It is worth noting that the term clean energy often goes on to bring to mind gleaming solar panels, some spinning wind turbines, or even water surging by way of a hydroelectric dam.
Some people would go on to imagine dark salt caverns that are a mile underground, but these geologic formations could very well play a key role when it comes to the development of emissions-free green hydrogen.
The fact is that Hy Stor intends to make use of such salt caverns all throughout the Mississippi and elsewhere in order to store hydrogen, which, by the way, happens to be made by splitting water molecules with electrolysis driven by new renewable energy. The fuel could very well get stored in the caverns until electricity demand sees a high and then gets used so as to come up with emissions-free electricity when other renewables cannot meet the demand.
Hy Stor happens to be among the companies that go on to support the proposed rules for a potentially profitable federal tax credit in terms of green hydrogen fuel production. These companies happen to offer a counterpoint to power companies as well as other industry players who are pressurizing the government to go ahead and at the same time relax provisions that ask green hydrogen production does not make use of existing renewable or any kind of nuclear power that would otherwise get used on the grid.
Companies, such as the members of federally funded hydrogen hubs, have gone on to argue that under proposed rules governing the tax credit called 45V, not ample hydrogen will be produced so as to meet demand and also help develop a zero-emission economy.
However, the environmental advocates as well as the academics point to the studies showcasing that hydrogen production sans any stringent rules can go on to actually lead to emissions increases. They, in addition to some industry sources, happen to be calling on the U.S. Treasury Department to enshrine the proposed needs that hydrogen receiving tax credits meet the three pillars, which are: The renewable energy that is used to power electrolysis must be freshly added to the grid, called incrementality or additionality; it must get generated nearby the hydrogen plant, called deliverability; and it has to generate almost at the same time it is used, called hourly matching.
manager of the electricity program from Energy Innovation, Dan Esposito, says that without any right rules in place, one is indeed going to see companies making as much hydrogen as possible, as the 45V tax credit happens to be so lucrative.
That, in turn, is going to place additional demand on the existing grid, most of which would be supported through coal and natural gas.
As per Esposito, not only is one making greenhouse gas emissions worse, they are also making it more difficult to clean up the electric system. The climate community happens to be saying that if they go on to set weak rules, it is indeed going to be a disaster, that this will not be clean hydrogen, and that it will just be a massive greenwashing campaign.
Hy Stor happens to be among those hydrogen companies as well as renewable energy developers that have gone ahead and sent letters so as to support the rules as proposed. A March 1, 2024, letter to the Treasury and White House officials from the companies, including Hy Stor, reveals that-
The Clear Section 45V guidance that goes on to uphold the three pillars is indeed necessary in order to guard against harmful climate impacts as well as significant emissions surges that might be as well pushed by increases in fossil fuel-based generation in order to sustain electrolysis in cases where renewable generation sources are not available. Weak Section 45V rules would go on to permit this perverse result, hence imposing quite a prominent climate and market risk that would then go on to undermine the achievement of U.S. climate goals, furthering the perception of political risk within the U.S. climate regulation, and also upset the hard-won momentum that happens to be presently driving investment in the sector.
That letter was also being inked by the renewable energy developers, namely CWP Global as well as ACCIONA, an ACCIONA affiliate named Nordex Green Hydrogen, and major hydrogen producers such as Air Products and Synergetic, along with the geothermal energy provider Fervo Energy and others too.
This action followed a Feb. 26, 2024, letter from seven federally funded hydrogen hubs to the Treasury Department, thereby arguing against all three pillars. That letter touts job creation potential when it comes to the hubs, but adds that:
Unfortunately, such kind of investments and jobs will not completely materialize unless there is a Treasury’s guidance in its present form, which is, as a matter of fact, significantly revised, as numerous projects generating such investments and supporting jobs are going to be no longer economically viable.
Esposito went on to note that when the hubs were created by the 2021 Bipartisan Infrastructure Law, the Inflation Reduction Act- IRA, including 45V tax credits, had not been passed; it was, as a matter of fact, inked by President Joe Biden nine months later. The federal government anticipated that the hubs would be able to succeed sans the tax credits.
