hydrogen investment thesis

Financing the hydrogen industry: exploring demand and supply chain dynamics

• Research Advancements & Challenges for Sustainable Hydrogen Energy
• Published: 09 October 2023

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• Sidhartha Harichandan 1 , 2 &
• Sanjay Kumar Kar   ORCID: orcid.org/0000-0002-8862-9430 2  

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The hydrogen industry has garnered substantial attention as a pivotal solution in addressing the intricate challenges of energy transition and achieving decarbonization across diverse sectors. The efficacy of deploying hydrogen technologies hinges upon the availability of robust financing mechanisms that can adequately support the dynamic demands and intricate supply chain intricacies inherent in the hydrogen sector. This comprehensive study is underpinned by a rigorous and systematic review of prior research on the hydrogen economy, leveraging authoritative databases including Web of Science, Scopus, and a range of consultancy-based reports. The study meticulously assesses the escalating interest in hydrogen as a paramount clean energy alternative, emphasizing its significance in propelling the multifaceted development and expansion of hydrogen supply chain dynamics. Furthermore, this research critically scrutinizes the intricate financial facets of the hydrogen sector, with a specific focus on delineating the drivers of demand and unraveling the complexities interwoven within the supply chain. Building upon this analysis, the study offers a forward-looking perspective on hydrogen financing, which considers emerging technologies, evolving policy landscapes, and dynamic market trends. In the face of existing global constraints within the hydrogen supply chain, innovative financing mechanisms such as green bonds, project financing underwritten by risk guarantees through public–private partnership paradigms, venture capital-equity models, and carbon pricing mechanisms emerge as indispensable tools poised to address these challenges effectively.

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Harichandan, S., Kar, S.K. Financing the hydrogen industry: exploring demand and supply chain dynamics. Environ Sci Pollut Res (2023). https://doi.org/10.1007/s11356-023-30262-9

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Hydrogen trade outlook: 2023 Update

Brings expert knowledge on oil and gas strategy, energy-market forecasting, proprietary data, and advanced analytics

March 1, 2024 McKinsey, in collaboration with the Hydrogen Council, published the Global Hydrogen Flows—2023 update which provides new insights into how the future of hydrogen production, demand, and trade may evolve. 1

The 2022 Global Hydrogen Flows report introduced three important elements to consider for the build-up of the hydrogen economy by 2050. First, even after controlling for capacity limits, land availability, and other constraints, there are ample low-cost renewable energy sources and low-carbon hydrogen capacity potential globally to meet or supersede the 2050 requirements for hydrogen. Second, transporting hydrogen as a gas through pipelines or in derivative or liquid form with ships can likely unlock significant total system cost advantages and could result in clean hydrogen evolving into a commodity market over time. Third, substantial supply chain investment and regulatory policies could impact hydrogen trade. 2

Global Hydrogen Trade Flows Model

The Global Hydrogen Trade Flows Model optimizes over 1.5 million potential trade routes, the cost position of each region, and the optional supply mix (exhibit). The software as a service model features a dynamic user interface, enabling the running of highly customized scenarios. In the 2023 Update , we have modified several assumptions, as well as including greater granularity on certain aspects of the model.

McKinsey and the Hydrogen Council developed a bespoke advanced analytics optimization model that balances potential hydrogen supply and demand across regions to inform the 2023 report update (see sidebar, “Global Hydrogen Trade Model”). The 2023 report is based on updated assumptions in line with the latest industry and decarbonization trends, updating the main findings from the 2022 report. The 2023 findings are as follows, highlighting what has changed since the 2022 report.

Hydrogen demand growth projections are robust but tempered by slower decarbonization expectations. The reference case of the 2022 report reflected a net-zero scenario, which McKinsey and the Hydrogen Council developed, setting out the potential for hydrogen to decarbonize energy systems and help ensure that the 2050 climate change requirements are met. However, it is now clear that the world is not on a net-zero trajectory—at least, not by 2030. 3 Industry players were asked what decarbonization trajectory they believed the world is on. 4 The majority picked the Further Acceleration (FA) scenario, where climate policies are further strengthened but will not be enough to meet global net zero by 2050.

In the 2023 Update , the forecasted demand for hydrogen and its derivatives has changed, given that the FA scenario is now used as the reference case for this analysis. To achieve net zero by 2050, clean hydrogen will play a critical role and will be required in greater volume.

Renewable hydrogen continues to play an important role, despite a higher cost outlook. We have carried out a detailed bottom-up assessment of the development costs of large-scale renewable hydrogen projects undergoing front-end engineering design studies. This approach considers not just equipment costs, but also includes a detailed review of the balance of plant (BoP), as well as engineering, procurement, and construction (EPC) costs.

We found that the levelized cost of renewable hydrogen (LCOH) increased by between 30 and 65 percent from mid-2022 to mid-2023. The rise in LCOH is driven by a 70 percent increase in capital expenditure (capex) for a 1 gigawatt system, from $1,200 to $2,000 per kilowatt, arising from higher BoP, EPC, and other developer costs. Financing and renewables power costs have also risen during this period, with risks of continued increases since the modeling was completed.

To soften the impact of higher plant capex, the electrolyzer load factor could be increased by swapping lower-cost solar, which has low load factors, with setups that yield higher load factors such as wind and hydropower. However, the cost of electricity per kilogram of hydrogen produced from wind and hydropower is higher, and renewables costs have also risen by approximately 15 to 35 percent in this period. Despite the higher cost outlook, our analysis points to renewable hydrogen largely maintaining its market share (two-thirds of total demand in 2050) compared to low-carbon hydrogen from gas—for reasons ranging from mandates on products derived from renewables to new subsidies and direct support.

Low-carbon, gas-based hydrogen production becomes relatively more competitive despite cost and technology uncertainties. Natural gas prices have seen sustained volatility since 2020. Natural gas futures in Asia and Europe remain elevated, which has guided the updated view to 2030. 5 Beyond 2030, the natural gas price outlook is based on supply-demand balance expectations after that point in time and is differentiated by region. Under the FA scenario, natural gas demand declines at a slower pace to 2050 than it does under the net-zero scenario, increasing the price of both natural gas and low-carbon hydrogen ($0.10 to $0.20 per kg).

Capex has also risen for low-carbon hydrogen, but this has a far more limited impact on the cost of production, given that costs are mostly driven by operating expenditure. Higher electrolyzer capex favors low-carbon hydrogen production, which could account for 45 percent of hydrogen production compared to the base case of 25 to 30 percent, and reach up to 65 percent of long-distance traded volumes. However, before 2030, the availability of low-carbon hydrogen will remain limited unless the required CO 2 transport and storage infrastructure is deployed quickly.

