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FAQ: Why Green Hydrogen?

Hydrogen is trending, and it is controversial.

RMI has been analyzing hydrogen as a low-carbon energy solution since 2003. What started as a work stream in our breakthrough technologies research now forms a central pillar of our efforts to decarbonize heavy industry.

Why?

This Q&A explains where RMI thinks hydrogen will play a part in the energy transition and where it won’t, what kind of hydrogen we’re talking about in the hydrogen “rainbow,” and some important calls to action to industry and regulators to make sure this technology reaches its decarbonization potential.

How does RMI define “clean” hydrogen?

Hydrogen is “clean” only if carbon emissions from its production, storage, distribution, and use are low or zero. It is insufficient to simply use the broad, color-coded definitions of hydrogen production and assume industry will adhere to strict performance standards. It is critical to include both Scope 2 and Scope 3 emissions to account for the emissions from energy production and supply chains associated with hydrogen production pathways. In particular, a full accounting of hydrogen’s emissions must include the carbon intensity of the grid used to make “green” hydrogen, as well as upstream leakage of methane from the natural gas used to make “blue” hydrogen. RMI believes hydrogen must be regulated and certified to ensure true emissions savings are quantified and reflected in the market.

The production of green hydrogen — which involves splitting water molecules with electricity — has no carbon inputs and no carbon outputs if that electricity comes from a dedicated renewables array or a renewables-powered grid. It is important to note that green hydrogen’s carbon footprint is not zero if the electricity comes from a fossil-powered grid, which significantly increases life-cycle emissions.

Blue hydrogen made by using natural gas and capturing carbon by-products can in theory be “clean,” if upstream emissions from the production of natural gas are limited (less than 0.2 percent leakage) and the carbon capture rate is high (90 percent or higher). In practice, upstream emissions of natural gas significantly increase the carbon footprint of blue hydrogen: the average leakage rate in the United States is 1.2 percent, and carbon capture technology has yet to reach capture rates above 60 percent at scale.

There is no place in the energy transition for “gray” hydrogen, made from natural gas or coal with no capture of the carbon emitted as a by-product. Gray hydrogen currently represents 95 percent of the hydrogen being produced.

Where does RMI see clean hydrogen being used to decarbonize the economy?

Hydrogen can be used to decarbonize many sectors of the economy, but it should be prioritized for “hard-to-abate” sectors such as heavy industry and long-haul transport, where direct electrification isn’t feasible. Hydrogen is currently the only low-cost, scalable, low-carbon pathway to fully decarbonize these essential and carbon-intensive activities.

These sectors can and should reduce their emissions through smart design, circularity, behavioral change, and increased asset utilization, as well as by increasing energy efficiency. But even with fully realized efficiency, hydrogen will likely constitute 15 to 25 percent of global final energy use by 2050.

RMI believes green hydrogen made using renewable electricity, and the green ammonia made with green hydrogen, are scalable now for use in industrial hubs and should be used to quickly displace the coking coal and natural gas used in industrial processes. Green ammonia is an increasingly viable substitute for highly polluting bunker fuel used in shipping, another sector that cannot afford to wait to decarbonize.

Hydrogen can be used as a storage medium for electricity by producing hydrogen on-demand using electrolyzers powered by electricity and storing it for later use in electricity generation. This approach could help resolve seasonal storage issues in renewables-powered grids. The flexibility of hydrogen production in electrolyzers can also significantly reduce intra-day variability and defer billions of dollars of investment in transmission grid upgrades. RMI is exploring the concept of using hydrogen and ammonia as an export medium for renewable energy, which would allow regions with strong renewable energy potential to export excess energy production to regions with renewable energy deficits.

Where will hydrogen likely not be a useful decarbonization tool?

Hydrogen is not a decarbonization panacea. RMI does not believe hydrogen has a substantial role to play in decarbonizing residential and commercial buildings, where direct electrification is cheaper and can be implemented immediately. As in all sectors, energy efficiency is a priority. Hydrogen should not be used as a Trojan horse by the fossil fuel industry in arguments for keeping the gas distribution system in place to bring this clean fuel to homes. There are few use cases for hydrogen-based heating in a zero-carbon economy, and none of them require gas pipelines for continuous supply but will rather rely on hydrogen for backup capacity.

