The hydrogen hub announcement in the US has ignited the green versus blue conversation once again, I'll go over the some of the talking points and give my thoughts 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 in Business Insider Catherine Boudreau writes, Can hydrogen be green, the debate heats up as the White House pours $7 billion into hydrogen hubs. Catherine writes, Most of us probably think of hydrogen in terms of h2o, the water we drink, bathe in and cook with, but it has the potential to help build a low carbon future. President Joe Biden is pouring up to $7 billion into seven hydrogen hubs in regions including the Gulf Coast, Pacific Northwest and Appalachia. The goal is to spur the production of clean hydrogen, because the way it's currently produced is a dirty business. Most hydrogen is separated from methane and natural gas through an energy intensive process that produces greenhouse gas emissions responsible for warming the planet. Hydrogen is mainly used to refine oil and make chemical fertilizers but experts say it can also be used for energy storage and as a fuel for long haul trucks and airplanes. If the production process is cleaned up.
It could help decarbonize industries that use hydrogen. But as with so many climate solutions, there's a debate over the best path forward. It boils down to this should hydrogen continue to be made from natural gas, but paired with carbon capture technology and storage. This is so called Blue hydrogen, or should it be made from a renewable energy powered process known as electrolysis, which splits water into hydrogen and oxygen. This is known as green hydrogen, an approach favored by many climate advocates. Both are still in the early stages of development. The White House said about two thirds of the overall investment in hydrogen hubs will be associated with the green kind, that still didn't land well with some of the climate advocates and scientists who cite research suggesting that blue hydrogen isn't clean at all. And a quote from Robert Howarth, a professor of ecology and environmental biology at Cornell University, told insider, I think it's a scam.
And I don't use that word lightly. Howarth found that blue hydrogen requires more natural gas and therefore produces more methane emissions. That's concerning because methane heats up the planet at times faster than carbon dioxide over a two decade period. This again, according to Howarth, he said, it takes a lot of energy to capture the carbon dioxide and that comes from burning even more natural gas. So it's not a surprise to him that the oil and gas industry likes the idea of blue hydrogen. The Clean Air Task Force, an environmental nonprofit that's working with the US Department of Energy, hydrogen hub, project developers and community based groups told insider that they also support the White House's approach Anna Menke. The task force's senior hydrogen hubs manager said she wants the debate to move away from Green versus blue because each technology has its pros and cons. Green hydrogen is more expensive and could lead to more emissions than its conventional version if electrolyzers aren't powered by additional renewable energy on the grid.
She acknowledged that for blue hydrogen to truly be a climate solution. Oil and gas companies must reduce methane leaks in their infrastructure and develop carbon capture systems that trap a lot of emissions and store them permanently. This according to the US and European researchers. Hydrogen hub projects that applied for federal funding had to meet a range of criteria, including low emissions targets. This according to Brian Korgel, Director of the Energy Institute at the University of Texas at Austin. Korgel is working on the HyVelocity Hub along the Gulf Coast, which is awarded $1.2 billion by the Biden administration and is led by companies including Chevron, ExxonMobil, and Sempra Infrastructure. The project aims to demonstrate that both blue and green hydrogen can be made with low emissions at a competitive cost while creating jobs and other benefits for disadvantaged communities. Korgel's team at the Energy Institute is conducting environmental and economic analysis of the project. According to Korgel, there are some safeguards.
These projects have to meet emissions standards, and it's not in company's benefit to do the smoke and mirrors thing because they won't get any grant money which wraps us up over time. Korgel also noted that the federal definition of clean hydrogen has been evolving and should be more clear soon. An unlikely government agency could settle the debate, the IRS has to decide what clean hydrogen is eligible for a tax credit worth up to an estimated 100 billion dollars over its lifetime. Okay, so a really good article showcasing how the hydrogen transition can fall into infighting on the basis of previous bias against oil and gas. Now, don't get me wrong legacy oil and gas has a history of trouble managing methane leaks. Now for the most part, these leaking systems wasn't something that the companies wanted as it was a loss of product. At the same time, the cost of inspections maintenance and the lack of enforcement to adhere to standards meant leaks went unchecked for some time.