Regulatory policies impact the global relative cost competitiveness in the medium term, potentially increasing exports from North America. Policies such as the Inflation Reduction Act in the United States and the Clean Hydrogen Investment Tax Credit in Canada have been included in the 2023 Update . 6 In the United States, the new estimates incorporate a production tax credit, with additional credits available for renewable electricity generation. These measures could heavily impact the merit order of hydrogen-producing countries until the 2030s, with North America expected to play a major role as a hydrogen exporter in the short term. In the European Union, demand mandates for renewable hydrogen from the Renewable Energy Directive (RED III) have been incorporated into the modeling. 7 This includes the mandate for 42 percent of hydrogen products consumed by industry (excluding refining) to be renewable by 2030, with the target increasing to 60 percent by 2035.

Locations with industries where biogenic CO 2 can be captured more easily could be more advantaged when it comes to producing synthetic kerosene or methanol. The lowest-cost producers combine access to low-cost renewable hydrogen and biogenic CO 2 from bioethanol production. A more granular approach was used for the view on sourcing clean and biogenic CO 2 to make synthetic kerosene and methanol. The availability, trade, and costs of biogenic CO 2 have been refined by differentiating between five sources of supply. Transport costs for CO 2 over long distances have also been revised upward.

To request access to the data and analytics related to our Hydrogen outlook, or to speak to our team, please contact us .

1 Global Hydrogen Flows: Hydrogen trade as a key enabler for efficient decarbonization , Hydrogen Council and McKinsey, October 2022; Global Hydrogen Flows—2023 update, Hydrogen Council and McKinsey, November 16, 2023. 2 Global Hydrogen Flows: Hydrogen trade as a key enabler for efficient decarbonization , Hydrogen Council and McKinsey, October 2022. 3 An affordable, reliable, competitive path to net zero , McKinsey, November 30, 2023. 4 The survey was conducted in June 2023, as part of McKinsey’s Global Energy Perspective, where 152 international energy experts and executives were interviewed. McKinsey analysis, drawing on expert interviews (n = 152); Global Energy Perspective 2023 , McKinsey, October 18, 2023. 5 Global Hydrogen Flows—2023 update, Hydrogen Council and McKinsey, November 16, 2023. 6 “ The Inflation Reduction Act: Here’s what’s in it ,” McKinsey, October 24, 2022; “Consultation on the Clean Hydrogen Investment Tax Credit,” Government of Canada, June 2, 2023. Note, these do not include the guidance published by the US Internal Revenue Service on December 28, 2023. 7 “European Green Deal: EU agrees stronger legislation to accelerate the rollout of renewable energy,” European Commission press release, March 30, 2023.

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How One Energy CEO Is Leading a Transition Toward Clean Energy

A conversation with Duke Energy CEO Lynn Good on when to test your assumptions and how to make incremental adjustments to your strategy.

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As the CEO of one of the largest energy holding companies in the U.S., Lynn Good is leading Duke Energy’s aggressive transition to renewables and net zero emissions. It’s a complex undertaking that involves short-term planning and long-term advances in technology as well as managing a wide range of stakeholders.

In this episode, HBR editor-in-chief Adi Ignatius sits down with Good to discuss her strategy for Duke’s clean energy transition. They discuss how to make incremental adjustments to strategy as new technologies emerge. Good also explains how and how often she tests her assumptions, and why she nurtures collaborations both within the energy industry and beyond it.

Key episode topics include: strategy, innovation, growth strategy, environmental sustainability, energy and natural resources sector, clean energy, transition, Duke Energy, technology, renewable energy, change management.

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HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business.

As the CEO of Duke Energy, one of the largest energy holding companies in the U.S., Lynn Good is  an aggressive transition to renewables and net zero emissions.

It’s a complex undertaking that involves short-term planning and long-term advances in technology, all while managing a wide range of stakeholders.

In this episode, HBR editor-in-chief Adi Ignatius sits down with Good to discuss her strategy for Duke’s clean energy transition.

You’ll learn how she makes incremental adjustments to her strategy as new technologies emerge, how and how often she tests her assumptions, and why she nurtures collaborations both within the energy industry and beyond it.

This conversation was originally part of HBR’s “Future of Business” virtual conference in November 2023. Here it is.

ADI IGNATIUS: Our next guest is Lynn Good, the CEO of Duke Energy. This is one of the largest energy holding companies in the US, and it is one that is in the midst of an aggressive transition to renewables and net zero emissions. Lynn previously served as Duke energy’s CFO, and she’s on the boards of Boeing, the Business Roundtable, and the World Association of Nuclear Operators. Lynn, thank you for joining us today.

LYNN GOOD: Adi, my pleasure. Good to see you.

ADI IGNATIUS: Great to see you. So, another reminder to our audience, put questions for Lynn in the Ask the Speaker Chat. We’ll try to get to as many as possible later. So, let’s dive right in. Lynn, so Duke Energy, in an earlier corporate form, had an environmental charter that I think dates back to 1990. I’m interested, in your decade-long tenure, what steps have you taken to accelerate this pace of change toward clean energy.

LYNN GOOD: Adi, it’s a really good question because Duke has been a recognized leader in sustainability and environmental stewardship for a long time. But what I would share with you is that leadership has matured and changed over time because we’re sitting here in 2023 with a demonstrated track record of carbon reduction above 40% and with targets established for 2030 and 2040 and 2050. And so, what has matured over time is we’ve taken what were probably aspirational goals in the 1990s, and we’ve turned them into more concrete plans, investment plans. We’ve taken them into stakeholder processes. We’re talking about them with our regulators and policy makers, not only about the clean transition, but also about how we achieve affordability and reliability in this world of complexity around the transition. And we’re also actively advocating, both at the state level and the federal level, on what public policy we think will be necessary in order for this transition to be successful. And I’d point to things like the Infrastructure Bill and the Inflation Reduction Act as two critical pieces of legislation that we have supported that we think will make this transition more affordable, make investments in the R&D necessary to continue the progress. And look forward to Duke’s continued leadership on sustainability and clean energy as we move forward.

ADI IGNATIUS: Got it. OK, so let’s talk some specific numbers. So, you’re clearly making progress, and I hope I get the numbers right. But from 1% renewable energy power, power generation in 2005 to about 8% this year, coal is down from 60% to 17%. But your target is 27% renewables by 2030, eventually zero coal and net zero emissions by 2050. So, in your role as a leader, how do you ensure that the company is able to get from here to there in that time?

