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New Mexico Wants to Be the Nation’s First Hydrogen Hub

Industry and government officials believe hydrogen can provide a powerful tool to accelerate the transition to a clean energy economy. But environmentalists warn questions remain about the hydrogen-production process.

(TNS) — New Mexico is barreling forward with industry and government plans to turn the state into one of the nation's first "hydrogen hubs."

But the pace of new developments is generating alarm among environmentalists, who are scrambling to pull the emergency brakes.

Industry and government officials, both at the state and federal levels, believe hydrogen can provide a powerful tool to accelerate the transition to a clean energy economy. That's because hydrogen has many potential applications as a relatively clean-burning fuel that doesn't emit carbon dioxide.

It could help decarbonize transportation when electric batteries are not good options, such as long-haul industrial vehicles like tractor trailers, maritime shipping, and even planes and trains. It could also help clean up heavy manufacturing operations, such as steel and cement production that require intense heat, making electricity from renewables like wind and solar inefficient and impractical because of the immense power levels needed.

And it could be used to produce electricity, replacing fossil fuels like coal or natural gas to run turbine generators in power plants with no carbon emissions. That could provide a critical source of backup generation as local and national grids become heavily dependent on intermittent production from solar and wind farms.

In fact, given its broad-ranging potential, hydrogen has been called the "Swiss army knife" of energy — a powerful tool to transform hard-to-decarbonize sectors beyond the electric grid as the country strives to build a fully non-carbon economy by mid-century.

As a result, hydrogen development enjoys broad bipartisan support at the national level, where significant funding is likely to be approved by the U.S. Congress as it debates massive investments proposed by President Joe Biden to combat climate change. That includes $8 billion to build four initial "hydrogen hubs" around the country, plus billions more in federal assistance for hydrogen-technology research and development.

The U.S. Senate already approved that funding in a $1.2 trillion bipartisan infrastructure bill it passed this summer, which is now under debate in the House.

But environmental groups in New Mexico and elsewhere are sounding warning alarms about growing enthusiasm for all things hydrogen. That's because many questions remain unanswered about its actual ability to lower carbon emissions in the hydrogen-production process itself, plus the potential danger of applying hydrogen solutions to decarbonize energy use in areas better served by renewable resources.

Environmentalists fear the emerging focus on hydrogen could derail the accelerated adoption of renewable generation now underway nationwide as policymakers and investors pursue massive hydrogen development rather than pushing full speed ahead on solar, wind and battery-storage technology.

That national debate is now playing out full-force in New Mexico, where Gov. Michelle Lujan Grisham's administration is considering a wholesale embrace of strategies to turn the state into a "center of excellence" for a future hydrogen economy.

A Race Against Time

After decades of slow or no action to fight climate change, a national consensus is finally emerging about the urgent need to rapidly decarbonize the economy, setting in motion foundational changes now in energy production and use to stave off the worst impacts of global warming in coming years. Some level of consensus has also emerged about prioritizing renewable generation from solar, wind, battery storage and other renewable technologies to transform the grid away from fossil fuels.

But strategies diverge over how to rapidly decarbonize broader sections of the economy such as transportation, heating and cooling of homes and businesses, and heavy manufacturing. And given today's increasing disasters from wildfires, chronic drought and extreme weather like hurricanes and tornados, it's become a race against time for everyone in the clean-energy transition to deploy non-carbon technologies in all sectors as fast as possible.

For hydrogen enthusiasts, that's a key driving force for building a hydrogen economy alongside renewable resources. And in New Mexico, Lujan Grisham is now promoting hydrogen production, distribution and consumption as a critical "bridge" to begin immediately transitioning hard-to-decarbonize sectors of the economy.

"You have to have this as a bridge," Lujan Grisham said in a Sept. 21 interview on the national podcast program "Everything About Hydrogen." "... We want to be decarbonizing everywhere we can in order to effectively do as much as we can about climate change. We need these transitions."

That means being "technology neutral" to deploy as many tools as possible, said state Environment Secretary James Kenney.

"We need to be as nimble as possible as new technology and ideas evolve and flow," Kenney told the Journal. "We need to incentivize industry to take a hard look at how to decarbonize faster."