But times are changing technological advancements and inspection mean leaks can be detected much cheaper and more accurately than ever before. Couple that with the fact that these new hubs must adhere to the clean practices outline for the grant funding means that if these operators don't stay on top of product transport, they can kiss that funding get by. But this isn't the only article I've come across since the hub announcement. I have noticed and not surprised in the least that many articles and opinion pieces like this have popped up. And why am I not surprised? Well, now that we know where billions of dollars are going to be flowing to. We're going to see the green and blue camps becoming more indignant that they have the best solution to the hydrogen revolution.
We'll also see politics become an even more prominent factor in how these hubs play out. Reuters had a great article covering this on October 18. US hydrogen tax credits touch off sparring letters from Senate Democrats. Ten Senate Democrats will ask President Joe Biden's administration not to include strict rules guiding use of clean hydrogen tax credits that the Treasury Department is due to release by the end of the year. This according to a draft of a letter seen by Reuters on Wednesday of last week. The letter which the senators plan to send to the White House adviser John Podesta, Treasury Secretary Janet Yellen and Energy Secretary Jennifer Granholm will urge the officials to make the Treasury guidance flexible. It seeks to allow projects fueled by existing energy sources, including gas, hydro-electricity and nuclear to be eligible for the tax credits.
The group is led by Washington Senator Maria Cantwell, who state was one of 16 to win part of the $7 billion in federal funding to build out regional hydrogen hubs. The letter warns that an approach favored by other Democratic lawmakers and environmental groups creating overly complex eligibility criteria would hamper the hubs and the growth of the nascent industry. These other lawmakers and groups have urged treasury to play strict guardrails on the tax credits, which are worth up to $100 billion, restricting them to hydrogen producers that use new sources of clean electricity instead of tapping power already on the grid.
It stated in the letter this may hamper the development of a robust clean hydrogen market, undermine volumetric production and price parity goals reduce the positive effects of scaling up electrolyzer investment and prevent clean hydrogen from fulfilling vital roles in hard to decarbonize sectors. In line with the administration's broader decarbonisation efforts. It was signed by other Democrats, including West Virginia's Joe Manchin, Pennsylvania, John Fetterman and Illinois, Dick Durbin, who states one hydrogen hub funding to decarbonize heavy industries, like steel, heavy vehicles and cement plants. They're at odds with another group of eight Senate Democrats, led by Rhode Island's Sheldon Whitehouse, Hawaii Brian Schatz, and Oregon's Jeff Merkley, who sent a letter to Yellen on Tuesday of last week to ensure that the tax credits be used strictly for projects using new clean energy sources.
These other senators allied with environmental groups also want projects to source locally produced clean hydrogen and are seeking something called time matching, which will ensure that electrolyzers used to produce hydrogen run at the same time as renewable energy to make sure they're not being powered inadvertently by hydrocarbons. Okay, so these tax credits, commonly referred to as the 45 V are still ambiguous and how they'll be dispersed. But if all things are equal, and the hub's leveraging natural gas as a feedstock option, are eligible for the 45 V, and depending on just how strict the IRS becomes on the three pillars of electrolytic hydrogen production, we could see a much larger portion of the 45 V credits, going to hubs leveraging both technologies over the other hubs.
And maybe that's not a bad thing, at least at first, because while I very much believe there is a future in electrolysis technology for supplying hydrogen for our energy needs, there are still economic hurdles to get over. The technology of extracting hydrogen from water needs extreme refinement. Think about this, the amount of energy needed for electrolysis is substantial. And the hydrogen content of water is relatively small, only about 11% versus 25% in methane. So considering the current efficiencies of renewables and electrolyzers, it makes more sense to leverage the other feedstock and technology solutions to drive the hydrogen transition and allow the renewable and electrolyzer technologies to continue to develop.
Again, I do believe there is a very strong future to extract the energy in water for our use. Because as a side note, if you don't know what happens when hydrogen gas and oxygen gas are mixed in the proper percentages, there's a great video from Gizmodo highlighting the reaction. It also showcases that hydrogen is flammable, not explosive, the explosion happens when oxygen gets involved. So with all that being said, if we allow for hydrocarbons to open the gate for the hydrogen transition, and start driving the caravan of the revolution, it will allow for the new technologies, including electrolysis time to develop the way we'll need in order to be economic.
All right, that's it for me, everyone. If you have a second, I would really appreciate it If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, YouTube, whatever it is, that would be a tremendous help to the show. And as always, if you ever have any feedback, you're welcome to email me directly at email@example.com. So until next time, keep your eyes up and honor one another. Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I'd appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.