LYNN GOOD: I think it’s consistent with the challenges that any company has as you set a long-term strategy and vision because where you’re trying to go, clean energy transition, affordable and reliable. But you’re also subject to external influences, whether it’s cost of capital or supply chain or an innovative technology that could show up somewhere along the way. So, we think about this transition as being short term. What are the projects and investments I can make today? But also, having optionality and flexibility in that plan so that I can stay aware of what’s going on in the outside world and make adjustments along the way. We actually go through a disciplined process to test our assumptions with every one year or two years so that we continue to stay on the right path, not a specific path that’s chiseled in stone, but introducing enough flexibility to make adjustments. And I think it’s particularly important as we think about this transition, which will unfold over decades because we not only need to be working on the technologies that we understand and know today. But we also need to be advancing our understanding of those technologies that will be important in the 2030s and 2040s, things like hydrogen, carbon capture, longer duration storage, advanced nuclear. And so, the transition itself lends itself to this notion of working in the short term, but also keeping an eye on the long term because we’re going to need those advanced technologies as we get deeper into the clean energy transition.

ADI IGNATIUS: Yeah, I’m sure you have scenario planning depending on when some of these, let’s say, somewhat more futuristic or somewhat unproven technologies to what extent they actually do the trick. Can you talk a little bit more about that though. What technological advancements are you most excited about that if they deliver as much as we hope, carbon capture, whatever it is, that could really be game changers?

LYNN GOOD: Sure, we are watching a number of things, Adi, hydrogen and carbon capture, really thinking about those as technologies that could be complementary to natural gas and natural gas infrastructure. The operating characteristics of natural gas are so complementary to renewables, to retirement of coal, that we are advancing our understanding of both of those technologies. We received a grant as part of the Infrastructure Bill to do some study around carbon capture at one of our plants in Indiana. And we also have a pilot producing hydrogen from a solar farm to prepare hydrogen to run in a simple cycle natural gas plant so that we can see the characteristics of hydrogen. But I would also say we are spending a lot of time on nuclear, and nuclear has been a part of the Duke heritage for a long time. We’re the second largest operator of nuclear power in the US.

ADI IGNATIUS: The other way.

LYNN GOOD: And so, finding our way into small modular reactors, understanding advanced nuclear with storage capability, those are technologies that we are keen to see advanced because a world of net zero needs nuclear. A world of net zero needs something that runs all the time, that produces carbon free energy. And so nuclear is something we’re also spending an awful lot of time on, really looking for what role it could play in the 2035 and forward. We’re also extending the licenses of what we operate today but looking into that 2035 and forward for new nuclear in a way that could really help us achieve our objectives and serve our customers in an affordable and reliable way.

ADI IGNATIUS: Got it. So, energy is a sector, at least it seems to lay people like me, where stakeholders are at odds with one another. And we did an article with your predecessor some years back, who basically said that retail customers care most about affordability, businesses about reliability, environmentalists about sustainability. I would add that suppliers and government officials maybe care most about jobs. How do you balance all those different wants and needs as you figure out your future plans?

LYNN GOOD: Well, there’s no question that energy policy is a conversation at the state level, the federal level, the international level. And we sit at the intersection of a lot of different points of view. You mentioned affordability, reliability, clean, all of those dimensions are important. I would say, as the conversation has progressed into 2023 and beyond, it’s a little more complicated. I don’t think there’s any policy maker where there’s a monolithic view. There’s no customer class where there’s a monolithic view of what’s important. But what we try to accomplish at Duke is to find the right balance between affordability, reliability, and clean because we do not believe that any single dimension can be a winning strategy if I ignore the other two. And we take that discussion deeply into stakeholder engagement, customer engagement, regulator engagement, public policy engagement so that we’re not only sharing our point of view on how we’re trying to strike that balance, but also get feedback from them on how they see the balance. What is their perspective on how they would like to prepare for the future of energy because it’s important, not only for citizenry but for manufacturing, for energy security, for national security. We operate critical infrastructure. And all of that becomes an important conversation. So, it’s about the and, affordability and reliability and clean, and it’s an ongoing conversation that I think will be a part of our industry for decades to come.

ADI IGNATIUS: Yeah, I get that. It’s interesting, the sequencing that you must think about is probably fascinating. I’m interested, as you try to get buy-in from this diverse set of stakeholders, I think people know what Duke Energy stands for. You’ve made it clear the path that you’re on. But I’m sure you have stakeholders who might not even believe in climate change. So, is there a educational/political role that you find you need to play?

LYNN GOOD: Being in the conversation, Adi, among policymakers, in our statehouses, among our customers is important no matter what. And you mentioned the dimension of economic development. Every state in which we operate is interested in attracting jobs. Every state in which we operate would like to have a stronger manufacturing base, would like to have more commercial customers, more jobs. And as we talk about economic development, reliability and affordability come to the table, but also clean because a number of our large customers have specific objectives around clean energy and renewables that they are interested in. And so, we were successful in the state of North Carolina actually advancing bipartisan energy policy that worked on striking exactly that balance. Let’s prepare the state. Let’s take control of our future because we do want to grow. We want to be competitive. We want to transition our energy portfolio in a way that makes sense for the state. And so that conversation, whether Republican, Democrat, Independent, is an important one as we think about the future of growing the economy and making our communities as great as they can possibly be so that we attract people to our state.

ADI IGNATIUS: So, if the goal is to achieve this balance, I’m always interested in the degree to which companies work together or even encourage regulation to get everyone in the same place. So ,I’m interested, do you see strong and useful collaboration in your industry among companies that may involve regulation or just may involve a shared vision of the future?

LYNN GOOD: Sure, our industry– it may be surprising, Adi, on how much collaboration there is, not only among the industry, but with our government partners. And maybe the best way to illustrate this is something called our mutual assistance program that exists in our industry where if there’s a hurricane or an ice storm or anything of that nature that hobbles a utility and causes damage, we bring resources from other utilities to the table. And we engage with our government partners, FEMA and others, DHS, others, to communicate and talk about how we’re working together to bring critical infrastructure back together. That has been a profile of collaboration that is exercised day in and day out in our industry and has been for a long time. That then opens up collaboration around workforce. It also opens up collaboration around technology. This company is piloting that technology. I might be doing a different one. How can we share learnings? We all have the objective of serving our customers well, serving them reliably. And throughout the industry, we’re all pursuing a clean energy transition, perhaps at different paces, but we’re learning from each other. And I think this collaboration has made us stronger with our government partners on cyber and physical security. It’s also been important. So you should think of our industry as one that works together quite readily on policy, on specific events with government partners in a way that I think strengthens the industry and strengthens the US.

