Distributed hydrogen generation gains popularity in absence of pipeline network

Hydrogen stakeholders tend to agree that a mature hydrogen economy will comprise a network of pipelines emanating from a few centralized production centers. Until then, some early movers in the transit and mobility spaces are producing their own fuel near to where it will be consumed or even on-site.

In June, the U.S. Energy Department launched its $8 billion regional hydrogen hub program in hopes of creating an economy of scale. But today, the U.S. has only 1,600 miles of hydrogen pipeline, and most of the hydrogen moving across state lines must be trucked.

The shipping cost has some off-takers installing their own generators created by companies like BayoTech Inc., which aims to become "the world's largest distributed hydrogen company," CEO Mo Vargas said in 2021.

"What makes our technology a bit different from standard hydrogen production on a large centralized scale is that we can produce it on a smaller scale quite efficiently for local customers," said Catharine Reid, chief marketing officer at BayoTech. "Rather than producing a bunch of hydrogen in, say, Texas or Louisiana, and then driving it across the country where the demand is, we're going to locate our hydrogen hubs close to the demand."

The company announced its first production facility in 2021 at its headquarters in Albuquerque, N.M. As of August, BayoTech is working with The American Center for Mobility, which runs a testing track in Ypsilanti, Mich., to install a hydrogen generator on-site and is in the permitting process for another facility in St. Louis, Reid said. Each generator occupies about as much space as two 40-foot container trucks.

The Detroit area facility will fuel the hydrogen fuel cell vehicles being tested by companies like Toyota Motor Corp. The American Center for Mobility anchor tenant was one of several to push for getting an on-site hydrogen generator, Reid said. But BayoTech anticipates serving other industrial customers as well in a semi-distributed hub model. "We're looking at customers within a region of about 150 to 200 miles from each of our hub sites that we would serve," Reid said.

Hydrogen for transit

Heavy industry is not the only sector willing to pay for round-the-clock hydrogen supply. As U.S. states and municipalities act on their decarbonization goals, some transit agencies are replacing their fleets with hydrogen fuel cell-powered buses.

Some have gone a step further: producing their own fuel on-site with an electrolyzer, which runs on electricity, separating the hydrogen and oxygen in a water molecule. Illinois's Champaign-Urbana Mass Transit District (Inc) and California's AC Transit in Oakland and SunLine Transit Agency in the Coachella Valley all have on-site electrolyzers for their hydrogen fuel cell bus fleets. SunLine has also partnered with Southern California Gas Co. to build a steam methane reformer.

"Really, the transportation is the largest cost of hydrogen," said Kirt Conrad, CEO of Stark Area Regional Transit Authority. "So you can reduce that cost by producing your own, so to speak."

The U.S. Federal Transit Administration awarded the transit authority, based in Canton, Ohio, a $2.4 million grant Aug. 16 through its low- and no-emission vehicle program for an on-site fuel cell generator, among other projects.

For a public service such as transit, distributed hydrogen generation adds an extra layer of reliability. "We've seen this happen where we've had a couple of supply disruptions getting the molecule," Conrad said. "And so if you actually have the on-site capability, you're not so dependent upon truck delivery."

Carbon footprint

In one regard, modular hydrogen hubs cut back on carbon dioxide emissions by using less trucking. But distributed hydrogen is not necessarily "clean" hydrogen, depending on the technology used.

The Inflation Reduction Act, signed by U.S. President Joe Biden on Aug. 16, will allow hydrogen producers to receive up to a $3 tax credit per kilogram produced below a certain emissions threshold. BayoTech generates hydrogen by steam methane reforming, a carbon-intensive process that uses natural gas as a feedstock.

When paired with carbon capture technology, steam methane reformers have been shown to lower their emissions by up to 90%, according to industry watchers. At a large-scale production facility, the carbon dioxide is piped away. But according to Reid, carbon capture may be possible at the modular level without using a pipeline.

"To be fair, we haven't done it yet. But what we've talked about is actually capturing that carbon dioxide and trucking it where it needs to go, likely a local place where it's used to produce another product, or stored," Reid said.

Another option is to install an on-site electrolyzer that, when powered by zero-carbon electricity, produces "green" hydrogen eligible for the full federal tax credit. But electrolysis is expensive and accounts for less than 5% of global hydrogen production, according to the Energy Department.

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