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Final yr’s Inflation Discount Act (IRA) highlighted clear hydrogen’s essential position in addressing local weather change by providing beneficiant incentives for the burgeoning know-how.
Now, the U.S. Treasury has to outline what “clear hydrogen” really means, and with $100 billion in hydrogen tax credit on the desk, organizations are eager to have a say. The Treasury has already acquired over 200 feedback, on which it intends to subject steering by the summer season.
In a nutshell, the controversy is raging internally inside the power business, with totally different gamers advocating for various levels of the most affordable, quickest definition that may encourage giant funding and enormous returns. Alternatively, local weather consultants, researchers and NGOs fear that if achieved flawed, these incentives might result in extra emissions. NRDC estimates that weak steering might result in subsidizing initiatives with twice the emission depth of standard hydrogen.
Listed below are the definitions divided into 4 buckets.
Co-locating electrolysis with clear power
How it could work: An electrolyzer is positioned someplace near a clear power plant (photo voltaic, wind, hydro, nuclear), and runs immediately off clear power.
I confess, earlier than desirous about this, I pictured this to be how inexperienced hydrogen would work, as “inexperienced” typically refers to hydrogen created from completely clear power. “Clear” hydrogen, alternatively, has a bit extra flexibility, because it might embrace hydrogen constituted of soiled power with carbon seize.
The upshot: Whereas demonstrably clear, this technique is just not scalable on the degree wanted for clear hydrogen to displace standard hydrogen in the present day — a lot much less ramp as much as different purposes.
“[Co-locating electrolysis with clean energy] will work in a really small variety of geographies, and at a particularly excessive price,” stated Lee Taylor, CEO of REsurety, who spoke to me about these 4 buckets. “You simply will not get the expansion of the hydrogen business if all of it needs to be co-located on website.”
Who helps it: Due to these limitations, this isn’t seen as a viable definition to qualify for the tax credit score.
Annual power matching
How it could work: A hydrogen producer makes use of grid power (no matter how the facility is generated) for electrolysis, and purchases an equal quantity of fresh electrical energy on an annual foundation wherever within the U.S., both via an influence buy settlement (PPA) or renewable power credit (RECs).
The upside: At its greatest, this technique deepens renewable penetration in some parts of the grid. That is how Scope 2 accounting works in the present day and could be simple to implement.
The company procurement equal: That is the methodology utilized by the primary technology of company renewable power procurements, and the methodology utilized by RE100.
The draw back: The carbon content material of megawatt hours can range drastically relying on time and site, doubtlessly resulting in a internet enhance of emissions. For instance, if an electrolyzer is positioned the place power is soiled and goals to stability that with extra renewables in a cleaner portion of the nation, it’ll seemingly add extra emissions than the clear energy is saving. That’s an issue that’s set to worsen.
“The hole between a really clear grid and a really soiled grid is simply getting greater and greater as we deploy an increasing number of renewables, usually in the identical location,” defined Taylor.
Who helps it: Main power suppliers focused on diversifying into hydrogen, equivalent to NextEra, Chevron and BP, say that is the strategy that may encourage essentially the most funding. In its submission, NextEra argued that requiring extra granular accounting “would devastate the economics of fresh hydrogen manufacturing” and stated it could not make investments.
Hourly power matching
How it could work: Hydrogen producers align power consumption to wash power manufacturing on an hourly foundation, in the identical geographic places.
The upside: If achieved accurately, this might imply hydrogen producers are solely utilizing power when clear power is on the market.
The company procurement equal: This is identical philosophy of the brand new technology of company clear power procurements and is commonly known as 24/7 carbon free power, which firms equivalent to Microsoft and Google are engaged on.
The draw back: Electrolyzers have to be in a decent geographic location to wash power initiatives, which limits the place initiatives may very well be cited and drives up prices (much like the constraints in co-locating amenities).
To make this implementable, the Treasury would seemingly must loosen the placement restriction to an space broad sufficient that it might diminish its decarbonization profit on account of transmission constraints, based on Taylor.
This conundrum is captured within the following slide from REsurety, which illustrates how a facility close to Houston has the next emission depth than the wind and photo voltaic assets, regardless of being a part of the identical regional transmission group (RTO).

Who helps it: RMI, MIT Vitality Initiative and NRDC (amongst others) see this technique as a method to encourage investments in rising clear power applied sciences and will keep away from emission and air air pollution will increase that might have an effect on native communities the place electrolyzers are positioned.
Carbon matching
The way it works: Generally known as “Marginal Emissions Accounting,” this framework requires hydrogen producers to scale back emissions wherever on the grid equal to the emissions elevated, on an annual foundation.
The upside: This technique appears immediately on the issues we wish much less of — emissions — fairly than utilizing electrical energy as a proxy to (hopefully) totally offset. It permits clear power to be constructed into the dirtiest of grids, offering extra cost-efficient methods to decarbonize.
The company procurement equal: That is much like the philosophy of the Emissions First partnership, a gaggle of company procurers trying on the emissions impacts of power methods, fairly than matching MWhs.
The draw back: Knowledge availability and strategies for calculating marginal emissions are restricted and require approximations, based on RMI. Moreover, the emissions of a grid over time will change over a undertaking’s lifetime, which can result in much less certainty from builders.
Who helps it: WattTime and REsurety, each organizations that observe the real-time emissions of the grid, see this as essentially the most cost-effective and environment friendly method to deal with emissions.
Shifting ahead
Ahead steering from the Treasury will form the way forward for the U.S. hydrogen economic system. Figuring out the definition of fresh power will function a microcosm of the evolution of company renewable procurements and the way we take into consideration Scope 2 accounting. The choice the Treasury makes might impart a long-lasting influence that shapes future considering of local weather advantages from clear power initiatives.
It begs the query of how forward-leaning we wish our clear power coverage to be. Ought to it’s rooted in what we’ve achieved till now, or rethink how we account for emissions into the longer term?
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