Hydrogen Hub Act Issues

Hydrogen Hub bill discussion draft of 11-12-21 – Tom Solomon’s comments

Overall, this is a fossil blue hydrogen bill.

• It defines ‘clean hydrogen’ to allow huge emissions of CO2.
• It explicitly allows Enhanced Oil Recovery in Section 5.b, which is not a climate solution.
• It relies on the false premise that hydrogen is a low emissions fuel which it is not.
• It supplies major tax subsidies to blue hydrogen production, which end up being fossil fuel subsidies.
• It prevents green hydrogen produced from fresh water (but may allow green hydrogen produced from brackish water, if that is feasible.)

Comments on the draft bill itself:

1. The underlying premise of the bill is flawed, i.e. that hydrogen is a low emissions fuel, which it is not. Section 3. Hydrogen Hub Act – Standards defines ‘clean hydrogen’ to allow huge emissions of CO2, but still qualify as clean. This is how:

o The 11-12-21 draft defines ‘clean hydrogen’ as having a declining range of allowed carbon intensities, starting at 9 kg of CO2 per kg of H2 AT THE POINT OF PRODUCTION at the effective date of the act (2022?), scaling down to 7 kg by 2024, 5 kg by 2026 and 3 kg by 2028, with possibly lower values after 2030 as determined by the Sect of NMED.

o So let’s use the most stringent requirement of 3 kg of CO2 emitted per kg of H2 produced after July 2028. What does that mean?

o Per this paper, ‘Assessment of CO2 capture options from various points in steam methane reforming for hydrogen production’ in the Oct 2014 International Journal of Hydrogen Energy, “Steam methane reforming (SMR), currently the main hydrogen production process in industry… has high emissions of CO_2, at almost 7 kg CO_2/kg H_2 on average. “

o So we will use 7kg CO2 per kg H2 as the basic SMR emissions rate.

o If, after 2028, they allow emissions of 3 kg/kg that means they are sequestering only 4 of the 7 kg from SMR, for a 57% sequestration rate. Talk about a low bar!

o And that 3kg of CO2 emissions is added to all the upstream GHG emissions (from electricity generation and methane leakage) called out by Howarth and Jacobson in their “How Green is Blue Hydrogen” paper where they concluded, “the greenhouse gas footprint of blue hydrogen is more than 20% greater than burning natural gas or coal for heat”.

o Hydrogen is not a low CO2 emissions fuel, in fact it is higher emissions than natural gas.

o The carbon intensity standard for ‘clean hydrogen’ should be zero which is the emissions rate from solar and wind electricity. Allowing 3kg of CO2 emitted per kg of H2 produced increases global warming.

1. Section 2. Definitions does define life cycle emissions, but the term is never used again, so there is no requirement to measure or control life cycle emissions.

“hydrogen production cycle emissions” means the aggregate quantity of direct and indirect greenhouse gas emissions across the production cycle of the hydrogen, including delivery and use of the feedstocks, the feedstocks, and production method, where the mass values for all greenhouse gases are adjusted to account for their relative global warming potential;

1. Section 4. Hydrogen Hub Act – Natural Gas Utilities.

· This section in particular relies on the false premise that Hydrogen is a low emissions fuel, to push natural gas utilities to do the wrong thing. It requires natural gas utilities to use hydrogen, develop hydrogen pipeline infrastructure and to blend hydrogen into existing natural gas transmission and distribution systems including for export based on the false premise that this will reduce GHG emissions. See this section:

1. Section 4. Hydrogen Hub Act – Natural Gas Utilities.

“Section 4: Gas utilities shall use available tools, including, without limitation, hydrogen to achieve greenhouse gas emission reductions, cost-effectiveness, and equity. The incentives available under this act shall be available to all persons, including Public Utilities (as that term is defined in NMSA 1978, Section 62-3-3), for the development of or use of hydrogen in New Mexico. Such development may include the following: Construction of hydrogen production from any fuel source, consistent with utilizing New Mexico’s abundant natural resources and resulting in reducing overall emissions intensity of the fuel;”

1. The tax subsidies in Section 7 are the major feature of the bill and take up pages 5-25 of the 27 pages. I counted four hydrogen tax credits plus five separate tax deductions. And since to qualify for them, ‘clean hydrogen’ needs to be produced from fossil fuels and NOT electrolysis of fresh water, these are more tax subsidies for fossil fuels. Someone better versed in tax law should say whether any of these individual 5% tax credits and deductions could be additive.

