over time, we would look to expand that infrastructure.

Browning: We've been using hydrogen now for over three decades to desulfurize motor fuels in the refining industry. There's decades of experience storing hydrogen in salt dome caverns like the three existing ones in Texas, and there are over 500 miles of existing hydrogen pipelines that connect all of those storage domes to refineries. So, transporting hydrogen through pipelines is also a well-known, well-established technology.

Still, renewable hydrogen is not common today. How do you change that?

Browning: Where we've got more work to do is in the gas turbines. We've used nearly 100% hydrogen in gas turbines in the past using older combustion technology that was not as low in emissions of pollutants like nitrogen oxide and carbon monoxide. But with the most recent combustion systems that are extremely low emission of those other pollutants, those right now are capable of using about 30% hydrogen. We're working on giving them the capability to use 100% hydrogen. Another important area is electrolysis, a relatively small industry. What we expect to see as we get economies of scale with electrolysis is the same kind of dramatic cost reductions that we saw with solar panels, wind turbines and lithium-ion batteries. Finally, it's important to see hydrogen today as a storage technology and compare its costs to other storage technologies rather than as a fuel because it's going to take us some time to get the overall cost to be competitive, for example, with natural gas.

How does hydrogen compare on cost with other storage today?

Browning: For short-duration storage, four hours or less, right now at today's prices, lithium-ion batteries are lower cost. We have a lithium-ion business that's just booming. But when you get to 10 or 12 hours, then the cost comparison flips. So, we think both technologies are going to be really important to the future. Day-to-day, week-to-week, month-to-month and seasonal storage are going to be very important.

Europe recently set some aggressive targets to help scale up green hydrogen. Does the U.S. need to follow suit?

Browning: It's decarbonization targets by utilities that are driving this in many cases. But one thing that we would really like to see is an investment tax credit for stand-alone storage. We think that would really help move the needle. Also, something analogous to renewable portfolio standards would be very helpful.

Hinnenkamp: There is certainly a role for smart policy for what we're trying to achieve, but I would say policy is not driving us.

What is hydrogen's biggest hurdle?

Browning: There's a little bit of a chicken-and-egg issue. The underground infrastructure won't get built until there's facilities above ground that need hydrogen. And the facilities above ground won't get built unless there's an underground infrastructure to provide the hydrogen. That's why you're seeing the early activity happening in places like Texas and Utah, where a lot of that underground infrastructure already exists or is low cost to put in place, and the above-ground need for decarbonization is very real. In other parts of the country, for example, PJM Interconnection and New York ISO, the underground infrastructure does not exist so we're putting hydrogen storage on-site in smaller quantities, sometimes above ground, sometimes below. That power demand then will allow an investor to make the investment in large-scale, below-ground infrastructure. So, I think we've got that chicken-and-egg problem pretty well addressed.

Hinnenkamp: I mean, straight up, there's a significant amount of work to be done. I need to get the economics right, that's the big one, and I need to get support from customers, communities, regulators and other stakeholders. I need to get a little further down the road on bending that cost curve on electrolysis and then being able to take that and power a unit. And I need to demonstrate that. I think the reliability will get there. It's just a matter of time.

Browning: We're sort of where we were five to eight years ago on solar, maybe where we were a decade ago on wind, or five years ago on lithium-ion batteries, where the industry is starting to scale, and you can see a very clear cost trajectory as a result of that scale. But it hasn't happened yet, and so until we really see it take off and scale … well, seeing is believing.

What does your crystal ball say about hydrogen in the next few years?

Browning: The next few years are actually crystal clear to me. We already have full notice to proceed on the project in Utah. It's got a 2025 commercial operation date. We've guaranteed the customer that that power plant is going to be able to use 30% hydrogen in 2025 and the customer has made a commitment that no later than 2045 it will be ready to convert to 100% hydrogen. With Entergy, that Orange County project has a delivery date of 2026. Assuming they get through the approvals, we'll be off and running on that project as well. We also have projects in the Netherlands, in Australia and Japan. That's the exciting thing. We have real projects, with real commercial operation dates, that we're really working on.

Hinnenkamp: My crystal ball says we have real projects that are on the table, that need to get developed, need to get selected and need to get approved. And should they, I think we will see some power plants powered by hydrogen, by us, this decade. I don't have a date yet for 100% green hydrogen on one of those power plants, but it's certainly our aspiration to have that delivered as soon as we can, assuming all the economics and technology are there.