Climate commitment, collaboration, and policy are keys to scaling decarbonized fuels
- Date: 09 November 2023
- Author: Cihang Yuan
Low-carbon fuels such as green hydrogen and renewable natural gas (RNG) are critical for decarbonizing hard-to-abate sectors such as industry and transportation. Green hydrogen is produced with renewable electricity through electrolysis that splits water into hydrogen and oxygen. RNG is methane produced from anaerobic digestion of organic matter like animal manure or food waste, which is processed and can then be used to replace conventional natural gas.
According to the Renewable Thermal Vision Report published by the Renewable Thermal Collaborative (RTC), clean hydrogen can supply approximately 13% of the heat used in industrial processes in the US by 2050. While RNG is likely to have a smaller role in the overall energy mix due to supply constraints, it can help mitigate methane emissions that would otherwise be emitted from manures or food waste.
An increasing number of companies are looking to clean fuel solutions like green hydrogen and RNG to address their thermal energy footprints by decarbonizing industrial process heat. As always, early success stories are essential to accelerating the growth of new technologies and nascent markets—and we heard many of them at the RTC’s recent Annual Summit in Washington, D.C.
Large industrial energy buyers and fuel producers shared early success stories about their on-the-ground experiences deploying these decarbonized fuels on the panel “Deploying Decarbonized Fuels: Case Studies and Infrastructure Opportunities.”
During the panel:
- AstraZeneca and Vanguard Renewables presented their first-of-its-kind partnership on RNG.
- General Motors (GM) and Ambient Fuels shared their early progress on exploring green hydrogen solutions for GM facilities.
- NextEra Energy Resources discussed their sister company Florida Power & Light Company’s first-of-its-kind clean hydrogen pilot and infrastructure opportunities for scaling these decarbonized fuels.
Panelists also discussed project evaluation, transaction structuring, greenhouse gas accounting, and the challenges and opportunities of delivering these solutions at scale.
Here are our main takeaways:
Commitment from Senior Leadership
AstraZeneca, GM, and NextEra Energy Resources agreed that commitment to reduce GHG emissions from senior leadership is critical for driving successful implementation of these projects.
“As a biopharmaceutical company, we recognize the direct interconnection between the health of people and the planet. Our commitment to sustainability is fundamental for the health of people, society, and the planet. Senior leadership commitment and focus has been the most critical success factor to the execution of AstraZeneca’s RNG deal,” said Andrew Wirths, Senior Vice President of America’s Supply at AstraZeneca.
Beyond the early buy-in, panelists stressed it was the continuous support from senior leadership for securing the internal alignment and resources necessary to move the projects forward that enabled them to succeed.
Policy Incentives
Policy incentives such as the Inflation Reduction Act (IRA) and the Department of Energy’s Regional Clean Hydrogen Hubs program will contribute significantly to the early progress of decarbonized fuels—especially green hydrogen. The IRA offers a production tax credit that could significantly reduce the production cost of green hydrogen, while the $7 billion Regional Clean Hydrogen Hubs program will be a big first step in establishing the long-term hydrogen infrastructure and ecosystem.
“The clean energy incentives in the IRA can help make green hydrogen a compelling part of the solution for decarbonizing our operations,” said Jason Traczynski, Energy Strategy Engineer at General Motors. “Policy support for the hydrogen value chain also prompted us to think more strategically about opportunities in the hydrogen ecosystem such as freight trucking.”
However, panelists also shared that companies urgently need clarity on the detailed guidance about these tax credits when it comes to making investment decisions. Clear rules for the renewable electricity required to claim the maximum clean hydrogen tax credit, including requirements around additionality, deliverability, and time-matching are essential to inform companies’ investment and deployment strategies.
Buyer/Solution Provider Collaboration
Lastly, building awareness and increasing collaboration between energy buyers and decarbonized fuel providers are imperative to a project's success—and for advancing the broader decarbonized fuels market.
For newer solutions, such as green hydrogen, educating energy buyers about the specific use cases for their sector is an important early step to help overcome initial barriers to engagement.
“Creating specific end use solutions to show how green hydrogen can be used in typical processes in various industrial sectors will make it easier for customers to see how it can fit into their decarbonization plan,” said Chris Shugart, Senior Vice President of Development at Ambient Fuels.
This panel is just one example of RTC’s market transformational work. The RTC is bringing together large energy buyers, solution providers, and other key market and policy stakeholders to facilitate knowledge sharing for its members, as well as to collectively discuss the shared challenges, and—most importantly—chart a joint path forward.
In the coming year, the RTC will continue to drive progress on RNG and green hydrogen by creating case studies, connecting buyers to solution providers, exploring contract structures and market instruments, and educating policymakers about the gaps that exist for scaling these decarbonized fuels.
To learn more about the work of the RTC, visit renewablethermal.org. If you’re interested in joining us in scaling renewable thermal energy solutions or have questions, please contact Blaine Collison, Executive Director of the RTC.
Cihang Yuan is Senior Program Officer, International Corporate Climate Partnerships at World Wildlife Fund.