Texas clean hydrogen exports to be competitive on global market by 2030: CHF

An expected fall in the cost of clean hydrogen produced in the Houston region using natural gas to $1/kg and electrolysis-based hydrogen hitting $1.50/kg by 2030 is likely to put Texas' low carbon hydrogen in competition with other potential hydrogen exporters, the Center for Houston's Future report said.

The report was released May 23 before Houston was selected as one of four international hydrogen clusters by the World Economic Forum May 24 in Davos. Other regions selected by the WEF included Geleen, the Netherlands, the Ohio River Valley and the Port of Antwerp-Bruges. The selection of these regions puts their nascent hydrogen hubs in a program, initially launched at COP26 that aims to accelerate the decarbonization of hard-to-abate sectors.

The Center for Houston's Future has long been working to build attention around the Texas Gulf Coast's potential to become a low-carbon energy hub. The center's latest report in combination with the WEF designation helps build its case in the race to become one of four hydrogen hubs selected by the Department of Energy and receive a portion of $8 billion from the US's Infrastructure Investment and Jobs Act.

"The timing of this report and the timing of the WEF announcement are important because they show policymakers in Austin, Washington and globally that Houston has a real opportunity here to help use low carbon hydrogen to decarbonize the rest of the world," said the Center's CEO Brett Perlman.

The report, which involved input from 100 experts, 70 companies and organizations, projects that only one clean hydrogen production technology will reach the $1/kg mark by 2030, a goal set forth in Energy Secretary Jennifer Granholm's Hydrogen Shot initiative.

Under current set of policies, which do not take into account proposed hydrogen production tax credits, the cost of electrolysis-based hydrogen production in Texas is projected to reduce to between $1.5/kg and $1.9/kg by 2030. As of May 23, Gulf Coast electrolysis-based hydrogen was priced at $4.08/kg (including capex), according to price assessments from S&P Global Commodity Insights.

The report analyzed two production methods for natural gas-based hydrogen -- steam methane reforming and autothermal reforming, both paired with carbon capture and storage technology. The cost of hydrogen via SMR with carbon capture and storage came down to between $1.1/kg and $1.5/kg by 2030, compared with today's cost of SMR-based hydrogen without CCS at $1.74/kg.

Of all these technology pathways, only ATR-based hydrogen reached the DoE's Hydrogen Shot goal of $1/kg by 2030. The cost of ATR hydrogen, which allows higher CO2 capture rates and better scaling, came down to between $1/kg and $1.3/kg by 2030.

"I think that when Secretary Granholm announced that goal, it was intended to be a moonshot – something that was difficult to achieve. Aspirational," Perlman said. "I think it's not incredibly surprising that we didn't get to the $1 [level] by 2030 on the electrolysis side, but we got darn close."

However, this would change if the proposed clean hydrogen production tax credits materialized into law. As proposed in the now-dead Build Back Better Bill, the tax credit would offer up to $3/kg of hydrogen produced using electrolysis, while a kilogram of hydrogen produced using natural gas with CCS could receive at least 60 cents, according to a draft bill.

"The production tax credit for electrolysis would be essential for reaching the [DoE's] dollar per kilogram goal," Perlman said.

Global competitiveness

Even without a tax credit, Texas-based hydrogen exports would be highly competitive on the global market owing to the region's abundant renewable resources, cheap natural gas, and natural geologic storage options.

Compared with other potential clean hydrogen exporting countries like Australia, Saudi Arabia and Chile, Texas' electrolysis-based hydrogen could match landed costs to hydrogen demand centers like the European Union and Japan, according to the report.

This will be an important demand driver, which will help expand Texas' hydrogen economy. The report projects that demand for clean hydrogen could rise from 3.6 million mt of conventional hydrogen today to 21 million mt of clean hydrogen by 2050. Export demand will account for nearly half of this total.

"I think the opportunity for export goes up if we can get our cost down," Perlman said.

"Hydrogen is a piece of [decarbonization] in Europe, and obviously demand is going to have to come from imports from the US as a way to ensure energy security," he said.