Green Hydrogen in US & Canada: It’s Getting Busy.

Together with over 150 expert delegates from the clean hydrogen segment, we’ve taken stock at the green hydrogen (GH2) market in North America specifically this week in Seattle at Solarmedia’s Green Hydrogen Summit North America. In the spirit of sharing with a still emerging group of developers, financiers and OEMs, here are my top 5 takeaways:

1.     What’s “clean” in North America? Greener than I thought!

In contrast to the European Union and its confirmed regulation of “Renewable Fuels of Non-Biological Origin (RFNBO)” (Hitachi Energy), North American federal regulators haven’t opted for “green” but “clean” hydrogen setting maximum allowable CO2 emissions of hydrogen rather than requiring the electricity used for hydrogen production to be renewable as done in the EU (Hitachi Energy). Given blue hydrogen produced from natural gas with CO2 captured and stored can be cheaper than green hydrogen from new renewables sources and is already subsidized in the US through the 45Q regulation in the IRA (IEA), this could suggest that blue hydrogen would dominate North America’s clean hydrogen project landscape going forward. However, driven by local political preferences, investors’ ESG requirements and in anticipation of the much-awaited final 45 V regulation (DoE) , it turned out that most North American projects currently planned are indeed green, i.e. powered by renewables.

2.     Clean hydrogen hubs? Slowly but surely – and largely green.

As has been published various times since October 2023 and to kick-start the clean hydrogen economy, the DoE has selected 7 clean hydrogen hubs of clustered clean hydrogen production and offtake across 16 US states to receive a total of 7 bn$ of CAPEX subsidies as one means to reach its target of 10 MMT of clean hydrogen produced p.a. by 2030. Reflecting above realities, and as revealed by the DoE, two thirds of all hydrogen in the 7 selected clean hydrogen hubs are also planned green. The hubs are currently in phase 1, negotiating MoUs mainly with the DoE but also potential hydrogen producers, offtakers, midstream / transportation partners and local communities (DoE). In phase 2 expected to start next year the latest, projects would then develop respective infrastructures of which owning and operating would expectedly start by 2030.

3.     Where else? Look West and go North.

Assuming that not all 7 hubs would make it through to producing the entire targeted 10 MMT of clean hydrogen by 2030, more projects will be required to reach North America’s targets of US and Canada combined. Therefore it’s helpful that various regions – including such not being selected with their hub applications – have already seen state-led additional incentives. In Colorado for example, offtakers, a partly neglected, must-commit stakeholder group to really get the clean hydrogen economy started in the US, can benefit from a 1$/kg green hydrogen tax credit if the hydrogen is produced with a carbon-intensity of max. 0.45 kg CO2e / kg H2 (Colorado Energy Office).

Having established its clean hydrogen regulation before the US, Canada helped developers’ and financiers’ business case certainty. Major projects are therefore already in more advanced stages of development than in the US. In Newfoundland and Labrador, for example, World Energy GH2’s project Nujio'qonik plans a total of 3 GW of wind to power 1.5 GW of electrolysis for RFNBO-compliant GH2 exports to Europe and already committed 20% of total required funding from SK Ecoplant (Green Giraffe). Another advanced project in Canada was presented from Nova Scotia: Having all green ammonia permits in place already and planning to start with 500 MW of wind in “phase 1 a”, followed by further phases towards up to 2 GW of electrolysis, BAES Infrastructure’s project seems one of the most mature large-scale GH2 projects in country, also targeting RFNBO-compliant GH2 export to Europe (Bearhead Energy).

4.     Will enough renewables be available? Yes, but...

If the majority of hydrogen projects in the US is expected to be powered by renewables: Will there be enough capacity available? Well, let’s do the math: As presented by one of the dominating electrolysis producers in North America, 30 tons of GH2 production per day require an electrolysis nameplate capacity of approx. 70 MW if using particularly renewables-compatible PEM technology (PlugPower). Assuming a 70 MW PEM electrolyzer would run 350 days p.a. at Plug-Power’s cited 90% of nameplate capacity for financial viability, this would then produce approx. 10’000 tons of GH2 p.a. To produce the 10 MMT p.a. of clean hydrogen by 2030 as targeted by the Biden-Harris Administration, this would require ~70 GW of renewables running at 100% capacity of name-plate installation. More realistically, considering low-wind periods, night-times and winter, approx. 100-150 GW of renewables would be required to feed green hydrogen electrolyzers, partly PEM, partly more efficient Alkaline, if the US 2030 clean hydrogen was to be produced entirely by renewables. For comparison: By end of 2023, the US had accumulated 150 GW of wind and approx. 100 GW of utility-scale solar installed already. In other words, the current Renewables installed base would already now be more than sufficient to produce all clean hydrogen targeted by the US for 2030 – but would need to be doubled to still serve all current loads supplied by renewables and potentially even tripled to also serve the additional loads to be renewables-powered, including a quickly growing wave of new datacenters and the electric vehicle economy.

