(296g) Multi-Tier Analysis of Low-Emission Hydrogen Production

The U.S. government is prioritizing the transition to clean energy due to concerns about climate change and energy security. Meanwhile, clean hydrogen is gaining attention for its high energy density and low lifecycle greenhouse gas (GHG) emissions. In 2022, President Biden signed the Inflation Reduction Act (IRA), providing funding and incentives to foster a clean energy economy, including incentives for low-emission hydrogen production (such as Section 45Q and Section 45V). In the meantime, the U.S. leads global natural gas (NG) production, but concerns arise due to associated GHG emissions. Steam methane reforming (SMR) with carbon capture and storage (CCS) is one of the low-emission hydrogen production methods, and emerges as a potential economic opportunity to utilize abundant resources and promote environmental responsibility in fossil-rich regions. Wyoming is one such state that has the potential of becoming a key player because of its abundant fossil energy resources, CO₂ storage resources, and natural gas and CO₂ transmission infrastructure. In addition, the state has made significant efforts in decarbonizing the state’s energy sector with policy and regulations, such as HB200 Low-Carbon Energy Standards. These resources, infrastructures, and regulations establish a solid basis for the development of an advanced hydrogen economy in the state of Wyoming.

This study reveals the interconnections among the techno-economics and resource impacts of low-emission hydrogen production under the IRA incentive policies in a fossil-rich state. The objective is to assess the feasibility of low-emission hydrogen production within the state. The research findings are intended to provide valuable insights into energy management decisions and policies as the energy sector transitions toward low-emissions, particularly in fossil-rich regions. To achieve the research goals, this study is conducted from various aspects at both plant-level and cluster/state-level as described below.

Plant-level techno-economic analysis. This study evaluates the technical and economic dimensions of a gas-based commercial hydrogen production plant, employing SMR with CCS, in line with the National Energy Technology Laboratory (NETL)'s baseline study. Performance metrics such as consumption intensities of water, natural gas, and electricity, as well as CO₂ capture rate, are assessed for the hydrogen production plant. Moreover, an engineering-economic model is developed to estimate the levelized cost of hydrogen (LCOH) production, including capital costs and operating & maintenance (O&M) costs, incorporating the performance metrics. The costs are adjusted to be specific to a region. The capital costs are adjusted to local values, using a regional adjustment factor reflecting regional variations in ambient conditions, labor, and material markets. O&M costs incorporate local resource and utility prices, as well as labor expenses. Furthermore, uncertainty analysis is conducted, encompassing the uncertainty in plant design and financial and economic parameters, using the Latin Hypercube Sampling (LHS) method to estimate LCOH in a probabilistic form.

IRA impact on hydrogen production cost. The hydrogen plant can either claim the 45V tax credit or the 45Q tax credit and is presumed to fulfill registered apprenticeship requirements. Thus, the bonus rate of IRA 45Q tax credit is $85 per metric ton CO₂ captured and stored in saline reservoirs and $60 per metric ton CO₂ captured and utilized by enhanced oil recovery (EOR) over a period of 12 years. At the same time, the bonus rates of IRA 45V tax credits range from $0.6 to $3.0 per kg hydrogen produced over a period of 10 years according to the tiers of life cycle GHG emissions (limit of 4.0 kg CO₂-eq/kg H₂). According to the annual amount of captured CO₂ and hydrogen production capacity, the total tax credits are summarized over the tax period, then levelized to the overall hydrogen production throughout the plant book lifetime.

