Dive Brief:
-
Green and blue hydrogen could be cost-competitive with natural gas as early as 2030 thanks to existing policy support and tax credits, according to analysis released this week by The Brattle Group.
-
The U.S. Department of Energy believes national demand for hydrogen could reach 50 million metric tons by 2050. But to meet this demand would require an additional 700 GW of renewable energy — equivalent to about two thirds of today's total U.S. generating capacity.
-
Although potentially more costly than green hydrogen, blue hydrogen may become the more prevalent product in many U.S. markets, according to Frank Graves, a principal at Brattle, a consulting firm.
Dive Insight:
Hydrogen may play a much bigger role in future energy markets than most experts previously assumed — if U.S. producers can figure out how to make enough, according to Graves.
For the past several years, the conventional thinking on hydrogen has been that it will play a small but critical role as a source of fuel for hard-to-decarbonize industries and as long-term seasonal energy storage, Graves said. But recent policy actions and expected advances in technology could change the calculus.
Between the DOE's hydrogen hubs, tax credits from the Inflation Reduction Act, and the EPA's proposed new standards for stationary combustion turbines, the price of hydrogen could fall to 90 cents per kilogram or $6.70 per million British thermal units, according to Brattle’s report, prepared for the Environmental Defense Fund. Natural gas currently runs about $3/MMBtu to $4.5/MMBtu, but could exceed $15.20/MMBtu with the addition of a carbon tax.
Those prices would allow both green and blue hydrogen to compete with conventional hydrogen — and potentially with natural gas, Graves said. Green hydrogen is produced using water and renewable electricity, while blue hydrogen is derived from natural gas with the addition of carbon capture.
Lower prices could allow hydrogen to displace natural gas across a larger swath of the economy, assuming the U.S. could make enough to meet demand, Graves said. Doing that with green hydrogen alone could prove difficult. At today's pace of development — which has run into roadblocks like backlogged interconnection queues and siting constraints — it would take 17 years to build enough renewable energy to make 50 million metric tons of hydrogen. That doesn't count the energy needed to finish decarbonizing the U.S. power grid, Graves said, nor does it factor in the potential impact of surging demand on energy prices.
Blue hydrogen, which uses about a third as much energy but may cost slightly more than green hydrogen in the future, could offer a solution, Graves said. Existing hydrogen producers could convert their facilities into blue hydrogen factories with relative ease — all it takes is adding a carbon capture system that would mostly pay for itself via government tax credits, he said. However, because blue hydrogen is not favored by individuals who believe humanity must end its use of fossil fuels, production facilities could run into public opposition, he said.
The extent to which end users would switch fuels also remains an open question, Graves said. Even if hydrogen is ultimately cheaper than natural gas, for industries and consumers to make the switch may require the installation of new appliances and equipment. In that case, consumers may look at the cost of upgrading and decide to stick with natural gas without further policy support, Graves said.
These potential political problems seem more likely to impede the development of hydrogen than any technical barrier at this point, but some technical barriers do persist, Graves said. As of now, he said, there aren't many solutions for the storage and long-distance transportation hydrogen, which requires more delicate handling than natural gas.
Absent development in these areas, hydrogen markets are more likely to develop on a regional level than on a national level, with the fuel produced in smaller facilities located near potential end users, he said.
