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Hydrogen Power

Hydrogen project decisions will hinge on power source

Growing acceptance and availability of CO2 storage will favor blue over green H2 in most locations

by Craig Bettenhausen
January 10, 2025 | A version of this story appeared in Volume 103, Issue 1

 

A large round pressure tank and many pipes in an outdoor chemical plant.
Credit: OCI Global
The commodity chemical maker OCI Global plans to double the size of its low-carbon methanol plant in Beaumont, Texas, to 400,000 metric tons in 2025 and supply it with a mix of clean hydrogen sources.

Takeaways

Sustainable power and carbon sequestration capacity will drive hydrogen technology decisions.

Carbon capture’s growing popularity will attract investment in blue hydrogen.

Regulations will determine the fate of many green hydrogen projects.

Hydrogen made by splitting water using renewable electricity, colloquially referred to as green H2, has enjoyed several years of prominence because of the clear carbon-free story it can tell.

But that story changed in 2024 as environmental advocates and policymakers dug into the details of how H2 projects connected to the electrical grid affect the amount of fossil fuels burned for energy. The response was concepts such as additionality and time correlation that aim to make sure utilities supply green H2 projects with new renewable energy rather than sell their existing green energy to H2 producers and then crank up fossil fuel–fired power plants to cover other customers.

Such rules are becoming a feature in subsidy and mandate schemes, and complying with them will increase the cost of green H2, analysts and investors say. At the same time, carbon capture and sequestration (CCS) is gaining regulatory acceptance as a way to lower the greenhouse gas footprint of conventional fossil fuel–based hydrogen, a provenance that gives it the moniker blue H2.

In 2025, it’s likely that areas where CCS infrastructure is either active, such as Illinois, or coming soon, such as Northern Europe, will see accelerated investment in blue H2. Areas that have a low-carbon electrical grid, such as France and the US Pacific Northwest, should see investment in green H2 projects.

The pursuit of cheap power is going to be a significant piece of the way that the industry is going to evolve.
David Eaglesham, chief technology officer, Electric Hydrogen

“The pursuit of cheap power is going to be a significant piece of the way that the industry is going to evolve,” says David Eaglesham, chief technology officer at the electrolyzer maker Electric Hydrogen.

But for both types of low-carbon H2, investors are tired of waiting for technology and economies of scale to bring costs down. In the second half of 2024, Air Products and Chemicals, Yara, Neste, Uniper, Hy Stor Energy, Shell, and Equinor all pulled out of major H2 projects; green H2 was hit the hardest. More cancellations are sure to come in 2025, and regions with modest or expensive renewable energy and uncertain prospects for CCS will struggle to attract hydrogen projects.

Developers of H2 technologies and projects will also be watching regulatory debates about what counts as a renewable energy source—and therefore satisfies mandates and subsidy schemes that support green H2. Nuclear power is on the table in the US and the European Union, with advocates touting its near-zero CO2 emissions but opponents questioning its safety and total environmental footprint.

Trash is another energy source under scrutiny. Lawmakers in Minnesota and Maryland may disqualify their trash-fired power plants from renewable energy credits and targets this year. On the other hand, Florida is adding to its fleet of trash-to-energy plants.

Because H2 is hard to move and store, companies will prioritize projects that are integrated into larger industrial sites looking to decarbonize, such as Topsoe’s planned H2 installation at a sustainable aviation-fuel plant in Brazil and Air Liquide’s colocated plant at a TotalEnergies biofuel complex in France. “The ultimate offtaker is usually a customer that has an existing molecule, and they’re looking for a decarbonized version of that molecule,” Eaglesham says.

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