New US tax credits will enable dispatchable electricity made from green hydrogen to be cost-competitive with gas-fired power by 2030, if the renewable H2 can be produced for $3/kg or less, according to a US consultancy.

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Virginia-based ICF International says that August's Inflation Reduction Act (IRA) — which introduced and extended tax credits for clean hydrogen and renewable energy, respectively — could make it economic to produce dispatchable electricity by burning green H2 using combined-cycle gas turbines (CCGTs) for the first time, as it could receive three incentives simultaneously.

“First, renewable facilities used to produce green hydrogen will be eligible for either the PTC [production tax credit] or ITC [investment tax credit], reducing production costs,” ICF states in a note on its website. “Second, being zero emissions, green hydrogen production facilities will qualify for the full value of the 45V hydrogen tax credit.

“Finally, electricity produced using green hydrogen will qualify for the PTC or ITC. The combined effect of these incentives in our analysis reduces the LCOE [levelised cost of energy] of green hydrogen-fueled CCGTs in 2030 by 52% to 67% relative to projects without incentives.

“Our analysis also indicates that with $3/kg green hydrogen prices in 2030, projects capturing these incentives would be cost-competitive with new natural gas-powered CCGTs.”

According to analyst S&P Global Platts, green hydrogen can be produced in the hydropower-rich US Northwest at today’s prices for $4.02/kg, which with a hydrogen tax credit of $3/kg would give a production price of $1.02/kg.

Chart showing calculations behind ICF's note. Photo: ICF International

A green hydrogen CCGT power plant could also be the lowest-cost form of dispatchable clean energy in the US by 2030, with better economics than wind and solar plus batteries, and even gas-fired power plants fitted with carbon capture and storage.

The ICF note continues: “With prices above $3/kg, however, green hydrogen-powered CCGTs will have higher LCOEs than new gas-powered CCGTs. The cost premium might not be prohibitive in regions with strong clean electricity mandates; firm capacity will be needed to meet the mandates, and additional development of unabated gas power generators is unlikely. In regions without such policies, green hydrogen facilities may still be viable despite the premium, as LSEs [load-serving entities] with ESG [environmental, social and governance] goals may be willing to pay it to ensure reliability.”

ICF made Its calculations comparing a 600MW CCGT facility running at an average capacity factor of 50% using both green hydrogen and unabated (and abated) natural gas.

However, it adds that such a large renewable H2 power plant would soak up around $5.8bn in hydrogen tax credits alone over the 10-year period allowed by the IRA.

There would also be question marks over whether making green hydrogen from wind or solar power for dispatchable power production would be a good use of renewable energy. Converting wind or solar electricity to green hydrogen using an electrolyser and then burning that H2 in a gas turbine results in energy losses of about 70%. In other words, for every 100MWh of renewable energy inputted into such a set-up, only 30MWh would come out of the other end — a very inefficient use of valuable green power.

“This diversion of renewables reduces the amount of fossil fuels that could be directly replaced, along with corresponding reductions in CO2 emissions,” says US non-profit organisation, Clean Energy Group.

ICF is careful throughout its analysis to use the word “could” when referring to green hydrogen power production — a chart attached to its note shows (see above) shows forecasts for LCOE prices in 2030 as a range, so renewable H2 could also work out to be the most expensive form of clean dispatchable power.

For more details and analysis on the new hydrogen tax credits, click here.