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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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Amarillo-area residents successfully beat back a $600 million project from Xcel Energy that would have provided useful tax revenue.
Power giant Xcel Energy just suffered a major public relations flap in the Texas Panhandle, scrubbing plans for a solar project amidst harsh backlash from local residents.
On Friday, Xcel Energy withdrew plans to build a $600 million solar project right outside of Rolling Hills, a small, relatively isolated residential neighborhood just north of the city of Amarillo, Texas. The project was part of several solar farms it had proposed to the Texas Public Utilities Commission to meet the load growth created by the state’s AI data center boom. As we’ve covered in The Fight, Texas should’ve been an easier place to do this, and there were few if any legal obstacles standing in the way of the project, dubbed Oneida 2. It was sited on private lands, and Texas counties lack the sort of authority to veto projects you’re used to seeing in, say, Ohio or California.
But a full-on revolt from homeowners and realtors apparently created a public relations crisis.
Mere weeks ago, shortly after word of the project made its way through the small community that is Rolling Hills, more than 60 complaints were filed to the Texas Public Utilities Commission in protest. When Xcel organized a public forum to try and educate the public about the project’s potential benefits, at least 150 residents turned out, overwhelmingly to oppose its construction. This led the Minnesota-based power company to say it would scrap the project entirely.
Xcel has tried to put a happy face on the situation. “We are grateful that so many people from the Rolling Hills neighborhood shared their concerns about this project because it gives us an opportunity to better serve our communities,” the company said in a statement to me. “Moving forward, we will ask for regulatory approval to build more generation sources to meet the needs of our growing economy, but we are taking the lessons from this project seriously.”
But what lessons, exactly, could Xcel have learned? What seems to have happened is that it simply tried to put a solar project in the wrong place, prizing convenience and proximity to an existing electrical grid over the risk of backlash in an area with a conservative, older population that is resistant to change.
Just ask John Coffee, one of the commissioners for Potter County, which includes Amarillo, Rolling Hills, and a lot of characteristically barren Texas landscape. As he told me over the phone this week, this solar farm would’ve been the first utility-scale project in the county. For years, he said, renewable energy developers have explored potentially building a project in the area. He’s entertained those conversations for two big reasons – the potential tax revenue benefits he’s seen elsewhere in Texas; and because ordinarily, a project like Oneida 2 would’ve been welcomed in any of the pockets of brush and plain where people don’t actually live.
“We’re struggling with tax rates and increases and stuff. In the proper location, it would be well-received,” he told me. “The issue is, it’s right next to a residential area.”
Indeed, Oneida 2 would’ve been smack dab up against Rolling Hills, occupying what project maps show would be the land surrounding the neighborhood’s southeast perimeter – truly the sort of encompassing adjacency that anti-solar advocates like to describe as a bogeyman.
Cotton also told me he wasn’t notified about the project’s existence until a few weeks ago, at the same time resident complaints began to reach a fever pitch. He recalled hearing from homeowners who were worried that they’d no longer be able to sell their properties. When I asked him if there was any data backing up the solar farm’s potential damage to home prices, he said he didn’t have hard numbers, but that the concerns he heard directly from the head of Amarillo’s Realtors Association should be evidence enough.
Many of the complaints against Oneida 2 were the sort of stuff we’re used to at The Fight, including fears of fires and stormwater runoff. But Cotton said it really boiled down to property values – and the likelihood that the solar farm would change the cultural fabric in Rolling Hills.
“This is a rural area. There are about 300 homes out there. Everybody sitting out there has half an acre, an acre, two acres, and they like to enjoy the quiet, look out their windows and doors, and see some distance,” he said.
Ironically, Cotton opposed the project on the urging of his constituents, but is now publicly asking Xcel to continue to develop solar in the county. “Hopefully they’ll look at other areas in Potter County,” he told me, adding that at least one resident has already come to him with potential properties the company could acquire. “We could really use the tax money from it. But you just can’t harm a community for tax dollars. That’s not what I’m about.”
I asked Xcel how all this happened and what their plans are next. A spokesperson repeatedly denied my requests to discuss Oneida 2 in any capacity. In a statement, the company told me it “will provide updates if the project is moved to another site,” and that “the company will continue to evaluate whether there is another location within Potter County, or elsewhere, to locate the solar project.”
Meanwhile, Amarillo may be about to welcome data center development because of course, and there’s speculation the first AI Stargate facility may be sited near Amarillo, as well.
City officials will decide in the coming weeks on whether to finalize a key water agreement with a 5,600-acre private “hypergrid” project from Fermi America, a new company cofounded by former Texas governor Rick Perry, says will provide upwards of 11 gigawatts to help fuel artificial intelligence services. Fermi claims that at least 1 gigawatt of power will be available by the end of next year – a lot of power.
The company promises that its “hypergrid” AI campus will use on-site gas and nuclear generation, as well as contracted gas and solar capacity. One thing’s for sure – it definitely won’t be benefiting from a large solar farm nearby anytime soon.
And more of the most important news about renewable projects fighting it out this week.
1. Racine County, Wisconsin – Microsoft is scrapping plans for a data center after fierce opposition from a host community in Wisconsin.
2. Rockingham County, Virginia – Another day, another chokepoint in Dominion Energy’s effort to build more solar energy to power surging load growth in the state, this time in the quaint town of Timberville.
3. Clark County, Ohio – This county is one step closer to its first utility-scale solar project, despite the local government restricting development of new projects.
4. Coles County, Illinois – Speaking of good news, this county reaffirmed the special use permit for Earthrise Energy’s Glacier Moraine solar project, rebuffing loud criticisms from surrounding households.