ADI IGNATIUS: So, it sounds like more and more companies are catching up to where Duke has been for a while. I’m interested, how do you differentiate then? How do you maintain a competitive advantage where, as you say, there is collaboration and a shared vision of what’s ahead?

LYNN GOOD: I think every company is, despite the collaboration, Adi, positioned in a different way. And some of the challenges and opportunities that Duke may differ from a utility that’s on the West Coast or one that’s in the Northeast. The good news about Duke Energy, positioned primarily in the Southeast, although we have a Midwestern position in Indiana and Ohio as well, is we’ve experienced extraordinary growth, population growth, economic development growth. We also happen to operate in jurisdictions with very constructive regulatory pathways with clear investment proposals in front of all of our regulators that are well understood and with a really strong story around growth. And so that’s how we differentiate ourselves, where we’re positioned, what we’re investing in, the pace at which we’re growing. And Duke offers a very strong investment thesis with a 5% to 7% growth rate in constructive jurisdictions.

ADI IGNATIUS: Yeah, let’s talk a little bit more about the investment community. I know that you fought off, like many people, an activist and investor a few years ago. To what extent do you have support of the investment community now? And to what extent is that an ongoing educational process?

LYNN GOOD: So, the investment community is important to Duke Energy. If you think about a utility with the capital investment that is really required by this clean energy transition, setting an agenda and a strategy that our investors understand and support is incredibly important. And we believe we do that on an ongoing basis by having a transparent set of investments, by producing predictable earnings and cash flow and growth, having a strong balance sheet that our investors can count on. And that is something that’s extraordinarily important. I spend a lot of time on it. Our team spends a lot of time on it because that investment community makes it possible for us to keep going and making investments that deliver for our customers and for our communities.

ADI IGNATIUS: So, I want to go to an audience question now. This is from Tessa. I’m not sure where Tessa is, but Tessa’s wondering, how do you test your assumptions on an annual or maybe biannual basis? What are the methods and processes for testing your assumptions, seeing where you actually are?

LYNN GOOD: It’s a really good question. And we actually have a disciplined approach, I would say, around that forward-looking view of key assumptions and drivers for our business. We actually present to our board in June of each year. And so, we start each year with an expectation around what are the key assumptions that we believe, we’re counting on to be right for 2024, 2025, 2026, and beyond. And then we try to test them. Can we pull them to boundaries? Can we test our assumption on how quickly a technology will develop? Can we test our assumption on what if public policy changes? Can we test our assumption about the economy, interest rates, and the macro environment in which we operate? Can we test our assumptions around availability of supply chain? And so, we try to pull on them. We pull on different ones each year depending on what’s happening. You might expect that during the invasion of Ukraine we were spending a lot of time on commodities. What does that mean, availability and pricing volatility, et cetera. And we always take something away from that discussion that makes us just a little bit better, takes us a little bit deeper into the assumptions. And we actually have an approach where we model what it might mean for Duke, what we invest in, how we grow, et cetera. And it has become a routine part of our process that I strongly endorse. And we do it every year, as I said.

ADI IGNATIUS: Yeah, got it. So, here’s a question from Paula, I think in the US, who asks, why isn’t there more investment in solar energy, particularly in certain states where you would think it would be favorable, like Florida in the South? Why is it less than 5% of the source of energy?

LYNN GOOD: So, I think those percentages, Adi, I don’t know if they’re energy percentages or capacity. So sometimes you need to look behind the numbers and what it really represents. But there is a lot of investment going into solar energy, both in the Carolinas in which I operate, North and South Carolina and in Florida, at a pace that is taking advantage of the technology, taking advantage of the Inflation Reduction Act, but also layering it in a way that makes sense affordably for customers. Solar is going to play a very important role in the energy mix going forward. Battery technology coupled with solar will also play an important role as we go forward. And Duke is a believer in all of the above. So, in addition to solar and battery, we’ll look for opportunities for wind in states where that makes sense. We’ll introduce some natural gas as we retire coal to complement those renewables. And then as I said, we think nuclear remains an important resource that we ought to consider as well that not only decarbonize energy, runs all the time, but it’s also an important resource that can be controlled on demand in a way that makes reliability a little bit more achievable.

ADI IGNATIUS: On nuclear, I’d love your thought. Look, I grew up in the era of Three Mile Island and Chernobyl, and we were worried about nuclear. Is the public, by and large, say, in the US OK with nuclear now? Is that a credible option that– you seem to think it’s very important for getting the mix right in the future. Are people OK with nuclear these days?

LYNN GOOD: Adi, I don’t want to paint– that’s a monolithic statement too, is everyone OK with nuclear? I think what’s important is the commitment that the industry in the US has and really the industry around the world is safety because we understand that safety is job one at nuclear. And that will always be the case at Duke Energy. I think nuclear fuel at times can also be a question. Are we storing it safely? Yes, we are storing it safely. And I have seen the conversation around nuclear change over the last several years as people have really grappled with this issue of how do we really get to net zero? With existing technologies, how do we get beyond 70% reduction or 80% reduction? You begin looking for technologies like nuclear and hydrogen and carbon capture. And so, I believe the receptivity and the recognition of the role that nuclear can play is being more significantly recognized over the last several years as a really critical tool for clean energy. And then our job as the utility in the communities in which we operate is to continue to engage with our customers and our communities to underscore the commitment that we have to safety because I believe nuclear can be an important part of the solution. And we can operate it and will operate it safely.

ADI IGNATIUS: OK, so here’s another question from the audience about another technology. This is Max, who’s asking– who notes that Holly Krutka, the executive director of the UW School of Energy Resources recently said that carbon capture could be made just as viable as wind and solar energies if it’s invested in at the same level. Does that does that sound right to you?

LYNN GOOD: So, we believe carbon capture is one of those technologies that should be invested in. We believe that there’s some additional research and development necessary. We believe that we’ve also got to grapple with what infrastructure we need once we capture it to move it somewhere and store it somewhere. And so, Duke is active in carbon capture with, as I said, an IIJ, an infrastructure grant at one of our facilities in Indiana, where we’ll be doing a feed study around carbon capture. I know the oil companies are also very active in carbon capture. So, I think it’s an important part of the solution. It needs to be invested in in this decade so that we’re getting to the commercial scale and availability that we’re going to need in the next one. And also think about it as a solution where storage and transport will be a part of that because it’s no good just to capture it. We have to be able to transport it and store it.

