Hydrogen watchers weigh priorities given infrastructure shortfalls

The hydrogen industry is bracing for bottlenecks on an already strained U.S. energy infrastructure, from the availability of the renewable energy used to power green hydrogen production to the district heating networks retrofitted to deliver the gas.

Hydrogen is touted for its versatility, but some experts are advocating for more targeted use as infrastructure could become a limiting factor. Meanwhile, questions remain about the gas's safety and environmental impacts, said Steven Hamburg, chief scientist at the Environmental Defense Fund, speaking on a Sept. 27 panel.

"The challenge we have is figuring out where we really need hydrogen to reach decarbonization — where it's really optimal — and in which environments hydrogen will slow us down," Hamburg said at the event, hosted by the Center for Strategic and International Studies.

Hydrogen is an energy carrier, with applications in energy storage, electricity generation, transportation and heavy industry. When produced without greenhouse gas emissions, hydrogen can be used as a low-carbon substitute for natural gas.

The Biden administration has encouraged the growth of a national hydrogen economy, offering up to $7 billion for the development of regional hydrogen hubs. The Inflation Reduction Act, signed in August, provided further incentives for the low-carbon fuel through investment and hydrogen production tax credits.

National Grid USA earlier this year outlined its strategy to transition to fossil-free heating in the U.S. Northeast by blending increasing amounts of hydrogen with renewable natural gas.

"If we plan ahead, we can make this relatively seamless," Ben Wilson, National Grid PLC chief strategy and external affairs officer, said during the panel discussion. Wilson said National Grid's schedule would give the utility time to update its customers' heating appliances.

Hamburg criticized the utility's pace, however, saying the plan would not be implemented fast enough to meet state climate objectives. Instead, Hamburg advocated for heating homes with electric heat pumps while reserving hydrogen for hard-to-decarbonize industries.

"What are those sectors where we don't have good alternatives — things like steelmaking and cement production?" Hamburg said. "Hydrogen allows us to meet the energy needs in those sectors."

Regulatory reform

When it comes to federal regulation, the hydrogen industry faces further uncertainty after proposed reforms failed to come to a vote on Sept. 27.

Sen. Joe Manchin, D-W.Va., in a permitting reform bill introduced in September, had sought to clarify the federal government's authorities to regulate hydrogen pipelines. But Manchin withdrew the permitting bill from a continuing resolution after failing to rally support.

The bill, among other energy reforms, proposed to amend the Natural Gas Act to give the Federal Energy Regulatory Commission the same jurisdiction over hydrogen as it has over natural gas infrastructure.

The amendment ran counter to recent advice from lawyers, who said the Interstate Commerce Act is the better regulatory framework for hydrogen. A Sept. 23 blog post by the law firm Venable LLP said Manchin's bill could impose a "significant burden" on hydrogen infrastructure owners, undermining development incentives authorized in the Inflation Reduction Act. The post was co-authored by Richard Powers, who testified in July at a Senate Energy and Natural Resources Committee hearing on federal hydrogen regulation.

Republican lawmakers, critical of FERC's scrutiny of natural gas pipelines, have also been reluctant to give the commission the same oversight on new hydrogen builds. The Natural Gas Act authorizes FERC to oversee a wide range of operations, from siting to storage to ratemaking.

Wilson, however, said National Grid supported the permitting reform for putting hydrogen on a level playing field with natural gas.

"We want to see all the tools in the toolbox," Wilson said. "We believe in choice. And we think, ultimately, the best way to achieve decarbonization is to set the targets that allow the market to decide."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.