Some U.S. hydrogen hubs that are marketed as "clean" are considering using natural gas, a fossil fuel.

• Two of the seven hydrogen hubs announced in October will utilize only renewable energy, while the remaining five will employ a mix of renewables, nuclear power, and natural gas with carbon capture and storage.
• The production of hydrogen from natural gas can have a positive impact on the climate, but only if it is executed with great care and strict oversight from the government.
• While it is possible to produce low-carbon hydrogen from natural gas, currently, this "blue hydrogen" is being produced on a small scale in the United States.

The Biden administration has approved $7 billion in federal funding for seven regional hydrogen hubs to promote the development of clean hydrogen in the US. This could be a vital solution to decarbonize difficult industries, such as heavy shipping, which emit significant amounts of greenhouse gases.

Jennifer Granholm, head of the U.S. Department of Energy, stated that clean hydrogen is a versatile solution for zero-carbon powering trucks, buses, and airplanes, heating homes and fertilizing crops, revolutionizing shipping, and cleaning up America's manufacturing industry.

Two of the seven hubs will utilize renewable energy exclusively, while the remaining five will employ a mix of renewables, nuclear power, and natural gas with carbon capture and storage.

Investing federal funds in a climate change program that relies heavily on natural gas, a fossil fuel, may appear counterintuitive.

The production of hydrogen from natural gas through carbon capture, known as "blue hydrogen," is not inherently detrimental to the environment. However, for it to have a positive impact on the climate, it must be executed with utmost care and strict government oversight.

The use of blue hydrogen in hubs poses climate and air pollution risks, which is why we were disappointed to see such over-reliance on it, according to Rachel Fakhry, hydrogen policy lead for the Natural Resources Defense Council.

The Department of Energy has a significant role in overseeing these hubs and must ensure that projects capture carbon at high rates to minimize methane leakage, protect against health harms, and comply with rules regarding the powering of carbon capture equipment, as stated by Fakhry to CNBC.

It all depends on how the hydrogen is made

Hydrogen, when burned or used in a fuel cell to produce electricity, results in only water as a byproduct. This method of generating energy from hydrogen does not produce carbon dioxide, a major contributor to global warming. Additionally, hydrogen serves as a means of storing energy that can be transported or utilized at a later time.

To use hydrogen in decarbonization solutions, it is necessary to split molecules, which has a significant impact on the climate.

Producing hydrogen through the process of splitting water, H2O, with electricity and an electrolyzer can be advantageous from a climate perspective if the electricity used to power the electrolyzer comes from sources that do not produce greenhouse gas emissions, such as wind turbines or solar farms.

Producing hydrogen using an electrolyzer that relies on electricity generated from coal or other fossil fuels is not considered "clean" according to any standard.

According to Emily Kent, who heads public policy and education for hydrogen at the Clean Air Task Force, running an electrolyzer on grid electricity could increase the carbon intensity of existing gray hydrogen by more than double, depending on the location of production. If the electricity used to run the electrolyzer is not clean, the resulting hydrogen would not be considered clean either.

Methane, the primary component of natural gas, consists of one carbon atom and four hydrogen atoms.

The majority of hydrogen produced in the US is generated through a high-temperature steam process that splits natural gas, resulting in "gray hydrogen" and contributing to climate change emissions.

To produce lower-carbon hydrogen from natural gas, it is necessary to employ point-source carbon capture technology to remove carbon emissions from the factory flues where steam-methane reforming occurs.

But how can hydrogen made from natural gas be ‘clean’?

Can hydrogen derived from natural gas ever be considered a "clean" alternative?

First, it’s a question of definitions.

Kent explained that the term "clean" is subjective and can have different meanings, similar to how the word "natural" is used for foods, which can have varying interpretations. A clearer understanding of the concept can be achieved by considering the carbon or greenhouse gas intensity of hydrogen production.

Fakhry explains that the federal government considers hydrogen production in a technology-agnostic manner, meaning any method, including fossil fuel-based, water electrolysis, or biomass, can be considered "clean" as long as it adheres to a specific carbon emissions standard.

The Bipartisan Infrastructure Law mandated that two of the chosen hydrogen hubs be situated in regions with abundant natural gas resources. Additionally, one hub was required to utilize fossil fuels with carbon capture, another must employ nuclear energy, and a third had to rely on renewable energy sources.

The carbon intensity of hydrogen produced from natural gas is complex and varies depending on the project. To produce low-carbon hydrogen from natural gas, there must be high rates of carbon capture, minimal upstream methane leaks, and the electricity used in the carbon capture process must be low or zero carbon, according to Kent.