Lifecycle GHG emissions. This study develops a cradle-to-grave LCA model to estimate GHG emissions of hydrogen production across the fuel cycle to determine the eligibility for and rate of the 45V tax credit. The Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5) global warming potentials with carbon-cycle feedback for a 100-year time frame are used to convert non-CO₂ emissions into CO₂ equivalent (CO₂-eq) emissions. The LCA system boundary encompasses upstream NG and electricity supply, the hydrogen production plant, and downstream CO₂ sequestration. Both fossil and renewable NG (FNG and RNG) supplies are analyzed in this study, with emission factors of regional FNG supplies obtained from Littlefield et al. (2022). GHG emissions of RNG produced from feedstocks, including animal manure, landfill gas, and wastewater sludge, are estimated using Argonne National Laboratory’s (ANL) GREET model. The emissions avoided from the current management methods of the feedstocks are considered as the credit of life cycle emissions of RNG supply. Additionally, GHG emissions of local power grid and alternative power sources (e.g., solar, wind, nuclear) are also modeled using the GREET model based on the local electricity generation profile. GHG emissions of CO₂ storage in saline reservoirs are estimated based on the study of Skone et al. (2013). This study estimates major components with emissions larger than 0.01 kg CO₂/tonne CO₂ sequestered and incorporating region-specific emission factors. In contrast, the emissions of EOR activities that purchase CO₂ from the hydrogen plant are not accounted for in the life cycle emissions. Furthermore, uncertainty analysis is conducted, encompassing the uncertainty in the NG and electricity supply as well as CO₂ storage using the LHS method to estimate life cycle GHG emissions in a probabilistic form.

State-level resource impact analysis. The development of a low-carbon hydrogen cluster at the state level requires various resources. The annual production capacity of FNG is obtained from the U.S. Energy Information Administration, while the potential for RNG production can be estimated based on feedstock (animal manure production, landfill waste in place, and wastewater flow rate) availability and methane conversion efficiencies. State-level hydrogen production potential can be estimated as a function of the annual production capacity or potential of both FNG and RNG according to the plant-level NG consumption rate. Additional resource requirements, including water, electricity, and CO₂ storage, are then estimated using plant-level performance metrics relative to the annual hydrogen production capacity. ArcGIS Pro is utilized to spatially analyze suitable locations for hydrogen plants based on the co-availability of multiple resources and infrastructures, such as freshwater availability, saline storage resources, oil and gas fields, and natural gas and CO₂ pipelines.

Preliminary Results. The performance, economics, and life cycle emissions of a low-carbon hydrogen plant in the context of IRA’s tax credits are assessed at a plant level. The resource use and infrastructures to support cluster-level development is further explored at the state level. The LCOH ranges from $1.6 to $2.0 per kg H₂ for SMR with CCS utilizing FNG and electricity from the power grid. In comparison, the hydrogen produced with CO₂ used for EOR can reduce the LCOH to $1.1–1.6/kg H₂ through the revenue generated from CO₂ sales. The 45Q tax credit can reduce about 19% of the LCOH. Compared to 45Q tax credit, the 45V tax credit has less of an effect on reducing the production cost. This is because the probability of life cycle emissions lower than 4 kg CO₂-eq/kg H₂ is less than 6% and 11% for the hydrogen plant with CCS and EOR, respectively. NG and electricity supply are the largest two emission components. Using alternative electricity sources (e.g., renewable energy or nuclear power) can reduce life cycle emissions. However, only the lowest tier of 45V tax credit is applicable, still less than that of the 45Q tax credit. RNG (animal manure and wastewater sludge) instead of FNG can achieve negative life cycle emissions, thus helping the hydrogen plant obtain the maximum level of 45V tax credits. However, the price of RNG is much higher than FNG and the low production potential makes RNG currently uncompetitive in Wyoming. With the expansion of production capacity and technology development, LCOH can further decrease with learning-by-doing. In Wyoming, 20% of the marketed production of NG can support a low-carbon hydrogen production capacity of 1.24 million metric tons per year, necessitating less than 0.4% of the state's total water withdrawal and less than 10% of interstate electricity export. In addition, the hydrogen cluster can leverage the existing and planned CO₂ pipelines and abundant existing natural gas infrastructures, as well as CO₂ storage resources. This study demonstrates that, with the support of IRA policies and state resources, the development of low-emission hydrogen economy can be sustained in Wyoming. Supportive policies at the state-level can further increase the competitiveness of low-carbon hydrogen when compared to fossil energy. Therefore, the application of low-emission hydrogen in other sectors such as transportation, utility, and industry can foster a low-emission economy in Wyoming and surrounding areas. The analysis framework is applicable to other fossil-rich states and offers insights into decision-making and policy designs for transitioning toward a low-emission energy economy.