The Promise of Zero-Carbon Hydrogen 

The Inflation Reduction Act is supercharging clean hydrogen development. Here’s how hydrogen could drive the energy transition for industrial facilities. 

The Energy Transition is here, but the transition is uneven across industries, proving more difficult for large energy and thermal users where dispatchable fuel is critical. In the medium-term future, hydrogen could prove to be the solution, as new incentives spur hydrogen production and investments across the U.S. 

The time to prepare is now. While hydrogen remains costly and hard to access at scale today, that is rapidly changing. Recent government measures, including the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, are spurring the rapid development of hydrogen development and infrastructure. Facilities that implement a system using natural gas today will be ready to make the transition and incorporate hydrogen as soon as it becomes more widely available. 

Hydrogen’s Role in a Green Future

Hydrogen is a “clean fuel” because it does not release carbon during combustion — although it may release emissions during production. Zero-carbon options for producing hydrogen exist but are more expensive and not widespread. Today’s main hydrogen categories include: 

• Grey hydrogen is produced through methane gas reformation, which releases emissions. This is the most common type of hydrogen production, with little to no CO₂ reduction compared with natural gas. 
• Green hydrogen is based on electrolysis that separates hydrogen from oxygen in water. The electricity source for this process is typically produced by wind and solar, although debate exists as to whether relying on the utility grid and carbon credits would qualify. Only a small fraction of today’s current production is green hydrogen. This method has the highest impact on CO2 reductions.
• Blue hydrogen is produced from natural gas but the process is integrated with carbon capture and storage (CCS) to result in zero CO₂ emissions. 

In energy-dense, high-thermal-energy industries, using some form of clean fuel for combustion — or implementing CCS post-combustion — is critical for successful decarbonization. Many sectors will continue to use fuel, typically natural gas, due to the cost of switching, technological feasibility, or resiliency requirements. Renewable natural gas is a clean fuel option today for some sectors, although the price point is higher than natural gas. 

The industrial and manufacturing sector, which comprised a quarter of U.S. emissions in 2020, uses fuel for industrial process heat, iron and steel production, marine shipping, and other processes. Heavy-duty transportation also requires fuel, making hydrogen important for trucking and aircraft. In fact, some companies are building both EVs and hydrogen fuel cell vehicles, and hydrogen fueling stations could proliferate alongside EV charging stations. 

Hydrogen is also a promising replacement or supplement for natural gas used in combined heat and power (CHP) systems. Hydrogen can be mixed with natural gas in pipelines to lower emissions for end users, or deployed using dedicated hydrogen pipelines.

Hydrogen Incentives Are Spurring Development

Two recent bills have kickstarted hydrogen development and investment. The Infrastructure Investment and Jobs Act includes a range of hydrogen-specific measures aimed at driving large-scale deployment and investment for the U.S. hydrogen industry. Included is $8 billion for four or more Regional Clean Hydrogen Hubs that produce, process, deliver, store, and provide end-use hydrogen. 

The Inflation Reduction Act creates new incentives for clean hydrogen. The full 45Z tax credit is available for clean fuel produced beginning in 2025 and sold before 2028. This direct pay production credit offers up to $3 per kg of hydrogen for the first ten years of operation. 

Hydrogen Infrastructure Is Taking Shape

The IRA has kicked off a hydrogen rush. With funding and incentives available for hydrogen hubs and infrastructure, many research and development projects are already underway. Once in place, regional hubs will enable a cross-country network of infrastructure, producers, and customers. Most of these projects will use green hydrogen produced using renewables or nuclear plants. 

These developments come on top of the 1600 miles of hydrogen pipelines currently operating in the U.S. In California, PG&E is running a feasibility study for blending hydrogen and natural gas in an end-to-end pipeline system. SoCalGas has announced a plan to decarbonize all its fuels by 2050, with a plan to start mixing hydrogen in its pipeline by 2024. Meanwhile, North Texas will be the site of the largest green hydrogen plant in the U.S. 

How Industrial Facilities Can Prepare for the Hydrogen Transition Today 

Industrial facilities require fuel for high-heat processes and thermal loads — frequently 40-60% of their carbon footprint is from gas boilers. Natural gas isn’t going away yet. Through 2050, natural gas and petroleum are expected to remain the most-consumed energy sources in the U.S., so when necessary, it makes sense to use them in the most efficient way possible. 

Combined heat and power (CHP) typically uses natural gas to support electric and thermal processes while decreasing emissions by 20-60% compared with the utility. Hydrogen offers a promising “next step” for CHP, as natural gas-based microgrids can easily transition to up to 100% hydrogen blends with a simple retrofit. This isn’t theoretical. All major reciprocating engine and turbine vendors are working on hydrogen-ready equipment, and Unison Energy’s equipment partners, 2G Energy and CAT Solar Turbines, have equipment that allows for 0-100% hydrogen-powered solutions. 

With a microgrid installed today, a facility can cut emissions immediately and be prepared to integrate hydrogen as the means and costs become feasible.

Making Hydrogen a Reality for Your Facility

The Energy Transition is just that: a transition. While we all wait for the perfect solution, it’s better to do something than nothing. A partner like Unison Energy can help each step of the way. We own, operate, and maintain our microgrids, and continue to make improvements throughout the contract term. 

Right now, natural gas or renewable natural gas are the most feasible fuel options for our clients’ microgrid systems. Hydrogen transportation and storage can be difficult, with higher costs than natural gas. But that picture is already changing. For some of our customers, hydrogen will be a realistic solution in the medium-term future, potentially within the next decade. Some clients, like those in California, are more likely to have access to the necessary supplies and infrastructure. 

For our clients, we routinely swap out microgrid system engines at approximately the eight-year mark. For new and existing clients, this will present a well-timed opportunity to resize and retrofit the system for hydrogen. The upfront cost of the switch can be bundled into the contract and is offset by the investment tax credits and improved cost savings. 

Get in touch with Unison Energy to learn more about how our microgrids can cut emissions today and integrate new technologies tomorrow.