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I spoke to experts about why the nascent industry is nothing like other climate solutions.
Is hydrogen really that different from an electric vehicle or a heat pump?
This is the provocative question raised by a letter sent to the U.S. Treasury Department last week by a hydrogen industry group, the latest salvo in an ongoing debate over the rules for a new tax credit for clean hydrogen that was created by the Inflation Reduction Act.
I’ve been covering this debate since December, when the public comment period for the rules first closed, and it has only grown fiercer as everyone awaits the Department’s decision. Clean hydrogen is essential to reduce emissions from fertilizer production, and likely a number of other industries, such as aviation, shipping, and steelmaking. But climate advocates and clean energy experts warn that producing hydrogen using electricity, a method incentivized by the tax credit, could actually increase greenhouse gas emissions unless the electricity comes from new wind, solar, or other carbon-free generators.
Industry groups say the opposite is true. Last week’s letter, penned by the Fuel Cell & Hydrogen Energy Association argued that this so-called “additionality” rule would “stifle the clean hydrogen market by adding unreasonable costs and delays,” thereby hurting the United States’ climate goals. The letter was signed by more than 50 companies and organizations, including Plug Power, Constellation Energy, Baker Hughes, the Chamber of Commerce, and General Motors,
When the government hands out subsidies for electric vehicles and heat pumps, it doesn’t require recipients to erect solar arrays, the letter points out. “It would be arbitrary and unfounded to presume hydrogen to have any more detrimental impact to the efforts to decarbonize than any other electric load,” it says.
On the surface, the comparison is compelling. But when I ran it by proponents of additionality, the logic broke down very quickly. And it’s worth talking about why hydrogen plants are, for a number of reasons, nothing like those other climate solutions, because the answers get to the heart of some of the risks and trade-offs of scaling up this new industry.
The Inflation Reduction Act explicitly says that hydrogen companies must meet certain emission thresholds to qualify for the tax credit, taking into account the “lifecycle greenhouse gas emissions” of production. It does not say that for electric vehicles or heat pumps.
The law establishes a tiered system, where hydrogen producers can earn more money depending on how low their emissions are. But researchers like Jesse Jenkins, a macro-scale energy systems engineer at Princeton University, have calculated that without additionality, electrolysis, an electricity-intensive method of making clean hydrogen, will induce so much new carbon pollution that it won’t even meet the minimum threshold to qualify for the credit.
That’s because when you add demand to the grid without adding any new energy supply, it’s almost guaranteed to cause a natural gas or coal plant to run more. Those are the only power plants we have right now that are capable of increasing their output to meet demand — especially at times of day when wind and solar are not available.
If companies are allowed to sign contracts with existing wind farms or nuclear power plants to qualify for the tax credit, this would simply rearrange the paperwork about who “owns” these resources. It wouldn’t change the outcome in the real world, where more coal would be shoveled into a power plant, spewing more carbon into the atmosphere. Jenkins’ lab modeled the long-term effects on energy markets and found that coal and natural gas plants that might have otherwise closed could even be kept open longer because of the increased demand for power.
“The letter does not even attempt to argue that a lack of additionality would be compatible with the emissions thresholds established by the law,” he said in an email.
Jenkins added that the law references a section of the Clean Air Act which defines “lifecycle greenhouse gas emissions” as “including direct emissions and significant indirect emissions.” (Emphasis added by Jenkins.) “This is simply the letter of the law,” he said. “Take it up with Congress!”
There’s a good reason Congress made this distinction.
Yes, the new electric load from EV charging and heat pumps will also often be met by firing up more fossil fuel power plants in the near term. However, electric vehicles and heat pumps are so much more efficient than the combustion engines and natural gas furnaces they replace, that they almost always reduce emissions regardless of where the electricity comes from.
The Department of Energy estimates that in Wyoming, for example, where more than 75% of electricity comes from coal, an electric vehicle’s annual carbon footprint would be less than half that of a gas-powered vehicle. And homeowners who replace their gas furnaces with heat pumps would reduce their emissions in at least 46 states, according to a 2020 study by the clean energy research organization RMI.