What’s more challenging than building the required renewables capacity is how this additional renewable energy will be used: Currently, utilities pay more for RECs than GH2 projects requiring such under the draft IRA V45 regulation could possibly pay (EDPR North America). Also, we lack performance guarantees in electrolysis equipment which currently is available in e.g. renewables when competing for project finance (EDPR North America). The competition for both renewable energy and capital is therefore a challenge for GH2 projects in the US.

5.     Electrolysis grid connections: More challenging than many think.

Another challenge became clear during one of the best-attended sessions on “Navigating the Gridlock.” Whilst renewables curtailment is often considered a main driver to help make Levelized Cost of Hydrogen (LCOH) competitive with other Levelized Costs of Energy (LCOE), curtailment for electrolyzers themselves could become an underestimated challenge: First, other fast-growing loads, especially datacenters, currently consume most of available new grid connections available for new loads especially in US’ east (Dominion Energy). Second, the applications for grid connections by far exceed available capacity for the next many years (National Grid) – in some regions new high voltage grid connections cannot be applied for with effective starting date before 2038. Whilst new grid connection capacity may become available even without major grid build-outs given multiple applications queuing are being pulled back as projects turn out not to be financially viable or lack equipment to be built (National Grid), lead times for transformers of approx. 36 months exceed by far the lead times for electrolysis equipment itself and represent another hurdle for building the required grid connections powering electrolysis, thus GH2 projects themselves. When planning to locate both GH2 production and renewables plants behind one potentially already existing point of common coupling as a way out from the grid connection dilemma, some developers saw independent system operators (ISOs) declining the application insisting on separate connections and metering for generation and consumption (Avangrid Renewables).

To sum it up: Waiting for regulation? A tempting but dangerous pitfall vs. competition.

Whilst for the US, the details of IRA regulation supporting clean hydrogen projects are still to be published and expected for the second quarter of this year as “V45 clean hydrogen production tax credit”, the competition for electricity, sites, permits, equipment and grid connections in the USA is already on. Hitachi Energy has grown expertise from over 20 GH2 projects mainly in Europe but also from the US and can leverage it to help keeping pace offering three main contributions to financiers, developers and IPPs:

·       Financial project planning and business casing: To raise debt and equity for project advancements, sound business planning and risk assessment supported by bankable forecasts of nodal-level power prices, grid capacity availability and LCOH is essential. Our US market-leading EPM offerings like our Energy Market Advisory Services, Velocity Suite or PROMOD have already been deployed by first US clients for GH2 project planning, enabling bankability and effective project advancement: Energy Portfolio Management | Hitachi Energy

·       Technical concept, Pre-FEED and FEED studies for the entire power infrastructure from grid to stack: Estimating project cost, sizing and duration requires technical expertise in bringing electricity from power grids into electrolyzers. Our power consulting team centered in Raleigh for the US is here to help you go from financial business casing to technical single line diagrams and equipment cost estimates for your specific project and – if desired – can directly consult a currently challenged supply-chain as well as industry-leading product management planning for the optimum system design even in earliest project phases: Power Consulting | Hitachi Energy

·       Grid-to-stack packages and digital solutions: For a complete overview of Hitachi Energy’s GH2 hard- and software solutions supporting from early project planning through to asset operations & maintenance, see here: Hydrogen Solutions | Hitachi Energy

Gian Schelling, Global BDM Renewables & Green Hydrogen, has worked for various Wind, Solar and Battery Energy Storage Systems OEMs, integrators and a utility. Under Gian’s leadership, Hitachi Energy’s automation business of integrating Renewables and BESS into energy markets, power grids and asset management has grown from 30 M$ in 2018 to 150 M$ in 2022. Together with his dedicated expert colleagues, Gian is now also developing our global hydrogen business. You can connect or follow Gian here.