Grumet on getting green hydrogen incentives ‘just right’
Editor’s note: the following content is excerpted from a full story in Renewable Energy World, written by Jason Grumet.
The next decade will do much to define our nation’s options and prospects for reaching net-zero greenhouse gas (GHG) emissions. If we get the incentives right, recent federal investments in infrastructure and clean energy will motivate trillions in private capital needed to grow and decarbonize the economy by midcentury. A critical decision currently facing the Biden Administration is determining the rules incentivizing the production of clean – or “green” – hydrogen (H2) for use in decarbonizing heavy industry, freight transport, and aviation.
The path toward a clean energy economy is to electrify everything we can while eliminating emissions from electricity production. This is the strategy behind the shift to electric vehicles and incentives to build more renewable power. However, there are key parts of the economy like steel and cement production that cannot be fully electrified with current technology. This is where green hydrogen must play a key role. Hydrogen does not emit carbon dioxide when combusted, but can be stored, transported, and burned like a fossil fuel. If produced using zero-carbon electricity, hydrogen becomes a climate super fuel, and zero-emitting steel mills and airplanes become possible.
While there is broad agreement that a new green hydrogen industry could play an essential role as a climate solution, surprisingly entrenched political positions may derail this historic opportunity. In simple terms, environmental groups are concerned that increased electricity demand for green hydrogen production will outpace the production of renewable electricity, resulting in more fossil generation and pollution. Conversely, the business community worries that restrictive regulatory constraints combined with the high costs of building early facilities will make green hydrogen uneconomic, preventing a viable U.S. green hydrogen industry from ever getting off the ground. The Administration faces a difficult balancing act as it works to finalize guidance around recently enacted green hydrogen incentives: too lax would diminish the industry’s decarbonization potential for decades; too rigid would prevent the private sector from making the major investments required to stand up an entirely new industry.