Reducing emissions in three crucial areas can lead to the production of low-carbon hydrogen from natural gas, as stated by Kent to CNBC.

Producing hydrogen from natural gas with carbon capture will require additional energy and be more expensive than producing hydrogen from natural gas where the excess carbon emissions are released into the atmosphere. However, it is feasible.

Sean Heinroth, principal at Ernst & Young’s EY-Parthenon practice headquartered in Houston, explained to CNBC how hydrogen can be produced using natural gas in a carbon-neutral process.

• Producing 1,120 kilograms of hydrogen through steam-methane reforming without carbon capture requires approximately 6.2 megawatt-hours of heat energy.
• To capture 70% of the carbon emissions (blue hydrogen) associated with producing 1,120 kg of hydrogen, it requires approximately 10.2 MWh of heat energy and 3.6 tons of carbon dioxide.
• Producing blue hydrogen and capturing 70% of emissions requires an additional 4 MWh of energy per 1,120 kg of hydrogen produced, which is approximately a 40% increase in energy usage.

The additional energy needed for the steam-methane reforming process does not necessarily result in increased CO2 emissions. Some of the hydrogen produced can be utilized to power the carbon capture process.

Blue hydrogen production becomes a closed loop process and carbon neutral once it starts, as the hydrogen produced is used to power carbon capture technology, according to Heinroth.

While all this is possible, it may never happen at scale.

Blue hydrogen production in the U.S. is currently being done on a small scale, according to Heinroth.

The U.S. government aims to alter the hydrogen hubs program and production tax credit through its efforts, according to Heinroth. However, this process will require time, as stated by him.

Fakhry stated that if a project captures at least 90% of its carbon and minimizes methane leakage to less than 1%, with safeguards to minimize air pollution and health harms, it could be considered to have climate bona fides in the context of the federal government.

Fakhry questioned whether projects must meet those high standards.

Hydrogen hubs will have to verify their emissions to keep their funding

The seven hubs did not receive an upfront check from the Department of Energy for the money awarded to them.

The $925 million awarded to the Heartland Hydrogen Hub is not a direct payment, according to Tom Oakland, energy research and development manager at the North Dakota Department of Commerce. Instead, the money from the federal government will be dispersed as reimbursements for the projects as they are constructed over time, Oakland explained.

The Heartland Hydrogen Hub, comprising Montana, North Dakota, Minnesota, and Wisconsin, has pledged to allocate $3 for every $1 in federal funding it receives.

Oakland stated to CNBC that "a 3 to 1 discount is significant. Although you'll receive a 25% discount, it's not as if it's entirely free. They must make a substantial investment on their own."

According to Alex Kizer, a senior vice president at the EFI Foundation, the hydrogen hubs are in the initial planning stages and must demonstrate their validity at each stage.

To obtain funding from the Department of Energy, projects must meet certain technical, economic, and community benefits requirements. One of these technical requirements is an emissions profile. If a project cannot prove compliance with these requirements during the early stage funding phase, it will not receive future funding, according to Kizer.

The U.S. should prioritize testing the technical and economic feasibility of different methods for producing low-carbon hydrogen, according to Kizer.

Hubs are crucial for evaluating and demonstrating different options for producing hydrogen in a clean way, as there isn't a single way to do it. However, not all pathways are equal, and having hubs with regional components and different technologies is essential for exploring various configurations and moving forward in the learning curve for our clean hydrogen future.

Fakhry and other climate-focused organizations will continue to push the Department of Energy for greater transparency.

The Department of Energy has not shared much information during the process, so it is crucial to increase transparency and information sharing moving forward, especially as projects begin to take shape. It is essential for the public, communities affected by these projects, and civil society as a whole to have a voice in how public funds are spent on these projects.

Fakhry stated that one of their top priorities is to urge the Department of Energy and hydrogen hub administrators to share more information with their partners.

The hydrogen production tax credit, 45V, is a tool in the federal government's arsenal to promote the growth of the clean hydrogen industry in the U.S., as it was included in the Inflation Reduction Act.

The implementation of the 45V tax credit, if adjudicated with strict guidelines, will help spur companies working within the hydrogen hubs to produce low-emissions hydrogen.

The tax credit for producing hydrogen without carbon emissions is $3 per kilogram, and it decreases proportionally based on the amount of emissions released over a 10-year period.

If the 45V rules are strict and rigorous, then hydrogen production in those hubs, both blue and electrolytic, will likely have better climate impacts than weak rules, as projects in the hubs want to tap into a 45V credit, which is lucrative.