Corrects source of 45V tax credit in second paragraph.
Hydrogen produced from natural gas with carbon capture and sequestration (CCS) may be too carbon intensive to meet the threshold for the US' hydrogen tax credit, according to a report from the US Department of Energy (DOE).
The Inflation Reduction Act set a carbon ceiling on its 45V tax credit of 4kg of CO2/kg of hydrogen (H2), with the value increasing for cleaner products. But hydrogen made via steam methane reforming (SMR) with CCS and autothermal reforming (ATR) with CCS could surpass the threshold, with estimated carbon intensities of 4.6kg CO2/kg H2 and 5.7kg CO2/kg H2 respectively, according to the report.
"These life cycle results may be higher than expected given the addition of CCS," the report said. But the energy required to run a CCS facility results in significant upstream emissions.
The report assumed capture rates of 96.2pc on SMR and 94.5pc on ATR, with life cycle emissions analyzed on a 100-year time horizon using the Intergovernmental Panel for Climate Change's fifth assessment report. But capture rates on plants operating today are closer to 60pc or less, which the report attributed to market conditions. Planned CCS hydrogen facilities are aiming for capture rates of 88-95pc, but these plants are not yet running, the report noted.
Projects could produce significantly cleaner — or dirtier — hydrogen depending on the sourcing of the gas feedstock and the carbon intensity of the grid used to power the CCS facility. DOE estimated a range of emissions from around 2.5-8.5kg of CO2/kg H2 for SMR with CCS and a range of 3-12kg CO2/kg H2 for ATR with CCS.
Based on the numbers, many CCS hydrogen projects would reap more benefits by electing the 45Q tax credit for carbon sequestration — which, as critics have bemoaned, rewards higher rates of carbon production as long as it is captured.
CCS hydrogen producers could lower their costs by selling captured carbon, and ATR plants could sell the argon that is generated as a byproduct of its air separator unit, the report notes.
DOE estimated that baseline costs for hydrogen from SMR with CCS are around $1.69/kg, and $1.64/kg for ATR. About 50pc of the cost is attributed to the feedstock gas, while the CCS system and balance of plant factors make up the majority of capital spending. With technological advancements the modeled costs could drop by 20¢/kg for SMR and about 30¢/kg for ATR, the report said.
Argus calculates prevailing costs for SMR + CCS hydrogen on the US Gulf coast at $1.42/kg, and ATR + CCS on the Gulf coast at $1.95/kg.
