Transportation sector key to growing California hydrogen market

California's burgeoning hydrogen market has the potential to rapidly replace oil and gas at scale, helping the state to meet its carbon-neutrality goals by mid-century, but it faces critical government policy challenges this year.

Overtaking California's medium- and heavy-duty transportation fuel markets is likely the most achievable near-term target for growing the state's hydrogen demand, according to a roundtable of policy and market experts gathered this week at the 2020 California Hydrogen and Fuel Cell Summit in Sacramento.

Currently, California has some 44 retail hydrogen fueling stations and another 18 in development, according to the California Fuel Cell Partnership. The state is also home to most of North America's over 8,000 hydrogen-powered fuel cell electric vehicles.

State-level policies and tax incentives for the purchase of vehicle models like the Toyota Mirai and the Honda Clarity have been critical in helping to develop California's existing hydrogen market.

The potential for growth is huge. California consumed an annualized 15.1 billion gallons of gasoline and 4.2 billion gallons of diesel in 2015, according to the most recent data from the State Board of Equalization.

Establishing a primary market for hydrogen in the transportation sector could also be key in helping California to achieve its Senate Bill 100 goal of reaching carbon-neutrality by the 2040s.

Big challenges for California's hydrogen industry, though, exist in the production and distribution of the fuel – particularly to industrial, residential and commercial end-users.

PRODUCTION

A recent move by Governor Gavin Newsom to cut funding in the state's 2020 budget for policy and tax incentives supporting the hydrogen market is top of mind for the industry this year.

The governor's decision was a critical blow, according to John White, executive director at the Center for Energy Efficiency and Renewable Technologies. The reason, he says, is that California's producer and distributor markets remain underdeveloped.

Currently it's far less capital intensive for entrepreneurs and developers to build new hydrogen fueling stations in the state than it is to build infrastructure to produce the fuel.

Scaling up production raises questions of its own, though. The state's motivation for transitioning to hydrogen fuel is predicated on its goal of achieving a carbon-neutral economy by mid-century.

Currently, commercially produced hydrogen in the US is made using steam methane reforming (SMR) – a process that splits a methane molecule into its component carbon and hydrogen parts. SMR production, however, simultaneously releases carbon that can potentially be captured, but is more frequently released.

According to market experts, the gold standard for hydrogen production is a "green" electrolyzer production method – a process that uses wind, solar or some other renewable power source to generate an electric current that splits a water molecule into its component hydrogen and oxygen parts.

DISTRIBUTION

Another major challenge facing California's hydrogen industry is fuel distribution.

Under the state's existing regulation, hydrogen is effectively considered a contaminant in the natural gas pipeline grid. That's a problem, according to California State Senator Henry Stern.

"The existing infrastructure cannot be stranded," Stern said from the Fuel Cell Summit. "It's what will make the transition possible."

California's hydrogen market experts agree – aggressive emission-reductions goals will require the state to leverage its existing natural gas infrastructure for hydrogen distribution. Questions remain, though, about how much hydrogen could be injected into the gas stream and at what cost.

Pipeline safety studies show that anywhere from 5% to 20% hydrogen can be safely injected directly into the gas stream depending on the specific design and age of the targeted grid.

Hydrogen blending into California's gas stream could become a reality soon, though. The California Public Utilities Commission has plans to propose an interim standard for hydrogen by November 2020.