Green hydrogen developer plans California startup of world's largest facility

The developer of what is said to be the world's largest green hydrogen production facility said Wednesday it plans to start operations in southern California by 2023, promising to supply the state's burgeoning market with the zero-carbon fuel at a cost competitive with conventional hydrogen production technology.

SGH2's Lancaster, California plant will produce some 40,000 tons of green hydrogen annually, sufficient to fuel 2,200 fuel cell electric vehicles per day. The plant also dramatically expands the US' announced production capacity for the carbon-neutral fuel, currently estimated at 180,000 tons/year, according to S&P Global Platts Analytics.

At a projected production cost of $2/kg, SGH2's waste-gasification process significantly undercuts existing green hydrogen technologies that rely on electrolysis – a production method that uses intermittent renewable electricity and deionized water to produce the fuel at an estimated of cost $10 to $15/kg.

Green hydrogen produced at the SGH2 plant will be sold into California's growing hydrogen transportation market – home to a vast majority of the US' 8,300 owned and leased fuel cell vehicles, according to estimates from the California Fuel Cell Partnership.

"We are the only company in the world delivering green hydrogen that is cost competitive with the cheapest, dirtiest hydrogen made from coal and gas," SGH2 CEO Robert Do said in a press release.

Conventional or "gray hydrogen" is derived principally from steam methane reforming of natural gas – a low-cost process that yields hydrogen at a cost of around $2/kg, but simultaneously releases carbon into the atmosphere.

Market development

While green hydrogen offers a promising pathway to decarbonize California's gasoline- and diesel-reliant transportation markets, the fuel also faces significant logistical and infrastructure challenges.

Currently, hydrogen distributed to California's 40-some vehicle fueling stations arrives in relatively small truck-loaded volumes, significantly limiting the industry's potential scalability.

According to SGH2, the company is already in negotiation with California's largest station owners and operators with plans to outsource its fuel delivery to customers at an estimated cost of $3/kg.

While some major oil and gas companies and car manufacturers have taken an interest in hydrogen, getting the industry to scale to meet mid-century climate targets will likely require some intervention from policy makers.

"The LCFS [low carbon fuel standard] is what's actually driving the whole hydrogen business in California right now," Do said in a telephone interview Wednesday. "That's where the regulation is important ... supporting the development of infrastructure," he said.

As SGH2 and other green hydrogen producers look to expand their footprint, they're hoping to capture a portion of the potentially vast market of end-users available on California's natural gas grid.

"We can inject up to 20% of green hydrogen into the gas grid without any changes required to infrastructure [or] downstream equipment," Do said.

According to SGH2, the company is already exploring future sales to southern California's gas utility, SoCal Gas, and to possible end-users on the grid, like cement companies and other heavy industries.