ADI IGNATIUS: Yeah. Earlier in this event José Muñoz of Hyundai talked about how the electricity in infrastructure needs to come a long way. And I guess, is that part of your game plan? Do you think about collaboration with other industries to bring that up to speed, up to code?

LYNN GOOD: So, I assume he’s talking about electrification and the fact that all of the OEMs are looking to move into an electric vehicle future. And I would say we’ve talked a lot on this discussion about forms of generation, wind, solar, battery, nuclear. But we are also making investments aggressively in our grid, the transmission and distribution center, not only to accommodate this change in generation that’s underway, but also to enable electrification. And so, we are working closely with the OEMs to try to understand what their needs are. We’re also working with customers, customers who are adopting electric vehicles, and even commercial customers who are thinking about electrifying their fleet so that we’re trying to prepare our system at the right pace for the adoption of this important technology. And that, I see, as a decades long set of activities as well. And we track adoption rates in our service territories, and we also do some work in data analytics around our circuits, where we believe the adoption will occur based on where a depot is, an airport is, customers that are showing an interest in electric vehicles so that our investments are keeping pace with the adoption of the technology. So, it is a front-and-center objective for Duke and for the industry.

ADI IGNATIUS: So, a lot of what you’re doing, everything you’re doing is very high stakes. You’re in a critical position. I’d love to hear you talk a little bit about, I don’t know, maybe some of the biggest challenges that you’ve faced in your decade in the role and how you’ve learned from them, the lessons you’ve taken out of them.

LYNN GOOD: Well, over the course of a decade, Adi, a lot of things can happen. That’s for sure. And I think anyone’s leadership tenure has great business opportunities that you pursue, and we’ve been talking about that really with this clean energy transition. But there are also a lot of things that just land on your plate, whether they’re crises or pandemics or environmental issues, et cetera. And I would say to you, I have been blessed at Duke to be surrounded by an incredible team, a team that’s passionate about the work that we do, a team that understands we have a 24/7 job that needs to be done just right. And that has been a part of it. But I’ve also learned a lot about really facing the reality of issues that land on your desk. And if there is an issue, let’s not be defensive about it. Let’s fix it and fix it fast. We’ve had an opportunity to do that a couple of times. I’ve also learned that you don’t always have the answers. I think the pandemic brings that to mind. Think about March of 2020, where we had no idea where this was going to go. But I needed to keep employees well and customers served. And so, you moved and moved quickly with what you did know. And you kept learning and trying to explore and check and adjust as you go. So there are so many learnings, and I think recognizing you don’t have all the answers, but you’re working keeping objectives open, getting the best advice, engaging your team, talking to the folks in the field, the stakeholders that are important to your company. There are learnings, all along the way.

ADI IGNATIUS: You had mentioned earlier cybersecurity. And I don’t mean to be fatalistic, but your industry in theory could be a target for cyber attacks. So how do you think about working with, whether it’s government or industry, peers on preparing for that, for securing against that?

LYNN GOOD: Adi, it is ongoing work. So, the electric industry, gas industry, we are critical infrastructure for the US. We have had standards in the electric sector for a long time. Standards are under way in the natural gas pipeline sector as well. We have very strict compliance. We are audited. We work together as an industry, sharing resources when needed and also doing peer reviews so that we’re staying on top of things. We have deep relationships with government partners from the FBI to DHS to SISA where we are learning about what’s going on and constantly working to make sure we’re making investments, not only to put defenses in place, but also to be able to recover. And we practice together. We drill together as an industry with our government partners just to work through simulations to see if this happens, how would we respond? And so that’s the world in which we live in. We understand that critical infrastructure is a vulnerability that can be exploited by our adversaries. And we work actively to do our very best to stay connected with the best information, making the investments necessary to protect our infrastructure in a way that we can serve our customers.

ADI IGNATIUS: Yeah. Thank you. So, this is a question from Gregory, who would love to hear more about how Duke operationalizes some of the strategic foresight and scenario planning processes that we mentioned. I think that’s a practical question. How do you how do you operationalize those? How do you bring them into your business?

LYNN GOOD: It’s an interesting question, and maybe I’ll pick one. So, the scenario plan or the plan around generation transition, we’ve been talking about the clean energy transition. So, we will work on a model that lays out an investment plan and a generation plan for the next several decades. And that becomes something that is worked on, reviewed, tested, stressed, not only by the operators, do we know how to build it? What kind of partnerships would it take? What are the implications to the workforce, the financial team? How are we going to finance that? How does that fit into our balance sheet, our investor proposition, et cetera? We also engaged with our government affairs team and our state presidents. How does that work with policymakers and regulators? Is this something that we think works and we take it into a stakeholder process? And so that’s a good example of a model, a set of assumptions, a scenario that would play out over decades, which is worked on from an operating standpoint, a financial standpoint, a government affairs standpoint. And it’s ongoing at Duke because those plans exist in every state in which we operate. And so, it has become a part of the way we do business so that we’re not only working on the 24/7 operation we have responsibility for right now. But we’re planning for the future. It takes five years to build a gas plant, for example. It might take 10 years to get a pump storage facility or a nuclear plant going. So, keeping that long and short-term view of where we may and want to go, need to go is important and deeply embedded in our culture, in our operations, in our executive leadership and our planning processes.

ADI IGNATIUS: So, I find that people who are thinking about sustainability, people who are thinking about climate change, people who are thinking about the trying to get to net zero, they fall on a spectrum between optimism and pessimism and how dire it is to do such and such by such and such a date. Where do you fall in the optimistic versus pessimistic in terms of getting to zero in terms of, beyond just Duke, the world getting to where it needs to be in terms of sustainable energy production?

LYNN GOOD: Adi, think it’s hard to be optimistic about moving the world from my chair because I can’t move the world. But I can move Duke. And so my optimism centers around– I have a clear line of sight on what I need to do between now and 2030 with investment plans and opportunities, not only to strike a balance between clean that we’ve been talking a lot about, but also between reliable and affordable, to be able to serve all the economic development, this reshoring of manufacturing, the CHIPS Act, the fact that data centers are an important part of leading the way on artificial intelligence. I have a clear line of sight on how to accomplish that between now and 2030. And then we are captured by the opportunities that exist with hydrogen and carbon capture and nuclear. And I have teams of people who are excited about figuring out how to make those technologies available for us when we need them in the 2030s. So, Duke is optimistic about the leadership role we can play and always willing and at the table to contribute on how the US can do more. We do engage internationally as an industry with Australia and Europe and South America on how we can work together as an industry. But that’s a once every couple of year engagement. But at Duke, this assignment is every day.

