Texas leans on natural gas to jump-start H2: Report

Natural gas could play a significant role in hydrogen production in Texas for decades to come, requiring a ramp-up in carbon capture and storage (CCS) projects to meet broader emissions goals, according to a new report from the nonprofit Center for Houston's Future and consulting firm McKinsey.

The Center's report estimates that Texas could produce as much as 21 metric tonnes (mt) of hydrogen by 2050 — with around 10mt available for exporting. But this assumes that 70-90pc of production would be from natural gas by 2035, meaning aggressive CCS measures would be needed to reach net-zero goals by 2050.

The report predicts Texas would need 45-55mt of CO2 storage by 2035, assuming a 98pc carbon capture rate. Houston accounts for a third of all US hydrogen production with 48 hydrogen plants fulfilling 3.6mt of demand in the state. Nearly all of those plants are gray, or natural gas-powered without CCS. These existing plants could be considered "clean" if fitted with CCS technology that would leverage storage in the many salt caverns along the Texas Gulf Coast.

But while stakeholders around the world have planned clean energy strategies to slice greenhouse gas emissions over the next three decades, the Center's report leaves the door open for Texas to build first and curb emissions later. If Texas follows the roadmap, it could continue to construct carbon-emitting gray hydrogen facilities near points of demand over the next decade, with the promise of future CCS acting as a catch-all to assuage concerns over continued fossil-based investment in the face of worldwide renewable targets.

CCS measures are currently supported by the 45Q tax credit. But with 45Q scheduled to expire in 2026, and other clean energy legislation currently at a standstill , the US for now lacks fiscal incentives for companies to make the switch to clean hydrogen.

But with "clean" energy a more distant goal, Texas could aim to ramp hydrogen production, bolstered by its existing local demand. Local refining and petrochemical operations already use hydrogen to desulfurize fuels, and demand could be expanded by piloting hydrogen applications in existing natural gas-fired power plant s . The existing need for hydrogen could jump start the state's production to reach 4mt at costs of $2/kg for gray or blue hydrogen and $3/kg for electrolytic hydrogen by 2025.

More zeros post 2030 The report assumes more aggressive zero-carbon hydrogen production buildout by 2030, with Texas capitalizing on its significant wind power potential in the western parts of the state. This could achieve total production of 8mt at costs of $1/kg or less for all types of hydrogen, and the start of an export economy. Beyond 2035, the state would exclusively pursue zero-carbon hydrogen and focus on its export infrastructure.

The Texas Gulf Coast hosts 900 miles of dedicated hydrogen pipelines and could focus on building hydrogen-related export infrastructure for ammonia and methanol at its ports in Houston and Corpus Christi. The report estimates that an additional 600 miles would need to be added by 2035, from a combination of new construction and retrofitting of natural gas pipes. Hydrogen liquefaction plants constructed at the Houston port would allow hydrogen to be trucked around the state to support a ground transportation refueling network.

With a $300mn-$400mn investment, Texas could build out a network of 100 hydrogen fueling stations by 2030 to initially support heavy-duty fuel cell vehicles. With a local hydrogen network in place, the state could expand to fueling commercial fuel cell fleets and help build out an interstate hydrogen network to California along I-10.

The report details a list of sample projects that include seasonal energy storage projects, the use of the state's two nuclear plants for hydrogen production, and waste-to-hydrogen projects in Houston, Dallas and San Antonio.

The report was developed with feedback from hydrogen stakeholders including Air Liquide, Air Products, BP, ExxonMobil, McDermott, Phillips 66, Hyzon Motors, Plug Power, Siemens, Shell, Sempra, Linde and others.

By Emmeline Willey

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