Hydrogen Policy Landscape and RTC Opportunities
Roundtable discussion – March 30, 2022
Summary
The first day of the Renewable Thermal Collaborative’s (RTC) two-day policy roundtable centered on policies to accelerate the deployment of green hydrogen, both through new programming from the Department of Energy (DOE) through the Infrastructure Investment and Jobs Act (IIJA) and additional mechanisms that are needed for market development. The roundtable featured two presentations on the hydrogen policy landscape, discussion, and live polling questions exploring the level of engagement on hydrogen among attendees. The roundtable also served as a policy session of the RTC’s Green Hydrogen Technology Action Plan and Partnership (TAPP).
The first presentation, from Chris Kardish of RTC co-convener C2ES, focused on DOE’s key programs, initiatives, and policies from IIJA: the hydrogen National Strategy and Roadmap, the Clean Hydrogen Production Standard, the Regional Clean Hydrogen Hubs, H2 Matchmaker, the Clean Hydrogen Electrolysis Program, and the Clean Hydrogen Manufacturing and Recycling Program. IIJA provides a legislative framework for DOE’s RD&D activities going forward, centering on a variety of feedstocks and end uses, supporting the DOE’s Hydrogen Shot goal of reaching $1/kg by 2031, and developing a national supply chain and networks. Funding announcements and the release of key policies like the production standard are expected in the months ahead. A number of states have already announced consortia to compete for regional hub funding, which will be the largest DOE hydrogen program. Those who are not part of the initial waves of hubs could potentially join in later years as additional partners. Among the companies that attended the roundtable, many are still at an early stage of hydrogen engagement. The largest number of respondents to two polling questions (48%) indicated that they are still learning the fundamentals, though a sizable proportion are actively considering how green hydrogen will play a role in their company decarbonization strategy (24%), and others are actively developing or deploying green hydrogen projects (7%). The biggest barriers were viewed as facility upgrades or retrofits required to use hydrogen, high prices, uncertain sources of supply, and uncertain sources of demand or off-taker needs.
Some companies on the buyer side elaborated on their considerations. For some, their temperature demands suggest that other more affordable abatement technologies might make more sense, especially in the absence of incentives. One company noted that Europe and the UK have stronger incentives and emissions controls that help address the cost differential, which supports stronger interest in those markets. There is also a potential need for on-site green electricity that might make other options for efficient. One company is piloting green hydrogen along with renewable natural gas and electrification to assess which technology makes more sense for scope 1 decarbonization. Another company is assessing the facility upgrades that would be needed to use hydrogen, which presents challenges relative to more established technologies such as biomethane.
Uncertainty around the thinking and needs of off-takers also presents challenges for companies working on the supply side. Some companies discussed their difficulties understanding the needs of buyers, who are often not able to articulate those needs at this stage or their own timelines. These uncertainties also exist for companies deploying hydrogen through existing infrastructure, such as applications that involve blending hydrogen with natural gas. Several participants said they see the RTC as a useful forum to better understand the precise needs of off-takers.
A number of participants saw the need for instruments that decouple the environmental attribute of green hydrogen from the delivery of the product as critical to market development, just as instruments such as renewable energy credits have been critical for the development of the renewable electricity market. Such instruments might also help overcome infrastructure limitations and equipment challenges, while providing much-needed early investment.
Infrastructure needs were also a major subject of discussion, along with the regulatory hurdles they present. This challenge is not unique to moving green hydrogen but also to bringing on existing and future sources of renewable power online through transmission expansion. The challenge with building electricity transmission infrastructure relative to pipelines and the sheer volumes that pipelines can move suggests they might be especially suited to hydrogen delivery. While the hydrogen hubs will provide clusters of suppliers and buyers, there will likely be a need for significant infrastructure expansions to connect optimal production centers to other demand centers. One participant suggested that obtaining regulatory authority for pipeline construction will pose a challenge, especially in the case of blending with natural gas and the use of existing natural gas infrastructure.
Many of these challenges were the focus of the second presentation by Emily Beagle, a Senior Associate with the Climate-Aligned Industries Program at the Rocky Mountain Institute. In the emergence or market activation stage of market development, where green hydrogen currently sits, RD&D like what is happening in DOE through IIJA is critical, but as the market reaches a state of diffusion with constant market growth, other levers will be needed, including tax credits or financing to address cost differentials, procurement policies, infrastructure, and supportive standards, such as guarantee of origin schemes. Some of these policies have emerged in specific legislative vehicles, such as the hydrogen production tax credit in the Build Back Better Act. Examples of procurement policies include those in India mandating refineries and fertilizer producers to meet a portion of their energy demand using green hydrogen. The U.S. is beginning to launch emissions-based procurement policies, but more focused on materials sourced for public projects. At present, a number of standards are in existence, with different requirements for measurements of upstream emissions. This includes differences in approaches between the DOE’s production standard and the methodology that would be used to award tax credits under the Build Back Better Act, which would rely on life-cycle emissions.
Discussions on market development and the needs of buyers will continue through the Green Hydrogen TAPP, which meets monthly.