Hydrogen fuel cell technology for cars and other light-duty transport shows promise but is likely to play a limited role as electrification dominates the market. In the transport sector, we believe that hydrogen is most immediately beneficial for heavy-duty trucking, shipping, and aviation.

Why use renewable electricity to make green hydrogen when the electricity could be used instead to directly decarbonize homes, transport, and other sectors?

RMI does not think hydrogen should be used for sectors and use cases that can be directly electrified.

The world requires massive build-out of renewable energy to reach net zero and decarbonize across all sectors. Grid decarbonization is critical, as is direct electrification to use these valuable renewable electrons most effectively.

If we are to reach net zero, sectors that cannot be directly electrified must be decarbonized immediately and by other means. Investments must be made in hydrogen today to begin to decarbonize these sectors, scale the technology, and make it cost-competitive, enabling it to reach its full potential as a decarbonization tool.

To minimize competition for renewable electricity use, we support the development of green hydrogen hubs, where dedicated renewables arrays would produce green hydrogen and ammonia. In addition, siting green hydrogen-fueled industrial hubs in geographies with high renewables potential would allow those regions to develop supply chains and export hubs with less risk of competition. This will require planning and sufficient investment in renewables build-out.

Isn’t green hydrogen prohibitively expensive as compared with fossil-powered hydrogen?

Given high global natural gas prices, green hydrogen is already cheaper to produce than hydrogen produced with natural gas in regions linked to LNG market prices or with great solar and wind resources. Globally, costs of green hydrogen production are expected to drop even further this decade and beyond, with many comparing the technology’s cost curve to installed costs for solar PV systems, which dropped more than 70 percent in 10 years. Additionally, green hydrogen is not subject to the price volatility of fossil fuels or any added costs from future carbon taxes.

In Europe, natural gas futures prices indicate that it will be consistently more expensive to produce gray and blue hydrogen than to produce green hydrogen in the region. Before 2028, imported green hydrogen produced in areas with abundant renewables will be cheaper than blue or green hydrogen produced in the EU, even when accounting for conversion to ammonia for transport and baseline shipping costs. Once global gas markets stabilize and gas prices renormalize (likely after 2025, based on futures prices), declining costs of renewables and electrolyzers will ensure that green hydrogen is cost-competitive through to 2030 and beyond.

Doesn’t hydrogen have significant environmental impacts from water consumption?

Aside from clean electricity, the other input required to produce green hydrogen is water. All energy production pathways consume some amount of water. Green hydrogen production uses nine liters of water for every kilogram of hydrogen created. In contrast, for every equivalent amount of energy produced, “blue” hydrogen from natural gas-based steam methane reforming consumes approximately 22 liters, and unconventional gas production (hydraulic fracturing) consumes 1.6 to 4.5 liters.

Large-scale renewable hydrogen production will not cause additional global water stress if it is coupled with the development of desalinization plants. In fact, industry players and governments are looking at these mega projects to produce water at a scale and cost that can reduce regional water scarcity and enable new water-intensive activities in desert regions of Saudi Arabia, Australia, Chile, and Namibia. Desalinization contributes less than 2 percent of the total capital requirements of green hydrogen and less than 1 percent of the energy requirements.

What about the climate risks of hydrogen leakage?

RMI believes that the climate benefit from a well-regulated clean hydrogen economy outweighs the impact of any emissions that hydrogen leakage would add to our energy system, especially if we prioritize green hydrogen produced from renewables-powered electricity. Supply chain transparency, regulation, and planning to focus hydrogen use in industry and transport hubs will minimize opportunities for leakage throughout the hydrogen supply chain. Even with leakage, hydrogen represents a huge emissions reduction when it replaces fossil fuels in industrial processes. And producing green hydrogen can also address a bigger leakage problem within the supply chain for natural gas used in the production of blue hydrogen.