Hydrogen 45V Basics
This post is to catch folks up on 45V if they aren’t familiar. It’s an FAQ.
First, for electrolysis the Biden administration interpreted 45V in a way that would force the expansion of the power grid. Without that expansion, the constraints they put in the way of getting 45V credits would be unachievable in most places. In other words, the Biden administration decided to hold H2 hostage in order to expand their other clean energy goals.
I’ve been told this was spearheaded by NRDC (a litigious very left environmental group with many class-regressive goals), RMI, and some academic—that they pretty much captured Podesta’s ear and he ran with their guidance. Not the best start to what was supposed to be a commercial liftoff.
Note that electrolytic hydrogen is the only clean energy topic that requires near zero emission. Most fast-charging of electric cars is powered by burning more natural gas on the grid, even in supposedly clean grids. This is a source of frustration for everyone in hydrogen.
Definitions
EAC - Environmental Attribute Credit - a credit associated with power production to indicate how “environmental“ it is
Three pillars - The three rules to assure that adding electrolyzers to the power grid doesn’t increase the amount of fossil power on the grid
Interconnect - the queue to build new power or add new demand to the power grid. This is extremely long waits, up to nearly a decade in some parts of the US
PPA - power purchase agreement. Typically companies that seek net zero will purchase the power for a renewable facility. They may end up getting power from a grid that isn’t zero emission, but they can count it as “net zero” because they added clean power elsewhere, ostensibly offsetting emissions elsewhere
45V is part of the Inflation Reduction Act that provides $3/kg for very clean hydrogen, and $0.60 for hydrogen that is half as emitting as standard H2. Here is a helpful comparison of where we are now:
Current costs and emissions
Hydrogen is currently used to make fertilizer and turn heavy crude into usable fuels
Most hydrogen is currently made from reformation of natural gas (stripping H2 off of CH4 and emitting CO2) but the IRA was meant to push electrolytic H2
$3 for production credit seems like a lot - but it’s not when considering all the other issues
Delivered costs of hydrogen on a pipeline are from $1.50 to $3 per kg of H2
Delivered costs of hydrogen via truck are between $12 and $20 per kg of H2
Hydrogen emissions are on average 8-10 kg CO2 per kg H2
The $3 per kg subsidy comes from reducing 95% of the emissions of standard H2 - this is easy to do with renewables but hard to do with grid power
The major issue with 45V is that reliably delivered hydrogen from renewables means that hydrogen storage needs to be purchased - the sun and wind can go away for days at a time. Think of cloudy, windless days. Most uses of H2 require a steady supply.
The three pillars and EACs
When more power is used on the grid, some part of the grid has to increase power production. When a person fast-charges a battery electric car, for example, somewhere as natural gas plant burns more natural gas.
For some reason Treasury and the Biden administration decided to hold hydrogen to far stricter standards than literally every other clean project ever and force any electrolyzer to assure that no emissions are made in any part of the value chain, or they will rip away all the credits, including the clean ones. I would reiterate that this is only for hydrogen, and all other subsidies don’t face this issue.
The original law called for clean H2 to get credits. After a law is passed, the executive branch determines how to enforce the law by creating rules. Both legislative branch (congressmen and senators) and the judicial branch (supreme court and other courts) have ways to reject these rules, but largely that doesn’t happen.
In the case of 45V, the executive branch went a bit wild and interpreted clean hydrogen in an extremely strict way - pretty much saying that if a production site made any hydrogen that had emissions at any point, it would invalidate all credits that the plant was supposed to get.
These are the three pillars
Time-matching - hourly matching. If an electrolyzer uses a kwh of power, that power has to have been produced in the same hour
Deliverability - there needs to be a grid connection with spare distribution capacity. In many parts of the US there is no extra capacity and we need new power lines. Los Angeles is an example of a place where distribution no longer works, so they had to build new natural gas peaker plants
Additionality - The clean power needs to have been no more than 18 months before the commercial start date for the electrolyzer
Meeting this three of these pretty much guarantees that zero extra emissions come from hydrogen.
This would be a good thing if all other “clean” projects were constrained thus. Zero are. Hydrogen is the only one.