Electrolysis, on the other hand, is not more efficient than the reformation of natural gas, which is the carbon-intensive way most hydrogen is made today. Jenkins and others estimate that hydrogen plants would produce twice as many emissions as that process if they just plug into the grid, without bringing any new, clean electricity online.
Additionality proponents argue that it would be a huge mistake to subsidize the production of a fuel that does not have lower emissions than what it replaces. “If that is the final outcome,” said Jenkins, “the hydrogen subsidy will go down in history as a costly policy disaster, and the whole concept of ‘green hydrogen’ will become a farce.”
Conceptually, producing hydrogen is totally different from buying an electric car. “An electrolyser is not an end use appliance like an EV or a heat pump – it’s an intermediate step in the energy supply chain,” said Morgan Rote, director of U.S. climate policy at the Environmental Defense Fund.
Reaching this intermediate step requires so much energy that the benefits of producing hydrogen depend as much on what we use it for as how it’s made. Rote said that using hydrogen as a fuel for home heating or road transportation would require three to seven times more energy than switching to heat pumps and EVs. Many climate advocates argue that it should be reserved for applications that can’t otherwise run directly on electricity.
Danny Cullenward, a climate economist and research fellow at American University, said concerns about how hydrogen is made and used are “all the more pronounced given the extremely generous subsidy levels” in the tax credit. “Basically, [the tax credit] points a giant funnel of money at a technology that has a critical role, but one that must be carefully tailored to produce short- and long-term benefits.”
Cullenward suggested another reason the government should hold hydrogen producers to a higher standard than EV and heat pump buyers when doling out subsidies: Because it can.
“It's not unreasonable or infeasible to ask projects at the $100 million or $1 billion scale to procure clean energy,” he said. “In contrast, it would be administratively infeasible to ask homeowners to procure clean energy.”
He pointed to a recent analysis by the nonprofit Energy Innovation, which found that subjecting hydrogen producers to tight standards, like an additionality requirement, would not result in “unreasonable costs and delays” as the industry claims. By contrast, the report found that the tax credit is so generous that even with stringent emissions accounting rules like additionality, projects in many parts of the country will be able to sell their hydrogen at or below $1 per kilogram, outcompeting conventional hydrogen.
There are a lot of uncertainties about what it will take to successfully scale up clean hydrogen in the U.S., and disagreement about what the biggest near-term priorities should be.
But one thing that is clear: Clean hydrogen is a unique climate solution with specific risks and tradeoffs that can’t be ignored.
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On America’s new crude record, coal costs, and Hungary’s SMR deal
Current conditions: Coastal storms are pushing water levels on New England’s shores two feet above normal levels • Japan just set a new temperature record of more than 106 degrees Fahrenheit • A cold front is settling over South Africa, bringing gale-forces to KwaZulu-Natal on the east coast.
The Department of Energy issued a report on Tuesday calling into question the global consensus on climate change and concluding that global warming poses less economic risk than previously believed. “The rise of human flourishing over the past two centuries is a story worth celebrating. Yet we are told — relentlessly — that the very energy systems that enabled this progress now pose an existential threat,” Secretary of Energy Chris Wright said in a statement. “Climate change is real, and it deserves attention. But it is not the greatest threat facing humanity.” But scientists whose work appeared in the 151-page report decried an analysis they said “fundamentally misrepresents” their research. I rounded up some comments they’ve made over the past couple of days:
A pumpjack in the Permian Basin.Joe Raedle / Getty Images
U.S. crude oil production surged to a record 13.49 million barrels per day in May, despite concerns about oversupply driving prices down to four-year lows, according to a Reuters analysis of data from the U.S. Energy Information Administration. The milestone represents a win for President Donald Trump, who has repeatedly urged the industry to “drill, baby, drill,” even as rival producers in the Organization of the Petroleum Exporting Countries increased output to maintain market share, making profits difficult to turn in the U.S.