ADI IGNATIUS: All right, Lynn, I’m afraid we’re out of time. There are more questions, but I have to cut it now. But I want to thank you very much for your time and your insights. It was a great conversation.

LYNN GOOD: It’s a pleasure. Adi, thanks so much.

HANNAH BATES: That was Lynn Good, CEO of Duke Energy in conversation with Adi Ignatius at HBR’s “Future of Business” virtual conference in November 2023.

We’ll be back next Wednesday with another hand-picked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.

When you’re ready for more podcasts, articles, case studies, books, and videos with the world’s top business and management experts, you’ll find it all at HBR.org.

This episode was produced by Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Special thanks to Dave Di Iulio, Terry Cole, and Maureen Hoch, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener.

See you next week.

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Partner Center

$900M project to create hydrogen plants, refuelling stops in B.C.

H2 gateway project aims to create 20 fill-up stations for hydrogen fuel cell vehicles.

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The British Columbia government says a $900 million project to create a network of hydrogen production plants and vehicle refuelling stations will create nearly 300 jobs and cut greenhouse gas emissions in the province.

The Crown corporation Canada Infrastructure Bank (CIB) is providing a $337 million loan to support the project by hydrogen company HTEC, which involves plans to build up to 20 refuelling stations for hydrogen fuel-cell vehicles, 18 of them in B.C. and the others in Alberta.

The CIB and the B.C. government say the refuelling stations will be supplied by three new hydrogen production plants in Burnaby, Nanaimo and Prince George.

They say a facility to liquefy 15 tonnes of byproduct hydrogen will also be built in North Vancouver and the project, called H2 Gateway, will create more than 280 jobs.

The government says 14 of the new stations will be able to refuel up to 300 heavy vehicles per day. It says hydrogen fuel-cell vehicles can travel long distances and have short refuelling times.

Is green hydrogen really eco-friendly?

Premier David Eby, who was attending the project announcement with federal Natural Resources Minister Jonathan Wilkinson and other officials, says H2 Gateway represents an economic and job-creation opportunity and a way to reduce pollution.

"We know the cost of inaction on climate change is not just in the price of responding to extreme weather like forest fires," Eby said.

"Inaction would also cost us new jobs, new investment and new opportunities in growing a cleaner economy. We can't afford to miss this economic opportunity. That's why we're supporting job-creating clean-energy hydrogen projects that will drive new investment and reduce pollution."

The B.C. government says H2 Gateway could reduce emissions by about 133,000 tonnes a year.

"Producing clean fuels like hydrogen right here in B.C. to replace diesel use for transportation helps to reduce harmful pollution while creating new jobs and opportunities in the clean economy," said Minister of Energy, Mines and Low Carbon Innovation Josie Osborne.

More than half of Canada's hydrogen and fuel-cell companies are in B.C., the provincial government says.

HTEC president Colin Armstrong said developing an "ecosystem" of supply and fuelling stations was the first step in creating demand for hydrogen adoption in the transport industry.

• B.C. to spend $16.5M to get 6 hydrogen-powered transport trucks on the road

"We can't quite drive up to Prince George today, but our goal is to connect up there, particularly on the heavy-duty side of things," Armstrong said. "But once we do this, we believe we can take [hydrogen] certainly across the country and to the rest of the world."

The project is designed to support hydrogen fuel-cell vehicles that the government says can travel long distances and have short refuelling times, and 14 of the new stations will be able to refuel up to 300 heavy vehicles per day. 

'A potential clean-burning fuel for mass adoption'

Murray Thomson, professor of mechanical and industrial engineering at the University of Toronto, said hydrogen has long been championed as a potential clean-burning fuel for mass adoption because it emits only water when consumed while generating a large amount of energy.

That large quantity of energy generated through hydrogen and its refill speed are two reasons the trucking sector prefers the source to electric trucks weighed down by heavy batteries with low energy density.

"Trucks need a lot of energy," Thomson said. "So you'd have to have a lot of batteries, and that might not be practical. Hydrogen is a way to [get] a lot of energy-dense fuel on trucks."

WATCH | CBC News explains why 6 hydrogen-fuelled transport trucks will soon roll on B.C. roads:

B.C. banking on hydrogen-fuelled transport trucks to meet climate-change goals

He said, while he isn't familiar with the details of the H2 Gateway, its plan on paper has several factors that could help it realize the decarbonization goal stated in the project's announcement.

First, the hydrogen production would be through electrolysis, a process that doesn't emit carbon, unlike the creation of hydrogen through processes such as natural gas reforming.

Second, the electricity needed for the hydrogen production plants in B.C. would be mostly from hydro, further limiting carbon emissions in the process.

Cost as a major hurdle in hydrogen adoption

Thomson said the key challenge for hydrogen adoption now is cost, and a decision for the federal government to financially support such a project is crucial in determining how a larger scale-up of the technology will look.

• Canfor to reduce reliance on natural gas with hydrogen power project in Prince George, B.C.

"Many times, you really don't know how it's all going to turn out," he said. "You don't know all the implications until you build it. So to a certain extent, building this first-of-a-kind technology — getting it out there, see how it works — is essential to see the potential of this technology.

"You can only do so much just designing it. You need to deploy it in order to really get the technology going."

HTEC did not provide a timeline for construction of the H2 Gateway on its fact sheet for the project.

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U.S. Department of the Treasury

U.s. department of the treasury, irs release proposed guidance to continue investment boom in clean energy production.

Proposed Rules for “Technology-Neutral” Clean Electricity Incentives in the Inflation Reduction Act 

WASHINGTON – Today, the U.S. Department of the Treasury and Internal Revenue Service (IRS) released proposed guidance on the Clean Electricity Production Credit and Clean Electricity Investment Credit established by President Biden’s Inflation Reduction Act. By providing clarity to developers of clean electricity projects, today’s guidance will further President Biden’s Investing in America Agenda, support American jobs, and bolster energy production and energy security while reducing energy costs for American consumers.  

The Inflation Reduction Act sunsets the existing Production Tax Credit (section 45 of the tax code) and Investment Tax Credit (section 48 of the tax code) by limiting their availability to projects beginning construction before 2025 and transitioning to the Clean Electricity Production Credit (section 45Y of the tax code) and the Clean Electricity Investment Credit (section 48E of the tax code) for projects placed in service after December 31, 2024. These new Clean Electricity credits are one of the law’s most significant reforms, providing incentives for the first time to any clean energy facility that achieves net zero greenhouse gas emissions. These credits provide the ability for new zero greenhouse gas emissions technologies to develop over time, while also providing long-term clarity and certainty to investors and developers of clean energy projects.

