Down A provision that could completely alter America's energy system can be found on Page 118 of the ambitious climate law that Congress passed last summer: a tax credit for "clean hydrogen," a potent fuel produced with little to no carbon emissions. It's a provision that could displace many of the unclean fossil fuels in the economy's hardest-to-cleanse sectors, such as heavy industry and aviation.
But it also can make things worse, depending on how it is carried out. President Biden's legacy on climate change hangs in the balance, along with the chance of making a mistake on the issue.
The clause relates to how water molecules are split apart by electricity in a process known as electrolysis to produce hydrogen. The industry uses a spectrum of categories to describe hydrogen produced using natural gas, from grey to green, for hydrogen produced with clean electricity, to describe how clean the process is. Almost all of the hydrogen produced in this nation at the moment is grey.
The substantial tax credit could generate upwards of $100 billion in investment, which would completely change the market. However, according to one estimate, lax regulations could cause more than 220 million tonnes of carbon emissions annually, which would be an increase in greenhouse gas pollution from the current dirty grey hydrogen. That equates to 26 new coal plants emitting pollution each year. Additionally, utilities like Constellation and firms that use fossil fuels like BP have already lobbied the government for lax regulations that could result in a monster made of dirty hydrogen.
If the Treasury Department follows the letter of the law when writing the regulations in the upcoming months, green hydrogen could flourish and significantly reduce carbon pollution in the United States and around the world. It boils down to three fundamental ideas.
Projects involving hydrogen must first use fresh, clean energy. If a hydrogen plant only draws clean energy from the grid, it is not producing new energy; rather, it is simply rerouting energy that could be used to run an electric vehicle or heat a house. Since most utilities would respond to the increased demand by burning fossil fuels, it would make the grid dirtier. That hydrogen cannot, in good conscience, be referred to as "clean."
The second tenet is that a hydrogen project must be dependent on nearby new sources of clean energy. A Wyoming company that produces hydrogen from coal shouldn't be able to pass itself off as environmentally friendly by purchasing a renewable energy credit from California, whose grid already uses a lot of clean energy sources. The government must mandate that the new clean power be sent to the same grid from which the hydrogen plant receives its electricity to prevent this.
To avoid using electricity from dirtier sources that are available at other times of the day, hydrogen must be produced at the same time of day that the new clean energy is flowing into the grid. A hydrogen plant shouldn't be able to claim to be using solar power if it runs at night when the sun has set and the only electricity available is from unclean sources unless it is drawing from a battery that has stored clean energy.
This is known as "hourly matching," and Google and the nation's largest electricity market, which covers 13 states and 65 million people in the Mid-Atlantic and Midwest, are already using the strategy despite claims to the contrary from some businesses.
The three-part test would unquestionably be passed by a hydrogen plant constructed next to a new wind farm. Hydrogen would be produced at the plant when the wind was blowing. Additionally, it could reduce hydrogen production to feed the grid with power when it was most needed. As more wind and solar power plants come online, this is exactly the kind of flexible operation we need.
The Treasury Department should just create a straightforward regulation if it decides that everything is too complex to regulate. It will only support brand-new clean energy initiatives that produce hydrogen on-site.
Clean hydrogen projects that increase pollution are an alternative. Constellation has already expressed a desire to redirect clean energy from the grid to hydrogen plants using generous federal subsidies. But we are aware that would contaminate the grid more.
Fortunately, a sizable coalition of business executives, proponents of renewable energy, environmental organizations, academics, and even hydrogen companies have urged the Biden administration to uphold the clear intent of the law by establishing regulations that reduce pollution. Lax regulations will encourage wrongdoing and limit the potential of clean hydrogen. We require every legitimately clean technology available to combat climate change.
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