The Digest’s 2024 Multi-Slide Guide to the State of Hydrogen

February 07, 2024

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by Jim Lane (Biofuels Digest) In this presentation, we explored the challenges faced by global hydrogen producers in shifting towards low carbon hydrogen — new technologies for green hydrogen, new carbon capture opportunities to make blue hydrogen, and much more, including how policy and finance are coming together to support the build-out. The Digest’s Jim Lane presented these slides at ABLC Connect. READ MORE WATCH recorded presentation

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Excerpt from Politico Pro: The heads of Exxon Mobil, Saudi Aramco and global trading company Gunvor all said the high cost of producing clean hydrogen was preventing it from displacing oil and natural gas. -- Oil industry executives said on Monday (March 18, 2024) they are skeptical that hydrogen can be used as a viable alternative fuel, potentially throwing a wrench into governments’ climate goals.

The heads of Exxon Mobil, Saudi Aramco and global trading company Gunvor all said the high cost of producing clean hydrogen was preventing it from displacing oil and natural gas. Their pessimism comes as Europe and the United States have created incentives aimed at making the fuel a linchpin in reducing greenhouse gas emissions at industrial sites that are ill-suited to use renewable energy.

Exxon Chief Executive Officer and Chairman Darren Woods told CERAWeek conference in Houston he doubted the United States would meet its goal of reaching net zero carbon emissions in 2050 — partly because the cost green hydrogen made from renewable energy was too high for customers.

“One of the challenges here is while society wants to see emissions reduced, nobody wants to pay for it,” Woods said. READ MORE

Excerpt from E&E News Energywire: Following bleak forecasts for the low-carbon fuel from Exxon Mobil and Saudi Aramco at the CERAWeek by S&P Global conference, DOE Undersecretary for Infrastructure David Crane said Tuesday that hydrogen will be an “absolutely key pillar” in U.S. decarbonization for decades to come.

Crane championed an emerging federal hydrogen offtake program designed to boost production of the fuel from DOE-sponsored hydrogen hubs, which are currently developing projects with $7 billion from the infrastructure law. Former Energy Secretary Ernest Moniz, a key organizer of the offtake program, also said final plans for it would be publicized before the end of September.

“The United States government is going to do what it takes to make hydrogen happen,” Crane said at the conference. “We know it’s not a smooth path — there are issues on permitting and things like that. We are going to try to tackle every issue that stands between hydrogen and commercial realization of hydrogen.”

In an interview with E&E News, Energy Secretary Jennifer Granholm added that the Treasury Department would come out with a “final rule shortly,” referring to guidance for companies to obtain new hydrogen tax credits under the Inflation Reduction Act known as 45V. The administration is evaluating 30,000 comments on a draft proposal, Granholm said.

“We want to make sure these hydrogen hubs that we have announced across the country are successful,” said Granholm.

The comments came after Exxon CEO Darren Woods and other executives questioned the viability of clean hydrogen Monday at the conference, saying it’s too reliant on subsidies. “There’s not a huge incentive to drive low carbon hydrogen over hydrogen sources of today,” Woods said.

The vast majority of U.S. hydrogen is produced by fossil fuels like natural gas in an emissions-heavy process. By 2030, the Biden administration is targeting 10 million metric tons per year of “clean” hydrogen — an amount roughly equal to all hydrogen produced in the U.S. today. The administration considers both “green” hydrogen produced with renewables and “blue” hydrogen tied to carbon capture technology to be clean.

In January, DOE tapped the EFI Foundation, a think tank run by Moniz, to stand up the $1 billion hydrogen purchase program to ensure hydrogen produced at nationwide hubs can be sold. The DOE hubs bring together a wide range of companies, government agencies, academia and nonprofits.

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On Monday, Woods, Exxon’s CEO, said there was “hesitancy” around hydrogen. Torbjörn Törnqvist, chair of the trading firm Gunvor, said the fuel source was “hype.”

Moniz addressed the controversy at CERAWeek, saying, “There’s just no way around it.”

“Treasury put out a proposal that I would say most people thought was narrower in its qualifications for carbon-free electricity than was expected,” Moniz said.

Along with setting the timeline for EFI to unveil the hydrogen purchase program, he said the organization is currently considering how to best use the $1 billion in funding.

According to Moniz, a potential model for hydrogen is a United Kingdom program to pay renewable electricity producers for the difference between production costs and the average sale price for electricity as a way to improve “bankability of projects.” Still, he said that template may “not be the right match here.”

Bryan Fisher, managing director of climate-aligned industries at the environmental group RMI, which is a partner in the consortium led by EFI, said current Inflation Reduction Act incentives still leave many hydrogen projects short of profitability. The $1 billion in demand-side funding for the offtake program is “a start, but not a panacea,” he said in an interview. Moniz said the funding was a “relatively modest budget.”

Oil industry, hydrogen champion?

Despite the concerns about the industry’s viability, some oil majors are moving forward with blue and green hydrogen projects.

“The people who are investing most in hydrogen right now are the American oil and gas industry,” said Mike Sommers, president of the trade group American Petroleum Institute, in an interview. He added that API member companies met with White House clean energy adviser John Podesta in recent days to express concern about the current 45V credit guidance.

“They have an opportunity to get this right. And I think we’re making progress,” he said. “There are billions of dollars at stake here.”

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Chevron CEO Mike Wirth also said Tuesday that his company has drilled test wells in Southeast Texas to collect data on prospects for blue hydrogen in the region. Chevron is on track to finish the Advanced Clean Energy Storage project, a green hydrogen initiative in Utah the company acquired a majority stake in last September, he said. The project envisions converting and storing up to 100 metric tons of fuel daily.

The project, a partnership with Mitsubishi Power Americas, will use renewable electricity during periods of low demand to power an electrolyzer to produce hydrogen and store it in a massive salt cavern. It is on track to be commercially operational in 2025, according to Wirth.

“It can be scaled up over time if we can develop additional markets and find additional customers,” he said.

Murray Auchincloss, CEO of BP, said his team is being cautious about the pace of rolling out hydrogen projects, considering differing incentives and global markets. But he said he’s optimistic about some projects, especially in Europe.

“The fiscal incentives in place are starting to solidify,” he said. “But we’ll carefully move these things forward.”

Frank Wolak, president of the Fuel Cell and Hydrogen Energy Association, said consternation from industry isn’t driving away investments in the industry.

“I don’t see any investment flight,” he said in an interview. “I think it’s more of a wait and see.”

For smaller hydrogen companies, warnings from leaders in the oil industry about the difficulty of scaling up hydrogen is reminiscent of earlier technologies that eventually gained traction.

“The big boys over there, they’re looking down their noses saying this can’t be done, it’s going to take forever, let’s be realistic, let’s keep on doing what we’ve always been doing for the past 100 years,” Raffi Garabedian, CEO of Electric Hydrogen, which designs and builds green hydrogen systems, said of oil majors. “I heard that 12 years ago in the solar industry. They’re wrong, but we have to get started.” READ MORE

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