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The Bureau of Ocean Energy Management has rescinded its designated areas for offshore wind development in federal waters. The move de-designated more than 3.5 million acres off the continental shelf in the Gulf of Maine, the New York Bight, California, Oregon, the Central Atlantic, and the Gulf of Mexico for potential wind development.
The agency said it was acting in accordance with Secretary of the Interior Doug Burgum’s order this week to weed out any policies that give preferential treatment to wind and solar. While the de-designation will not affect existing leases, the decision makes permanent the temporary pause on offshore wind leases Trump issued via an executive order on his first day in office in January.
In May, Energy Secretary Chris Wright issued an emergency order directing the utility Consumers Energy to keep Michigan’s J.H. Campbell coal plant operating for another 90 days, through August 20, to meet surging electricity demand on the Midwest’s grid. In a public filing as part of its quarterly earnings announced Thursday, Consumers Energy named the price of complying with the administration's order so far: $29 million. And that’s just the cost of operating the plant through June 30. The company said it plans to recoup the cost from ratepayers. The filing did not indicate what the total cost would be for the full three-month period.
Even before Trump returned to office, coal plant retirements were slowing. As Heatmap’s Matthew Zeitlin wrote last year, “Coal and gas were being retired so steadily over the past 20 years not just because plants were aging, but also because power use was essentially flat from the early 2000s through, essentially, yesterday. This meant that older plants — especially dirty coal plants — became uneconomic to run, especially as natural gas prices began to fall.” Coal plant retirements dropped last year to their lowest level since 2011, according to the Energy Information Administration, though at least as of February they were projected to increase this year again by 65%.
Of all the small modular reactors competing for a shot in the West’s ballyhooed nuclear renaissance, GE-Hitachi Nuclear Energy’s 300-megawatt model is among the most promising. Ontario’s public utility just broke ground on what could be the world’s first BWRX-300s. The Tennessee Valley Authority has plans to build the second set. And Finland, Sweden, Estonia, and Poland are all considering buying their own. Add Hungary to that list. Piggybacking off the Polish project, Hungary on Wednesday signed a letter of intent with Poland’s Synthos Green Energy to back construction of up to 10 BWRX-300 reactors, the U.S. Embassy in Hungary announced. “This is American engineering at its best — the kind of trusted technology that reflects the strength, reliability, and excellence of the American industrial base,” Chargé d’Affaires Robert Palladino said in a speech at the signing event.
The move comes as the U.S. looks to broaden its grip on Europe’s nuclear sector. Westinghouse, the legendary American nuclear developer behind the only two new reactors built from scratch in a generation in the U.S., is building Poland’s first atomic power station. Earlier this week, Slovakia skipped its competitive bidding process and picked Westinghouse to construct its next nuclear plant. But after struggling to build its own reactors at home, the U.S. has to prove it can deliver on the deals.
“Wind farms: Loud, ugly, harmful to nature. Who says that? These giants are standing tall against fossil fuels, rising up out of the ocean like a middle finger to CO2,” Samuel L. Jackson says in a new minute-long TV commercial from Swedish wind giant Vattenfall advertising seaweed snacks from aquatic crops grown on the artificial reefs around the behemoth turbine foundations. It may be one of the most defiant, if expletive-laden, defenses made yet of the industry the Trump administration is bent on drowning.
And more of the week’s most important conflicts around renewable energy.
1. Nantucket County, Massachusetts – The fight over Vineyard Wind is back with a vengeance. But can an aggrieved vacation town team up with conservative legal activists to take down an operating offshore wind project?
2. Henry County, Virginia – A fresh fiasco around a solar farm is renewing animus against solar projects in the Commonwealth of Virginia.
3. Calcasieu Parish, Louisiana – Solar developer Aypa is now suing this parish on the grounds it allegedly used zoning rules in an unfair and biased manner against one of its projects.