He adds that the public evidence suggests hubs can go ahead and do this the right way, and that too right from the start, as they are supposed to be centers of innovation, and the whole point is they happen to be centers of research and development, and thereby one should not give them the easiest path forward.
Salt to the industry
Claire Behar, the Hy Stor COO, says that the company goes on to control 10 salt domes in Mississippi and happens to have the necessary permits from the state oil and gas regulatory body in order to move forward with its hydrogen production along with the storage project.
Behar says that they would like to think that their location at scale can really go on to serve as a strategic hydrogen reserve, having years’ worth of hydrogen storage.
Power generation companies, apart from the green steel mills, as well as other hydrogen-hungry industries, could very well be co-located near Hy Stor. The company opines that these industries would then basically be powered by renewables, which are built specifically for this purpose, pushed by hydrogen, which is created due to renewables and then stored for when it is required.
As per Nehar, it really depends on having such large-scale storage, which is dispatchable, that they are able to deliver a 24/7 product. Those end users go on to gauge that the zero-carbon solution has to be hydrogen and that they are focused on both industries already existing in the region, like maritime and large industrial, and also attracting new greenfield customers.
Behar opined that requiring new renewable generation is indeed crucial in order to define hydrogen production as clean.
The fact is that they cannot cannibalize the present demand by way of using those renewables that are already on the grid, said Behar, and they require a strong 45V rule that will go on to safeguard them against harmful climate impacts. If one happens to have weak or blurred rules, it can essentially go on to carry significant climate as well as emissions risks that will in a way undermine both the achievement of climate goals as well as the credibility of the industry.
Novel technologies
Startup Q Hydrogen goes on to argue that green hydrogen can be produced in certain ways that go on to use much less energy along with water than typical electrolysis. Whitaker Irvin Jr., who is the Q Hydrogen CEO, said that his company was never in favor of tax credits and that he thinks Q Hydrogen can even go on to produce hydrogen at a profit sans any of such supports.
However, since the tax credits are indeed a reality, he wants strict rules ensuring that only truly green hydrogen production happens to be eligible.
As per Irvin, the economic incentive happens to be so astoundingly large, that if it does not happen to exist, people can be creative and also go on to make the three pillars work.
Irvin explained that the technology that happened to be pioneered by his father in order to develop a more efficient heat pump can actually go on to make hydrogen with low energy as well as water requirements, by way of using streams of air with a wide temperature differential so as to create a chemical reaction.
It is well to be noted that the company’s flagship facility happens to be in the New Hampshire town of Groveton, drawing water from the Ammonoosuc River and electricity from a hydroelectric plant nearby. It happens to take backup power from the grid.
The hydrogen manufactured can, in turn, go on to create clean energy that can be sold to industrial users as well as deployed when needed, said Irvin. This could go ahead and relieve demand on the grid from existing industries, and that too during peak demand times, and enable the attraction of new industries to a town that has kind of had an economic issue since the time one of the paper mills closed in 2007. Irvin remarks that he ultimately hopes that a hydrogen-powered plant when it comes to the former paper mill site can as well sell power into the New England grid.
Irvin adds that Q Hydrogen would go on to qualify for tax credits under proposed IRS rules, since they make use of relatively little energy and since New England’s grid operator happens to employ technology that makes it possible to go ahead and log when and where renewable energy is consumed and produced already, thereby enabling them to meet the hourly matching and deliverability pillars of the rules. This capacity, along with the ample water resources, are the reasons Irvin went ahead and chose New England for the organization’s first commercial-scale plant.
It is well to be noted that the company happens to have a pilot operation in Park City, Utah, which has been running ever since 2016 and can produce 10,000–50,000 kg of hydrogen every day. Plants also happen to be planned across Sweden and Germany, he added.
In December 2022, Q Hydrogen went ahead and wrote a letter to the Treasury Department in response to the request when it came to an input on the tax credits. The letter goes on to urge the department to go ahead and need additionality as well as strict accounting when it comes to emissions impacts, when it comes to awarding tax credits.
