August 15, 2022 • Paul Rodden • Season: 2022 • Episode: 139
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In episode 139, An article in the Financial Times highlights how the hydrocarbon industry can take advantage of the new environmental bill. I'll go through the article and give my thoughts on it on today's hydrogen podcast.
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An article in the Financial Times highlights how the hydrocarbon industry can take advantage of the new environmental bill. I'll go through the article and give my thoughts on it on today's hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.
In an article from the financial times.com Amaid Williams writes why the US fossil fuel industry wants to get in on the hydrogen Act. In the months before the historic us climate bill. Jim justice, the billionaire coal magnate and West Virginia governor who believes in divine intervention as a climate change solution became a champion of hydrogen. The unlikely backer of what could be a cleaner form of energy was not alone. US oil and gas majors joined him in pushing for the devisive fuel source. Collectively spending millions on lobbying campaigns in Washington, aimed at ensuring hydrogen projects would benefit from federal dollars. For decades, hydrogen has been touted as a potentially revolutionary alternative to hydrocarbons with the promise to power dirty heavy industry replace car and jet fuel and act as a store of energy. Last year, President Joe Biden earmarked $8 billion for the creation of regional hydrogen hubs across the US as part of his infrastructure bill. And already this year, the Department of Energy has doled out 1.5 billion and low cost loans to two hydrogen projects.
Now, Biden's new flagship tax and climate package identifies hydrogen as among the nascent clean energy industries eligible for lucrative tax credits worth about 5.3 billion over 10 years in a bid to scale up America's green sector. While hydrogen is a clean fuel when burned only produces water. The process of creating it through electrolysis fired by coal or gas is not green hydrogen uses renewable energy such as wind or solar to power the split of the water atom into its hydrogen and oxygen components. But the production of blue hydrogen being promoted by oil and gas companies using hydrocarbons is energy intensive and emits relatively high levels of greenhouse gases. scientists and experts warn that the difference in how hydrogen is produced cause carbon emissions to vary significantly.
Some consider that hydrogen should only be used when electrification is possible. Cornell and Stanford University scientists estimate that the carbon footprint of blue hydrogen is 20% larger than burning gas directly for heat. And a quote from Robert Howarth, a professor at Cornell University, one of the papers authors said blue hydrogen is something that was born out of the oil and gas industry as an energy source. If you're making it from natural gas, you're losing some of that energy when you convert it, emissions are going to be higher, and it's more expensive than natural gas. It's just not any better than natural gas again, according to Howarth, but for hydrocarbon company executives.
The prospect of the use of oil and gas for the production of hydrogen represents a significant opportunity. Shell BP and Chevron have all backed the Washington push for hydrogen. The three oil majors sit on the board of the clean hydrogen future Coalition, which says it aims to catalyze a clean hydrogen industry in the US. Its website demonstrates the use of hydrocarbons to produce clean hydrogen with carbon capture technology involved to trap the polluting emissions. Shell BP Exxon Mobil and Chevron have also individually had discussions about legislation affecting hydrogen with lawmakers according to filings that disclose a combined $13 million in lobbying spent across multiple issues over the first half of 2022 alone. Two major trade bodies representing the US gas industry has spent nearly $1 million pushing for investment into hydrogen and the inclusion of gas in the US's clean energy plans. BP has said it was previously looking at Green hydrogen alongside blue hydrogen. Exxon said that all types of low carbon hydrogen will require additional policy support. The group said was important to see the policy discussion is evolving from exclusively focusing on wind, solar and electric vehicles to carbon capture and storage biofuels and hydrogen. Just as Democratic Senator Joe Manchin has pushed the climate bill over the line with his vote on the grounds of national energy security.
His state of West Virginia has put forward a broad pitch that outlines its history as a mining powerhouse and list the state's coal Association and Oil and Gas Association as potential supporters of a new hydrogen hub. In West Virginia is not the only state looking to take advantage of the infrastructure bill funding. New York, Massachusetts, New Jersey and Connecticut have joined forces to propose a green hydrogen hub that will use solar and offshore wind to power hydrogen Korea. nation, Arkansas, Louisiana and Oklahoma have a pitch that would involve producing hydrogen with gas and using carbon capture to cut emissions. Now the Department of Energy defines clean hydrogen based on the amount of carbon dioxide equivalent produced in making it. The new climate bill rewards developers on a scale with lowest emissions getting a maximum credit. That is five times that for the most polluting process, Rachel Fakhry the hydrogen lead at National Resources Defense Council. So there were similarities between the business models of a gas company and a potential hydrogen industry that led the companies to support the prospect. She said you're producing a gas transporting it, storing it and reusing it.
There's interest in the gas industry to use the hydrogen economy to maintain and protect their business model. But Fakhry said hydrogen was a much less efficient source of power than electrification and should be used in a targeted way. She said we need to think about where hydrogen will play an important role because we don't have better alternatives, and where it's being touted as a solution where we already have better proven solutions. In those cases, hydrogen is being used to derail solutions. Cornell's Howard highlighted recent scientific papers that have suggested hydrogen may interact with greenhouse gases such as methane. To prolong their life and the atmosphere. The small molecular size of hydrogen would mean relatively high levels of leakage from pipelines. He said, his paper critiquing the carbon intensity of blue hydrogen attracted fierce pushback from the oil and gas industry.
A rebuttal was published in a scientific journal involving authors who included a member of the BP advisory board and advisors to Exxon Mobil and Totaal energies, though they stated that there was no conflict of interest. The environmental and energy study Institute, an independent bipartisan nonprofit Policy Research Group, said there was poor understanding of the different carbon profiles of the methods of creating hydrogen among lawmakers on Capitol Hill. According to Daniel Bresette Director of EESI there's a lot of interest in the topic, but not a lot of understanding of what makes it blue, gray or green, but Adria Wilson policy and advocacy manager at Breakthrough Energy, the Bill Gates back Clean Energy Investment Fund said it was pleased to see the tax credits for hydrogen structured in a way that favored lower carbon production methods. According to Wilson, when we talk about hydrogen, we're not talking about one specific technology, but a whole process. I think most people see green hydrogen as winning out. Okay, so really a good article highlighting how the hydrocarbon industry can now interact with this new climate bill recently signed by the Biden administration.
But there is something important that this article leaves out. And that is that these super majors that they talk about BP, Shell, Exxon, Mobil, and Chevron, all of them in some form or fashion, are investing in green hydrogen projects, and not just blue. And I believe that's a critical distinction that needs to be made. Because all of these super majors understand that in the future, hydrogen is going to be treated like oil and gases now in that hydrogen made in different locations, and utilizing different technologies will be blended together and stored. And so the only numbers that will matter, are the carbon intensity levels of the technology leveraged to create the hydrogen.
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