After extensive consultation with interagency experts, today’s Notice of Proposed Rulemaking (NPRM) identifies specific technologies that meet the high environmental standards set out in President Biden’s Inflation Reduction Act and would categorically qualify as zero greenhouse gas emissions for the purposes of the Clean Electricity Production Credit and Clean Electricity Investment Credit. The technologies recognized in today’s NPRM include wind, solar, hydropower, marine and hydrokinetic, nuclear fission and fusion, geothermal, and certain types of waste energy recovery property (WERP). The proposed guidance also clarifies how energy storage technologies would qualify for the Clean Electricity Investment Credit. The statute requires that clean energy technologies that rely on combustion or gasification to produce electricity undergo a lifecycle greenhouse gas analysis to demonstrate net-zero emissions. The proposed rules released today seek comment on a range of important questions related to this required lifecycle analysis for combustion and gasification technologies. Treasury, in consultation with interagency experts, will carefully review comments received and continue to evaluate how additional clean energy technologies, including combustion and gasification technologies, will be able to qualify for the clean electricity credits. 

“President Biden’s Inflation Reduction Act has driven an investment boom that is adding historic levels of new clean power to the grid while keeping consumer energy costs in check, reducing greenhouse gas emissions, and bolstering energy security,” said  U.S. Secretary of the Treasury Janet L. Yellen . “The Clean Electricity Tax Credits created under the Inflation Reduction Act provide certainty to the market and are poised to drive substantial further growth and lower utility bills over the long-run.”

“The Inflation Reduction Act’s new technology-neutral Clean Electricity credits, which will come into effect in 2025, are one of the law’s most significant contributions to tackling the climate crisis,” said John Podesta, Senior Advisor to the President for International Climate Policy . “Today’s initial guidance from Treasury will help provide long-term certainty to investors and developers, support new zero-emission innovations, and accelerate our progress toward a 100 percent clean power sector.”

“With today’s guidance, energy companies have yet another tool to cut electricity costs for families and businesses and power President Biden’s American manufacturing renaissance,” said Assistant to the President and National Climate Advisor Ali Zaidi.  “Under the President’s leadership, the U.S. is projected to build more new electric generation capacity this year than we have in two decades – and 96 percent of that will be clean. Thanks to the Biden-Harris Administration’s efforts, American families are expected to save up to $38 billion on their electricity bills and American businesses are projected to spend 15% less on electricity by 2030. This is how we win the future, by harnessing American innovation and the best workers in the world to grow our economy, reduce energy costs, and save the planet for future generations.” 

These proposed rules generally follow rules from the existing Production and Investment Tax Credits, which should provide clarity and certainty to developers as they move forward with clean energy production projects. Treasury is committed to grounding these rules in the best available science and ensuring continued transparency and public accountability. That is why today’s guidance proposes that any future changes to the set of technologies that are designated as zero greenhouse gas emissions or the designation of lifecycle analysis models that may be used to determine greenhouse gas emissions rates must be accompanied by an analysis prepared by the U.S. Department of Energy (DOE)’s National Labs, in consultation with agency technical experts and other experts. The NPRM also proposes a process by which taxpayers can request a Provisional Emissions Rate, which DOE would administer in consultation with the National Labs and other experts as appropriate.

Additionally, the NPRM includes proposed rules that provide clarity on the inclusion of costs of interconnection-related property for lower-output clean energy facilities that take the Clean Electricity Investment Tax Credit. Eligible costs, which are a major barrier to faster clean energy deployment, include the costs of upgrades to local transmission and distribution networks that are necessary to connect facility to grid.  The proposed rules continue the approach taken in the proposed rules for the Section 48 Investment Tax Credit, which was modified by the IRA to cover qualified interconnection costs. 

Treasury encourages the public to submit written comments in response to the proposed rules. Comments will be accepted for 60 days following publication in the Federal Register, and a public hearing is scheduled on August 12 and 13. The NPRM seeks comment on a variety of issues, and Treasury and the IRS look forward to receiving further input and benefitting from additional stakeholder perspectives on those issues.  Treasury will carefully consider public comments before issuing final rules.

Outside studies have shown that the Clean Electricity Production and Investment Credits are key to accelerating U.S. emissions reductions and achieving President Biden’s climate and clean energy goals. A recent  Rhodium Group study found that by 2035, the credits will reduce power sector carbon emissions by 43-73% below 2022 levels, save American consumers up to $34 billion in annual electricity costs, and add nearly 650 gigawatts of clean electricity to the grid.   

A Debate Rages Over the Putative Environmental Benefits of the ARCH2 ‘Hydrogen Hub’ in Appalachia

Proponents say carbon emissions from a process to produce hydrogen from fracked natural gas would be sequestered. environmentalists counter that carbon capture technology is unproven, expensive and, at best, of minimal benefit., share this article.

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A Drop in Emissions, and a Jobs Bonanza? Critics Question Benefits of a Proposed Hydrogen Hub for the Appalachian Region

Backers of a planned “hydrogen hub”’ in the Appalachian region have issued a document responding to criticism by environmentalists, saying that carbon capture and sequestration technology would mitigate greenhouse gas emissions from the project and that the hydrogen it produced would ultimately protect “environmental justice” communities from pollution currently emitted by heavy industry. 

The project, which would produce, distribute and consume hydrogen in West Virginia, Ohio and western Pennsylvania, plans to make so-called blue hydrogen from natural gas by combining it with steam at a high temperature and pressure, a commonly used process called “reforming” that creates most of the world’s industrial hydrogen. 

Instead of being released into the atmosphere, where it would warm the climate, the carbon dioxide produced by burning the natural gas would be pumped underground and permanently stored using carbon capture and sequestration (CCS), a process that critics say is unproven and expensive.

Leaders of the Appalachian Regional Clean Hydrogen Hub (ARCH2) rebutted claims that CCS would fail to prevent the escape of carbon dioxide from blue-hydrogen production, and said the United States is the world leader in the technology, with about two-thirds of global capacity.

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“CCS technologies encompass the capture of CO2 at emission sources, followed by its compression, transport and geologic storage,” ARCH2 said in the 24-page Frequently Asked Questions document. “Each has been proven effective as individual components, and as integrated systems at commercial scale in numerous settings.”