Four Tax credits:

1. “hydrogen energy income tax credit”. Of 5% of plant costs
2. “hydrogen production income tax credit”. five percent of the eligible production plant costs
3. “hydrogen energy corporate income tax credit” five percent of the eligible generation plant costs
4. “hydrogen production corporate income tax credit” five percent of the 5 eligible production plant costs of a certified clean hydrogen production

Five Tax deductions

1. Deduction for construction of hydrogen filling stations for vehicles
2. Deduction for sales of Hydrogen (based on 7-9-90 and 7-9-110.1)
3. Deduction for Generating Equipment (based on 7-9-79.2 and 7-9-114)
4. Deduction for Production Equipment
5. Deduction for Construction of Distribution Infrastructure (based on 7-9-101)

General comments

A. Hydrogen electricity is uneconomical and not compliant with the ETA

· Electricity produced from fossil blue hydrogen is expensive and, according to eH2 Power is not profitable. Electricity from solar + battery or wind is far cheaper and is profitable.

· Because fossil blue hydrogen is at least 20% higher carbon footprint than just burning natural gas, a hydrogen-electricity plant is not low carbon and will NOT be compliant with the ETA.

· Any claim that a hydrogen-electricity plant produces reliable, dispatchable power must be backed up by evidence including a history of operations and uptime.

· Why would the PRC approve electricity generating certificates for expensive, non-ETA compliant hydrogen-electricity plants?

B. Carbon capture and storage (CCS) has a record of failure

· Carbon capture has a record of failure, with industry making inflated claims of high percentage CO2 capture, but failing to meet those in long term operations. We should not accept any CCS claims without iron clad guarantees including ongoing monitoring and reporting, that they pay for, and requirements to cease operations if and when they fail.

C. Any hydrogen project claiming a climate benefit should be measured against US commitments in the Paris accords and the Governor’s Jan 2019 Climate Executive Order to ‘achieve a statewide reduction in greenhouse gas emissions of at least 45% by 2030’, and the cleanest and cheapest options available: 100% renewable electricity generation from solar, wind and battery, or battery electric transportation.

D. Hydrogen as a blend into natural gas pipelines is foolish

· Blending H2 into a natural gas pipeline is not being done at commercial scale in the US. It is speculative and has a host of problems to solve (pipeline embrittlement, explosive burning, water in customer equipment as a combustion by-product, etc).

· This proposed end-use of hydrogen for sales is premised on the existence of a viable long-term market for natural gas. But the only way to meet US/Paris climate goals is to have a managed decline in our use of natural gas and oil, aligned to 45-50% emissions reductions by 2030 and to zero by 2050. That is not a viable market to depend on.

· Hydrogen has a much lower (68% lower on HHV) volumetric energy density than natural gas, so blending hydrogen actually dilutes gas energy content. For instance, a 5% blend by volume of hydrogen would only displace 1.6% of natural gas demand, requiring the customer to buy more of the blend to get the same energy.

E. This is a wordsmithing comment: The definition of “carbon intensity” seems confusing. In section 3, the units of carbon intensity are “kilograms of carbon dioxide equivalent per kilogram of hydrogen produced”. But in Section 2, the definition includes the phrase “expressed in grams of carbon dioxide equivalent per megajoule”. Why?

Section 2. Definitions. As used in the hydrogen hub act.

“carbon intensity” means the quantity of carbon dioxide-equivalent produced at the site of production per kilogram of hydrogen produced, expressed in grams of carbon dioxide equivalent per megajoule;