On October 13th, the White House announced that it was disbursing nearly $7 billion in funding to create seven manufacturing hubs across the U.S. Each hub will produce masses of hydrogen, and be entirely lit, fueled, and run on that element. Unlike oil or natural gas, which power most manufacturing facilities today, hydrogen does not release planet-heating carbon dioxide or noxious pollutants when burned. In fact, the only by-product of hydrogen use is water vapor — which proponents argue could make it a green energy source to replace fossil fuels in everyday use. The Biden administration hopes that October’s multi-billion dollar investment will manifest this vision.
The federal money, which will be distributed from the 2021 Bipartisan Infrastructure Act’s $1.2 trillion fund, will be injected into the seven most successful bids received by the White House. Biden projects that an additional $40 billion of private investment will be catalyzed by his “hydrogen cash,” as well as tax cuts for makers of hydrogen.
All this sounds promising. If the hydrogen investment plays out like the 2022 CHIPS and Science Act (which funded semiconductor makers and has attracted $230 billion in commitments from companies like Intel, Nvidia, Texas Instruments and Micron Technologies), Biden will have cause to boast about his achievements. Yet, the new “hydrogen hubs” face an uphill battle to yield any substantive boost to the U.S. economy, let alone make a dent in carbon emissions. At extremes, they may even become counterproductive by subsidizing the use of hydrogen in applications where it isn’t necessarily optimal.
Six of the seven hydrogen schemes that the White House is funding are powered entirely by renewable energy (the other will offset carbon emissions). They will take advantage of power from solar fields, wind farms or nuclear power plants to zap water with bursts of current. Although hydrogen production does not add to the total amount of zero-carbon energy being created in the U.S., it can be shipped and stored in tanks. In theory, companies using hydrogen will be able to store it in the same tanks and burn it in the same furnaces that previously ran on natural gas, coal, or oil.
The applications of hydrogen fuel are potentially as numerous as those of fossil fuels. Yet, the government’s plan to produce masses of green hydrogen — as many as ten million tons per year by 2030 — will face a myriad of scientific and logistical challenges. Perhaps the most significant of these is that green hydrogen is all but absent from the current world economy, representing perhaps one ten-thousandth of current global energy consumption and one hundredth of hydrogen production. Renewable-powered electrolysis is expensive; instead, firms use carbon-intensive processes to separate hydrogen from fossil fuels. In fact, the International Energy Agency (IEA) estimates that dirty “gray” hydrogen production accounts for six percent of natural gas consumption and two percent of coal consumption worldwide. This is about as much fossil fuel production as the U.K. and Indonesia combined. Most of the resultant hydrogen is processed into ammonia and other chemicals. An eco-fuel, it is not — at least not yet.
Source: Organization for Economic Co-operation and Development
If the Biden administration is to succeed in establishing hydrogen as a primary fuel source for American industry, it must make green hydrogen dramatically cheaper. Producing hydrogen from natural gas, the IEA reckons, costs as little as $0.90 per kilogram. Producing it with renewables starts at $3.00 per kilo and goes to $7.20. No matter how much money the administration pays states to build hydrogen hubs, they must be economical to run. President Biden has pledged some tax cuts to this end, but that is hardly a long-term solution if, as the White House hopes, an entire industry is to be created around green hydrogen.
More subsidies probably won’t help. If anything, they could hurt: creating too-large incentives for hydrogen production could lead to its overutilization in domains where it is more appropriate to use other renewable sources. The proven efficacy and low cost of solar and wind power make them far superior investments to hydrogen or fossil fuels, even without government cash. If the commercial imperatives for hydrogen production become strong — for instance, if the government instituted a tax on carbon-emitting fuels that made hydrogen relatively cheaper, or affordable electrolyzers were developed — an industry will develop of its own accord. For now, though, the White House is plowing money into a risky venture that, relative to its cost, will do little to reduce America’s carbon footprint. It should by all means consider and fund research into affordable hydrogen manufacturing, but it is not yet time to bring hydrogen into the American energy mix.