ARCH2 is one of seven proposed hydrogen hubs which the Biden administration has funded with up to $7 billion as part of its effort to decarbonize sectors such as long-haul trucking and chemical manufacturing, helping to hit the national clean-energy goal of net-zero carbon emissions by 2050. The Appalachian hub’s share of the public funding is up to $925 million. 

The project is a collaboration between the U.S. Department of Energy; state and local governments in Pennsylvania, Ohio and West Virginia; academic and technology institutions; community groups; and 15 companies, including the natural gas drillers EQT and CNX. Its leaders say it would create 3,000 permanent jobs and another 18,000 during construction. Overall, the build-out is expected to cost about $6 billion, of which some $5 billion would come from the private sector.

The FAQs respond to a wide range of concerns raised by the public since the hub program was announced in October 2023, and aired in a series of online ‘listening sessions’ held by the U.S. Department of Energy starting in the spring of 2024.

Despite critics’ claims that the production of blue hydrogen will perpetuate the production of natural gas in the energy-rich Appalachian region, ARCH2 leaders say their hydrogen will meet all the requirements of clean hydrogen, as defined by the federal government.

Hydrogen produced by ARCH2 and the other hubs will cut C02 emissions by at least 5 million tons a year, or the equivalent of that produced by 1.1 million gasoline-powered cars, the document said. But the planned carbon cuts by all seven hubs combined would represent less than half of 1 percent of total national CO2 emissions, according to federal data for 2022.  

The new paper also argued the project will address environmental justice concerns in disadvantaged communities that have been harmed by the effects of industrial development such as poor air quality.

It said the production of clean hydrogen will mitigate the impact of past industrial activities, and will comply with the Biden administration’s Justice40 initiative, which aims to deliver at least 40 percent of federal environmental investments to disadvantaged communities.

ARCH2’s assurances on environmental justice followed comments at a ‘listening session in late March, when all but one of 20 public speakers voiced their opposition to the project.

“It doesn’t matter what we want or what we fear as long as our concerns are never included in the calculus of decision making,” said John Detwiler, a retired engineer representing North Braddock Residents for Our Future, a community group that advocates for environmental justice issues in the heavily polluted Monongahela River area near Pittsburgh.

“To be holding a mere listening session at this point in the process with proposals already in and contracts ready to be awarded just feels like a meaningless gesture or maybe a deliberate slap in the face,” Detwiler said in the 90-minute session.

Other speakers accused the federal government of selling out to the natural gas industry, which has seen strong growth in the Appalachian region since the widespread adoption of fracking, starting in the mid-2000s.

“ARCH2 appears to be another government-subsidized way to let the fracking industry continue to operate despite the known harms of its toxic pollution,” said Leatra Harper, another speaker at the listening session. “Instead of ARCH2, the government should give more incentive for electrification and reduction in energy consumption.”

Kyle McColgan, a spokesman for ARCH2, predicted that opposition to the project will fade as the public understands more about it.

“The concerns expressed during the listening sessions are consistent with those we have heard during other public engagement activities. We are confident that these concerns will diminish as we share more information on our projects and increase our community outreach and engagement efforts post-award,” he said.

“ARCH2 appears to be another government-subsidized way to let the fracking industry continue to operate despite the known harms of its toxic pollution.”

But community opposition persists. Last week, another critic said the FAQ document failed to address his concerns.

“The FAQs offer little or nothing that wasn’t known previously,” said Sean O’Leary, senior researcher at the Ohio River Valley Institute, a nonprofit that studies economic development in the region that would include the hub. “ARCH2 continues to be at best vague, sometimes opaque, and occasionally downright disingenuous.”

O’Leary accused ARCH2 of failing to say where it plans to sequester carbon; which pipeline routes it is considering for both captured carbon and generated hydrogen, and how communities can be part of decisions about siting and operations. 

And he charged ARCH2 and the DOE with ignoring concerns that the hub would stimulate increased fracking, which has been accused of harming public health by contaminating drinking water and eroding air quality near natural gas plants. 

David Masur, executive director of the nonprofit PennEnvironment, said he hasn’t seen evidence that blue hydrogen can cut carbon emissions enough to justify its high cost, especially when considering the life-cycle emissions of natural gas from production to distribution to consumption.

ARCH2’s defense of carbon capture fails to compare its expected capacity for sequestering greenhouse gases to the nation’s total carbon emissions, Masur said. If it had provided that context in the new document, it would have shown that the predicted capture of 25 million metric tons a year is tiny by comparison to the total, which stood at 6,340 million metric tons of greenhouse gas equivalents in 2022.

“The reality is that 25 [million] metric tons is nothing,” he said. “The projects are expensive, and really not in a scalable model but you would never know that, reading what they put out.”

In contrast to ARCH2’s plan, some of the seven hubs plan to produce so-called green hydrogen which uses electricity generated from renewable sources like wind and solar to power electrolysis that splits water into oxygen and hydrogen. The green-hydrogen projects include MACH2 in southeastern Pennsylvania, southern New Jersey and Delaware, which will also use power from a local nuclear plant to produce what’s known as pink hydrogen.

Rob Altenburg, senior director for energy and climate at the nonprofit PennFuture, said the new FAQs did nothing to ease his earlier doubts about the viability of hydrogen as a way to significantly curb emissions.

Among the concerns, he said, is that the hydrogen hub concept is unproven, and could become a drain on public and private funding at the expense of other more reliable means of decarbonization.

“We have some concern that we would be diverting resources from things that we know how to do,” he said.

At the University of Pennsylvania’s Kleinman Center for Energy Policy, senior fellow Danny Cullenward said he doubts whether the planned adoption of hydrogen by industry would justify its high cost by cutting carbon emissions significantly.

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“There’s all this boosterism around hydrogen but it’s not clear to me that this is really the center of the energy transition,” Cullenward said. “There are clearly far more proposals to build hydrogen hubs than there is a need for hydrogen in the medium term.”

Subsidies for hydrogen are expected to go well beyond the initial $7 billion after tax breaks from the Treasury’s 45V program, which provides tax credits for the production of clean hydrogen under the Inflation Reduction Act and could end up costing the federal government hundreds of billions of dollars, he said.

Concerns about the high cost of hydrogen hubs, and their modest expected contribution to cutting carbon emissions, raise questions about why the Biden administration appears all-in on the concept. The answer to that, said O’Leary, may lie in their political implications.

“They’re thinking, ‘We can do something to help the environment; that will please some segment our constituency. At the same time, it will do something that pleases a deep-pocketed and entrenched industry in important states, and it pleases organized labor,’” he said. “I can understand that political calculus.” 

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