Dive Brief:
- The Inflation Reduction Act has lowered the cost of producing green hydrogen, but more incentives will be needed to ensure U.S. manufacturers can afford to transition their processes and equipment, according to a report released Tuesday by the Renewable Thermal Collaborative.
- Chemical, steel and cement manufacturers will have the greatest need for green hydrogen, because these industrial processes require higher temperatures than can be achieved economically with other technologies.
- However, access to green hydrogen will be limited as production scales up in response to the IRA. Companies interested in green hydrogen will need to act quickly to secure access to available supplies, said Cihang Yuan, senior program officer for international corporate climate partnerships at the World Wildlife Fund, one of the co-authors on Tuesday’s report.
Dive Insight:
The IRA’s tax credits and incentives for green and low-carbon hydrogen will go a long way toward making hydrogen cheaper to produce, but there remains a need to provide financial support to the companies that could actually use hydrogen, according to a new report by the WWF and Deloitte for the Renewable Thermal Collaborative.
The collaborative, which represents member companies such as Johnson & Johnson, AstraZeneca and Cargill that are looking for ways to decarbonize their industrial heating and cooling needs, commissioned the report to evaluate where hydrogen would best fit in an industrial decarbonization strategy.
Low-temperature heating needs can be met with current electric heat technologies like heat pumps, according to the report. In the mid-range of up to 300 degrees Celsius (572 degrees Fahrenheit), other emerging solutions like thermal solar and nuclear heat could prove competitive. But above 500 degrees Celsius (932 degrees Fahrenheit), hydrogen, which burns at up to 2100 degrees Celsius ( 3,812 degrees Fahrenheit), remains one of the only low-carbon solutions, the report says.
Based on their heating needs, the report concludes that oil refiners and the chemical industry, along with iron, steel and cement makers will have the greatest need for green hydrogen, which is derived from water using renewable energy. However, oil refiners can use byproducts of the refining process to meet their heating needs, and so green hydrogen will more likely be used in other sectors with greater demand and willingness to pay, according to the WWF. Carbon capture may be a better option for reducing carbon emissions from the refinery sector, the WWF said.
But these sectors still face barriers to accessing green hydrogen. Industries that already use hydrogen, including oil refiners and fertilzer manufacturers, will have an advantage over prospective new users like the steel industry because they already have appropriate pipelines, storage facilities and other infrastructure in place, Yuan said. New users also face the cost of replacing or upgrading equipment so that it is compatible with hydrogen, and will need policy support in order to make the transition, she said.
“When you look at the broader economy ... we see that sectors that are already using gray hydrogen today will be early adopters,” Yuan said. “They have everything set up, they have the infrastructure.”
Martin Stansbury, a principal in Deloitte’s U.S. energy, resources and industrials practice, said that companies looking to use green hydrogen would likely benefit from engaging with policy makers and taking swift action to form partnerships with hydrogen producers.
Clarification: We’ve updated this story to clarify that while hydrogen could meet the heating demands of oil refiners, oil refining is not a priority sector for hydrogen use.
