Skip to content

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 divisive 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 fossil fuels, 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 $8bn 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 $1.5bn in 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 $5.3bn over 10 years, in a bid to scale up America’s green sector.

While hydrogen is a clean fuel when burned and produces only 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 fossil fuels, is energy intensive and emits relatively high levels of greenhouse gases.

Scientists and experts warn that differences in how hydrogen is produced cause carbon emissions to vary significantly. Some consider that hydrogen should only be used where electrification is impossible.

Cornell and Stanford University scientists estimate that the carbon footprint of “blue” hydrogen is 20 per cent larger than burning gas directly for heat.

“Blue hydrogen is something that was born out of the oil and gas industry,” said Robert Howarth, a professor at Cornell University and one of the paper’s authors.

“As an energy source, if you’re making it from natural gas you are losing some of that energy when you convert it, emissions are going to be higher, it’s more expensive than natural gas — it’s just not any better than natural gas, ” Howarth got.

But for fossil fuel 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 fossil fuels to produce “clean” hydrogen, with carbon capture technology involved to trap the polluting emissions.

Shell, BP, ExxonMobil and Chevron have also individually also had discussions about legislation affecting hydrogen with lawmakers, according to filings that disclose a combined $13mn lobbying spend across multiple issues over the first half of 2022 alone.

Two major trade bodies representing the US gas industry have spent nearly $1mn pushing for investment in hydrogen and the inclusion of gas in the US’s clean energy plans.

BP has previously said it is looking at green hydrogen alongside blue hydrogen. Exxon said that “all types of low-carbon hydrogen will require additional policy support”. The group said it 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 lists the state’s coal association and oil and gas association as potential supporters of a new hydrogen hub.

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 would use solar and offshore wind to power the hydrogen creation. Arkansas, Louisiana and Oklahoma have a pitch that would involve producing hydrogen with gas, and using carbon capture to cut emissions.

An electrolyser stack, the key to producing hydrogen. in the research and development area of ​​the Plug Power facility in Massachusetts © Bloomberg

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 the lowest emissions getting a maximum credit that is five times that for the most polluting process.

Rachel Fakhry, the hydrogen lead at the Natural Resources Defense Council, said there were similarities between the business models of gas companies and a potential hydrogen industry that led the companies to support the prospect.

“You’re producing a gas, transporting it, storing it, reusing it,” she said. “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. “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 Howarth highlighted recent scientific papers that have suggested hydrogen may interact with greenhouse gases such as methane to prolong their life in the atmosphere. The small molecular size of hydrogen would mean relatively high levels of leakage from pipelines, he said.

His paper criticizing 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 a BP advisory board and advisers to ExxonMobil and Total Energies, although they stated that there was no conflict of interest.

The Environmental and Energy Study Institute, an independent, bipartisan non-profit policy research group, said there was poor understanding of the different carbon profiles of the methods of creating hydrogen among lawmakers on Capitol Hill. “There is a lot of interest in the topic,” said Daniel Bresette, a director at EESI. “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-backed 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.

“When we talk about hydrogen we’re not talking about one specific technology but a whole process,” said Wilson. “I think most people see green hydrogen as winning out.”

The colors of the hydrogen rainbow

Green hydrogen Made by using clean electricity from renewable energy technologies to electrolyse water (H2O), separating the hydrogen atom within it from its molecular twin oxygen. Currently expensive.

Blue hydrogen Produced using natural gas but with carbon emissions being captured and stored, or reused. Negligible amounts in production due to a lack of carbon capture projects.

Gray hydrogen This is the most common form of hydrogen production. It comes from natural gas via steam methane reformation but without emissions capture.

Brown hydrogen The cheapest way to make hydrogen but also the most environmentally damaging because of the use of thermal coal in the production process.

Pink/purple hydrogen Made using nuclear energy to power the electrolysis.

Turquoise hydrogen Uses a process called methane pyrolysis to produce hydrogen and solid carbon. Not proven at scale. Concerns around methane leakage.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here.

Are you curious about the FT’s environmental sustainability commitments? Find out more about our science-based targets here

Leave a Reply

Your email address will not be published. Required fields are marked *