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.
1. Congress said so.
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!”
2. The laws of thermodynamics also say so.
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.”
3. Hydrogen is a means to an end.
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.”
4. Administratively, it’s just different.
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.
IEA