5. Lee County, Mississippi – It’s full steam ahead for the Jugfork solar project in Mississippi, a Competitive Power Ventures proposal that is expected to feed electricity to the Tennessee Valley Authority.
A conversation with Enchanted Rock’s Joel Yu.
This week’s chat was with Joel Yu, senior vice president for policy and external affairs at the data center micro-grid services company Enchanted Rock. Now, Enchanted Rock does work I usually don’t elevate in The Fight – gas-power tracking – but I wanted to talk to him about how conflicts over renewable energy are affecting his business, too. You see, when you talk to solar or wind developers about the potential downsides in this difficult economic environment, they’re willing to be candid … but only to a certain extent. As I expected, someone like Yu who is separated enough from the heartburn that is the Trump administration’s anti-renewables agenda was able to give me a sober truth: Land use and conflicts over siting are going to advantage fossil fuels in at least some cases.
The following conversation was lightly edited for clarity.
Help me understand where, from your perspective, the generation for new data centers is going to come from. I know there are gas turbine shortages, but also that solar and wind are dealing with headwinds in the United States given cuts to the Inflation Reduction Act.
There are a lot of stories out there about certain technologies coming out to the forefront to solve the problem, whether it’s gas generation or something else. But the scale and the scope of this stuff … I don’t think there is a silver bullet where it’s all going to come from one place.
The Energy Department put out a request for information looking for ways to get to 3 gigawatts quickly, but I don’t think there is any way to do that quickly in the United States. It’s going to take work from generation developers, batteries, thermal generation, emerging storage technologies, and transmission. Reality is, whether it is supply chain issues or technology readiness or the grid’s readiness to accept that load generation profile, none of it is ready. We need investment and innovation on all fronts.
How do conflicts over siting play into solving the data center power problem? Like, how much of the generation that we need for data center development is being held back by those fights?
I do have an intuitive sense that the local siting and permitting concerns around data centers are expanding in scope from the normal noise and water considerations to include impacts to energy affordability and reliability, as well as the selection of certain generation technologies. We’ve seen diesel generation, for example, come into the spotlight. It’s had to do with data center permitting in certain jurisdictions, in places like Maryland and Minnesota. Folks are realizing that a data center comes with a big power plant – their diesel generation. When other power sources fall short, they’ll rely on their diesel more frequently, so folks are raising red flags there. Then, with respect to gas turbines or large cycle units, there’s concerns about viewsheds, noise and cooling requirements, on top of water usage.
How many data center projects are getting their generation on-site versus through the grid today?
Very few are using on-site generation today. There’s a lot of talk about it and interest, but in order to serve our traditional cloud services data center or AI-type loads, they’re looking for really high availability rates. That’s really costly and really difficult to do if you’re off the grid and being serviced by on-site generation.
In the context of policy discussions, co-location has primarily meant baseload resources on sites that are serving the data centers 24/7 – the big stories behind Three Mile Island and the Susquehanna nuclear plant. But to be fair, most data centers operational today have on-site generation. That’s their diesel backup, what backstops the grid reliability.
I think where you’re seeing innovation is modular gas storage technologies and battery storage technologies that try to come in and take the space of the diesel generation that is the standard today, increasing the capability of data centers in terms of on-site power relative to status quo. Renewable power for data centers at scale – talking about hundreds of megawatts at a time – I think land is constraining.
If a data center is looking to scale up and play a balancing act of competing capacity versus land for energy production, the competing capacity is extremely valuable. They’re going to prioritize that first and pack as much as they can into whatever land they have to develop. Data centers trying to procure zero-carbon energy are primarily focused on getting that energy over wires. Grid connection, transmission service for large-scale renewables that can match the scale of natural gas, there’s still very strong demand to stay connected to the grid for reliability and sustainability.
Have you seen the state of conflict around renewable energy development impact data center development?
Not necessarily. There is an opportunity for data center development to coincide with renewable project development from a siting perspective, if they’re going to be co-located or near to each other in remote areas. For some of these multi-gigawatt data centers, the reason they’re out in the middle of nowhere is a combination of favorable permitting and siting conditions for thousands of acres of data center building, substations and transmission –
Sorry, but even for projects not siting generation, if megawatts – if not gigawatts – are held up from coming to the grid over local conflicts, do you think that’s going to impact data center development at all? The affordability conversions? The environmental ones?
Oh yeah, I think so. In the big picture, the concern is if you can integrate large loads reliably and affordably. Governors, state lawmakers are thinking about this, and it’s bubbling up to the federal level. You need a broad set of resources on the grid to provide that adequacy. To the extent you hold up any grid resources, renewable or otherwise, you’re going to be staring down some serious challenges in serving the load. Virginia’s a good example, where local groups have held up large-scale renewable projects in the state, and Dominion’s trying to build a gas peaker plant that’s being debated, too. But in the meantime, it is Data Center Alley, and there are gigawatts of data centers that continue to want to get in and get online as quickly as possible. But the resources to serve that load are not coming online in time.
The push toward co-location probably does favor thermal generation and battery storage technologies over straight renewable energy resources. But a battery can’t cover 24/7 use cases for a data center, and neither will our unit. We’re positioned to be a bridge resource for 24/7 use for a few years until they can get more power to the market, and then we can be a flexible backup resource – not a replacement for the large-scale and transmission-connected baseload power resources, like solar and wind. Texas has benefited from huge deployments of solar and wind. That has trickled down to lower electricity costs. Those resources can’t do it alone, and there’s thermal to balance the system, but you need it all to meet the load growth.