4. Outagamie County, Wisconsin – If at first you don’t kill the solar farm, try and go after the substation.
5. La Paz County, Arizona – Republicans in Congress are helping at least one area open up for more solar development.
6. Idaho – The federal government will officially re-do its review of the LS Energy Lava Ridge wind farm.
7. Monterey County, California – The EPA is finally getting more involved in the Moss Landing battery plant cleanup, after the agency declared this week it approved a new comprehensive remediation plan under CERCLA, a law that also governs the Superfund program.
More than $760 million from the Inflation Reduction Act’s Green and Resilient Retrofit Program is still caught in legal limbo — but no one seems to have noticed.
When a federal judge put an injunction on the Trump administration’s efforts to freeze Inflation Reduction Act funding back in April, many grantees were able to pick up their clean energy projects where they left off. But not everyone.
Some 100 low-income housing providers that won more than $760 million in grants and loans from the IRA’s Green and Resilient Retrofit Program to make critical safety and energy upgrades to their buildings are still in limbo. The U.S. Department of Housing and Urban Development will not respond to their questions about if or when projects can move forward, and also fired all of the third-party contractors that had been hired to implement the program.
While these developers are certainly not the only ones locked in a bureaucratic standstill — a lawsuit aiming to unlock money from the Greenhouse Gas Reduction Fund is still wending through the courts, and many states are waiting to hear whether they’ll ever get funding for their home energy retrofit rebate programs — their plight has so far been overlooked, raising the risk that the money could quietly disappear.
The Green and Resilient Retrofit Program addressed a known funding gap for affordable housing preservation. Low-income housing providers operate on tight margins and often struggle to pay for regular maintenance, let alone to make upgrades to their buildings. On top of that, many of the buildings that receive other subsidies from HUD are barred from taking on debt for improvements.
“So what do you do if your building is now 40 years old and it needs upgrades?” Juliana Bilowich, the senior director of housing operations and policy for Leading Age, a nonprofit focused on affordable senior housing, said to me. “There are some housing communities that haven’t had air conditioning for years because the HUD budget won’t support it, or it’s broken and it needs to be upgraded, but there’s no funding they can get to do that.”
That was the case for The Towers, a 20-story senior living center in New Haven, Connecticut, except the building was nearly 60 years old. While its individual apartments have air conditioning, there’s no HVAC system serving the hallways where residents have to wait for the elevator. “The summertime is horrible,” Gus Keach-Longo, the president and CEO of The Towers, told me.
While the building has made cosmetic improvements over the years, it hasn’t done major efficiency or structural work outside of installing LED lightbulbs, Keach-Longo told me. A recent assessment of the building scored it at a 7 out of 100 for energy efficiency. In addition to an HVAC solution, the building needed a new roof and windows.
The Green and Resilient Retrofit Program looked like it could be a lifeline for Towers residents. For one, it was uniquely flexible. The funds could be used for a wide range of projects, as long as they reduced the building’s emissions, improved its energy or water efficiency, or made it more resilient to flooding, extreme heat, or other weather-related hazards.
Billowich called the program a “linchpin” for buildings that didn’t have the ability to go to the bank and get a loan. “This was the way that housing communities were going to be able to continue operating.” Applicants planned to insulate their pipes so they didn’t burst during a cold front, or replace their windows to save money on energy and protect residents from wildfire smoke. The funds could also be leveraged to raise additional money for other kinds of repairs. The resulting energy savings could then be put toward expanding services for residents.
The $1 billion program was divided into three streams of funding. A building owner could get up to $750,000 per property under the “Elements” stream to supplement existing retrofit plans with green upgrades like solar panels. The “Leading Edge” stream supplied up to $10 million for more involved projects and required the building to ultimately meet a green certification, such as Passive House or LEED. The “Comprehensive” stream was designed to facilitate more complicated, full-building retrofits that required significant technical assistance to plan. Grantees could get up to $80,000 per unit, or $20 million total, but they would have to work with HUD-employed contractors that would scope out and oversee the project.
