How Clean Hydrogen Can Enable California’s Climate Goals

Hydrogen is sometimes referred to as the Swiss Army Knife of climate solutions due to its potential to replace fossil fuels in multiple sectors. However, not all hydrogen is created equal – with certain production methods better for the climate than others. Prioritizing end-uses for hydrogen based upon regional characteristics can also ensure that project investments are as optimal as possible.

This blog post examines California’s opportunity to produce and consume clean hydrogen. It identifies promising production methods in electrolysis and biomass gasification as well as end-use options in long-duration energy storage, transportation fuels and fertilizer production. It concludes by outlining key deployment considerations, including that grid-connected electrolysis does not draw renewable electricity from the grid resulting in increased fossil fuel combustion, the role of infrastructure as well as a potential near-term opportunity to buy-down costs by mandating procurement from refineries.

For more information, see the Landscape of Clean Hydrogen: An Outlook for Industrial Hubs in the United States as well as WRI’s Industrial Innovation and Decarbonization Initiative which outlines emissions reduction strategies for key sources including cement, chemicals, refineries, and more.

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California’s ambitious climate goals require an unprecedented expansion in solar and wind energy, batteries, electric vehicles and clean fuels, notably hydrogen. The 2022 Scoping Plan estimates needing an enormous 1,700x increase in clean hydrogen to meet carbon neutrality by 2045. More recently, Gov. Newsom identified clean hydrogen as a priority decarbonization option for the state.

What is clean hydrogen? And how should it be deployed to achieve climate goals across the U.S.? A recent report by World Resources Institute and Great Plains Institute titled Landscape of Clean Hydrogen examined these questions. Below, we outline the key findings as they relate to California.

What is Clean Hydrogen?

Clean hydrogen refers to low- and zero-carbon as well as carbon-negative hydrogen which can be produced via a number of feedstocks and technology processes (Fig. 1). Hydrogen produced via electrolysis is a leading zero-carbon option. Biomass can be converted into hydrogen via multiple processes and has the potential of being carbon-negative if appropriate feedstocks are used. Natural gas may provide low-carbon hydrogen provided there is minimal upstream methane leakage and highly efficient (i.e. 95%+) carbon capture.

Fig. 1: Clean hydrogen supply methods and their carbon-intensity, ranging from negative-carbon through high-carbon

Different regions have different opportunities for clean hydrogen production. California has high potential to produce renewable hydrogen from water electrolysis and biomass. This is due to both the state’s high solar energy potential as well as abundance of annual biomass waste from farms and forests that is otherwise typically burned in piles or left to decompose, releasing carbon and air pollution.

Applications for Clean Hydrogen

Hydrogen is an energy carrier, fuel, and chemical feedstock that can enable decarbonization in multiple applications. Petroleum refining and fertilizer production consume the vast majority (90%+) of hydrogen produced today which could be immediately replaced with clean hydrogen (Fig. 2). Net-zero economies will require many more applications of clean hydrogen, which could include materials manufacturing, electricity generation and storage, clean fuels for aviation and shipping, and more.

Fig. 2: Clean hydrogen demand options¹

Clean Hydrogen Opportunities in California

The multitude of potential hydrogen end-uses means that prioritization based upon regional and in-state characteristics is needed to optimize investments. For example, the Gulf Coast and Great Lakes have major steel industries that could be sustained by leveraging clean hydrogen for decarbonization. The Midwest has an obvious need for ammonia for fertilizer production. Northeast manufacturing industries could swap fossil fuels for clean hydrogen as an alternative source for high-temperature heat.

Like these regions, California has its own opportunities. We identify three such opportunities below:

• Long-duration storage. California’s goal of a high-electrification, renewables-heavy economy creates a need for long-duration storage which can be met in part with hydrogen. During periods of low energy demand, excess supply can be used to produce hydrogen via electrolysis that is stored in large quantities in caverns, depleted oil fields and aquifers. This can then provide a ‘firming’ option during periods of high energy demand in the evening. With a growing number of extreme heat events, clean hydrogen storage is likely to be a critical adaptation measure for California
• Transportation fuels. California’s transportation sector is its largest source of emissions. Clean hydrogen as a feedstock can enable drop-in fuels that cut emissions in freight transport where there are barriers to electrification. It can also enable sustainable aviation and shipping fuels, both widely anticipated to be dependent on liquid fuels over the long-term. California could progressively transition its major refining industry to support clean fuels production.
• Fertilizer production.As the ‘vegetable basket’ of the nation California consumes a significant amount of synthetic fertilizer. However, over 90% of this fertilizer is imported, including a potentially sizeable amount from Russia. There is a compelling opportunity for California to drive part of its merchant clean hydrogen production towards a new clean fertilizer industry. This can create rural jobs and limit the state’s exposure to potential new geopolitical crises in the future.

Key Considerations for Clean Hydrogen

Clean hydrogen can play a meaningful role in supporting California’s climate goals. However, this ultimately depends on how the technology is deployed.

One key issue is ensuring clean hydrogen produced via water electrolysis actually uses renewable electricity. Specifically where electrolytic hydrogen is produced via grid-connected renewables there is a risk that this production draws clean energy from the grid and results in more fossil fuel combustion. Proposals to mitigate this risk include “additionality” which requires grid-connected producers match their consumption by separately purchasing carbon-free generation on the open market (i.e., effectively mimicking ‘behind-the-meter’ users) and “hourly matching” which requires hydrogen producers match or verify their renewable consumption occurred in the hour it was generated.

Another key consideration relates to hydrogen delivery and the role of infrastructure. Hydrogen has a low energy content by volume and is a slippery molecule that is prone to leakage. This means that, as hydrogen is variously produced, compressed, moved and stored, it rapidly loses efficacy as a climate-friendly energy carrier. Minimizing delivery steps is therefore important, underscoring the importance of building infrastructure that is targeted to priority end-uses. Go-Biz’s forthcoming Market Development Strategy will be an important forum to address these considerations.

A final issue relates to credibly scaling clean hydrogen. The main hurdle to wider clean hydrogen uptake is cost: it is currently 3-5x more expensive than conventional fossil hydrogen. Bridging this gap was a focus of the Inflation Reduction Act, which included the 45V tax credit. Additional state-level policies could buffer this measure. For example, the state could consider mandating that refineries must procure a small but progressively increasing amount of clean hydrogen. This offtake assurance is often more powerful than a tax credit and could drive early in-state production. As other state policies drive a phase-down in refineries, including multiple retirements, this clean hydrogen could be used to support the remaining refineries that transition to clean fuels production.

Conclusion

Clean hydrogen can play a key role in California’s path to net-zero emissions. However, this depends on multiple factors including how its produced, transported, and consumed. California is well-placed to lead on electrolytic and waste biomass hydrogen production, which makes sense to target largely towards long-duration storage, transportation fuels and fertilizer production. New policies including additionality for grid-connected electrolysis as well as procurement can ensure that clean hydrogen is both truly clean and scalable. Finally, forthcoming plans should consider that although hydrogen has the benefit of being versatile, this benefit can decline rapidly due to inefficient transportation and/or leakage. As a result hydrogen infrastructure investments should be designed carefully to support priority end-uses.

For more information on clean hydrogen opportunities in California, please contact Sam Uden (sam@csgcalifornia.com).

The above excerpt was originally published by CSG. Click here to view the full article.