According to Irvin, they don’t require the tax credit to be financially feasible; however, the sector does, and that kind of boost will indeed enable innovation, technological rollouts, and mass use at scale. He compares it to the early solar as well as the wind days, when subsidies happened to be involved, and remarks that this is indeed the beginning of hydrogen becoming a real player across the market.
Hourly matching
The 45V rules as drafted need hourly matching documentation for renewable energy by 2028, elaborating on the fact that the renewable energy that is used to power hydrogen production happened to be generated within the same hour.
In the present scenario, energy attribute certificates- EACS which happen to be similar to renewable energy credits, happen to be based on yearly matching, hence noting how much clean power a user goes on to theoretically buy and also makes use of in a year.
However, if that power happens to be mostly generated by solar in the summer, for instance, the user is, as a matter of fact, still dependent on fossil fuel generation in the winter. Hourly matching can go on to help make sure that renewable energy happens to be literally powering an operation, but critics have gone on to say that the software as well as other technology is not available to document hourly matching and that too on a large scale any time soon.
Toby Ferenczi happens to be the co-founder and CEO, Granular Energy, which is a software company that offers hourly matching certification to utilities all across the world. He says that such documentation happens to be totally feasible and will push the construction of more renewable energy, which includes powering green hydrogen.
He asks, how does one, as a consumer, choose a particular kind of electricity over another? The fact is that whether there’s a homeowner trying to purchase clean energy for their home, a technology company looking to buy clean energy for the data center, or even a green hydrogen developer who is trying to buy green energy for the electrolyzer, it is indeed going to be the same question.
It is well to be noted that hourly matching does not secure green hydrogen producers from going ahead and diverting renewable energy from the grid, causing varied customers to rely on fossil fuels. But affixing the time stamps on the renewable energy credits and also mandating hourly matching in terms of tax credits will go on to create market value for renewable energy, which is used in real time, Ferenczi says, thereby driving the construction of more renewables and energy storage. Batteries or certain other storage technologies can go on to store renewable energy that would also go on to qualify for hourly matching when dispatched.
At the end of the day, the tradable instruments can be priced according to supply and demand, having revenue streams for things such as energy storage, flexibility, and also more renewable energy, said Ferenczi. If one happens to be a green hydrogen producer, one could either go ahead and also ink lots of individual contracts with individual wind farms or solar farms, or one may as well just sign up for a product from the local utility or energy supplier that can offer clean energy with hourly-matched credentials.
Even the hydrogen producers that happen to have exclusive power purchase agreements-PPAs, with new renewable developments or even on-site renewables will still go on to need energy from the grid when the wind is not blowing or the sun is not shining, he goes on to argue. So hourly matching will enable them to ensure all their power happens to be truly green. He is of the opinion that hourly matching is indeed a potentially better way to go ahead and also create more renewable energy vis-Ã -vis the PPAs with new renewable developments.
Ferenczi also asked that additionality happens to be, first of all, very challenging to prove. Even if someone is the one who signed a PPA, how does one know that someone else would not have signed a similar PPA? Is it the person who has gone ahead and signed the PPA who gets to claim the benefit out of it, as opposed to the person who put up equity or debt for the project or even took the risk when it comes to developing the site, and that too at the very beginning? It is indeed very difficult to go ahead and claim additionality and then assign the rights to those claims to a particular individual.
The fact is that the time-stamped EACs get kept in a registry, which is taken care of by regional transmission organizations. While the technology upgrades will be required to handle hourly matching across the country, Ferenczi said that PJM as well as other transmission organizations such as the ones at New England already happen to have similar capabilities.
Ferenczi said it is critical that tax credit rules go ahead and retain strong requirements to make sure that clean hydrogen production does not actually raise emissions, and called on the regulators to ensure that the proposed rules do not get watered down.
As per Ferenczi, they are indeed essential so as to prevent what could go on to be a catastrophe when it comes to carbon emissions, which goes ahead and pushes up the cost of electricity for one and all. He adds that if one goes on to build a fleet of gas turbines in order to meet this rising demand in terms of electricity so as to make hydrogen since you do not have an hourly matching need, there is not going to be a perverse side effect that is the opposite of what one went on to intend.