Department of Housing and Urban Development
The Towers applied for a Comprehensive grant and was one of just a few properties to win the full $20 million. But since signing a contract for the award last July, Keach-Longo said his team has “heard almost nothing.” They were supposed to be assigned a Multifamily Assessment Contractor, or MAC, the term for the HUD-employed contractor that would oversee the project, but the Biden administration never got to it. When the Trump administration came in, it halted the program as part of the larger IRA funding freeze. On February 12, HUD terminated its contracts with all five of the companies it had selected to serve as MACs, including big consulting firms like Deloitte and Ernst and Young. HUD did not respond to emailed questions for this story.
Margaret Salazar, the CEO of REACH Community Development in Oregon, has also been “stuck in a holding pattern” regarding her organization’s two Comprehensive awards. “We want to do right by what we’ve communicated with residents that we are making these repairs. We want to involve them in the process. And now we’re hanging out there without any path forward,” she told me.
When the funding freeze first went into effect in March, an affordable housing operator in the Boston area called the Codman Square Neighborhood Development Corporation, which had won an Elements grant, joined a lawsuit filed by five other nonprofits that challenged Trump’s pause. In April, the district court judge overseeing the case issued a preliminary injunction barring HUD and other agencies from maintaining any program-wide freezes.
The agency complied, in part. HUD sent a letter to awardees notifying them of the injunction and resumed processing reimbursements for Elements and Leading Edge grants. Ron Budynas, the chief operating officer for an affordable senior housing provider called Wesley Living, which won 10 separate awards from the program, told me he’s been able to proceed with his three Elements projects. He’s already completed one, upgrading an apartment complex in Lexington, Tennessee, with high efficiency heat pumps, and is now working on the others, installing solar and battery backup systems at two other properties in Tennessee.
His remaining seven are Comprehensive projects, however, and are “a whole different story,” he said. “Every time I’ve written to the [Green and Resilient Retrofit Program] staff, the only answer I get back from them on the Comprehensive grants is ’we’re still waiting for direction from headquarters.’”
Budynas was much further along than Keach-Longo at The Towers by the time Trump came into office. He said he was already working with a MAC and had completed a capital needs assessment on five of the properties; the next step was to scope out the work. He told me he contacted HUD after the court’s injunction and asked whether his team could put together the scope for one project to move it forward, but the agency told him no, since the program rules say that the MAC has to do it — even though it had fired all of the MACs.
Then the reconciliation bill that Congress passed earlier this month rescinded $138 million from the program — money set aside for administrative costs and technical assistance, i.e. to pay for the MACs. “How do we go forward if the MAC has to do the scope and they don’t have any money to pay the MAC?” Budynas said. Six of the seven Wesley Living properties that won Comprehensive awards receive HUD subsidies that preclude them from using other types of financing, “so there’s no way for us to update those properties if the Comprehensive doesn’t go forward,” he said.
It’s unclear whether any of this will be addressed in the lawsuit, since the only plaintiff in the case that challenged HUD — Codman Square — has been able to progress with its Elements award. I reached out to Democracy Forward, the nonprofit legal organization that is representing the plaintiffs, but it declined to comment.
Beth Neitzel, a partner at the law firm Foley Hoag, which is not involved in the case, told me this might be an unfortunate gray area for the Comprehensive award winners. She said the lawyers could argue that HUD is violating the terms of the injunction, but the government could respond that no one in the case is being injured by its actions.
“I don’t know if that will carry the day. It seems pretty clear they are violating the terms of the preliminary injunction by not unfreezing that fund,” Neitzel said. “But there is that potential wrinkle that they will argue that’s not an issue here because nobody here has standing to challenge that.” As a matter of law, she added, it’s irrelevant that HUD fired the contractors overseeing the program since the program itself was congressionally mandated.
Meanwhile the grantees wait, and the consequences of the delay stack up. Salazar, of REACH in Oregon, told me the organization missed out on an opportunity to get additional funding from the Portland Housing Bureau because it hadn’t been able to scope out the project with its MAC.
“This isn’t just money on the line. This is the future of these affordable housing communities,” Bilowich said. “That is a blue issue, that’s a red issue, that’s everybody’s issue. And so we need a solution, and this was the most efficient and cost-effective solution that everybody had come up with.”