In that regard, hydrogen seems like a natural fit for New Mexico, which has many more assets in place for its rapid development than most other states, Lujan Grisham said.

That includes vast reserves of natural gas needed for steam methane reform, or SMR, which is the traditional process used to produce hydrogen by pulling hydrogen molecules out of methane. And with decades of natural gas production under its belt, New Mexico already has extensive infrastructure in place to extract, process and transport natural gas from the field to hydrogen plants, plus a vast network of pipelines and other means of transportation to move hydrogen to market.

To decarbonize the use of natural gas in the SMR process, which emits a lot of carbon, industry is focused on carbon capture and sequestration technology. And unlike many other states, New Mexico has deep geological formations in the northwestern San Juan Basin and the southeastern Permian Basin that are needed to permanently store captured carbon underground, Lujan Grisham said.

In addition, the state has a large, skilled workforce that can fairly easily re-train from oil and gas production to hydrogen operations, which requires many of the same skills and experience. And that, in turn, can help buffer the long-term impact of transitioning the state economy away from fossil fuels to clean energy.

"It's very exciting about how well positioned the U.S. is, and frankly, how well positioned New Mexico is," the governor said.

Lujan Grisham's administration is now preparing a new bill for the upcoming legislative session that would establish the legal framework — including standards, regulatory measures and incentives — to guide the industry forward.

Industry On Board

That broad state-level support is emerging alongside advanced industry plans to build out the hydrogen economy in New Mexico. That includes three big projects involving different companies and investors:

New Point Gas LLC and Brooks Energy Co. are pursuing a joint project to transform the coal-fired Escalante Generating Station near Grants — which Tri-State Generation and Transmission Association shut down last year — into a hydrogen production and generating facility.

Libertad Power — a new company that launched in 2014 — is now working to construct the state's first newly-built hydrogen production and generating facility in Farmington, which it says could be up and running by 2025. The plant would be the anchor for establishing a broad hydrogen production and distribution hub in San Juan County that provides clean electricity for utilities throughout the West, plus hydrogen as fuel for transportation and industrial uses. Over the summer, it submitted a detailed project proposal to the U.S. Department of Energy to be considered for federal hydrogen-hub funding once approved by Congress. The proposal significantly broadened Libertad's focus to also build a second hydrogen hub in Lea County in the Permian Basin.

Albuquerque-based BayoTech Inc. — which is building compact, mobile hydrogen generators based on technology originally developed at Sandia National Laboratories — is now beginning to deploy its first units in New Mexico and elsewhere to provide on-site hydrogen production and fueling stations wherever needed. The company established a partnership with Farmington-based Process Equipment & Service Co., or PESCO, to build the generating units.

In terms of technology development and deployment, BayoTech is by far the most advanced, with four generating units rolling off the PESCO production line this fall, and at least seven more next year, said company CEO Mo Vargas. BayoTech, which employs 110 people now and plans to hire another 50 or 60 next year, has wracked up a $1 billion potential sales pipeline with customers worldwide.

Establishing a legal framework for the hydrogen industry in New Mexico can help accelerate business development, Vargas said.

"We're encouraged by the current administration's ambitions to turn New Mexico into a central hydrogen hub," Vargas told the Journal. "The legal framework can help us move forward faster."

Moving Too Fast?

But the rapid pace of industry development and state policy plans have alarmed the local environmental community, which sees hydrogen as a potential "niche" tool for some hard-to-decarbonize things like long-haul shipping in the future, after "green hydrogen" production methods are fully developed and proven.

The problem now, they say, is that most industry hydrogen plans are based on SMR technology with natural gas as the feedstock. And to decarbonize that process, industry proposes carbon capture and sequestration, which environmentalists generally consider an unproven, risky technology that only prolongs fossil-fuel production.

SMR with carbon capture is called "blue hydrogen," a step above today's traditional "gray" hydrogen that simply vents carbon emissions into the atmosphere with no effort to capture and sequester it.

Environmentalists prefer "green hydrogen," which uses renewable generation from solar or wind to power a process known as electrolysis. That process pulls hydrogen molecules from water, with no carbon emissions. But green production is still too expensive for widespread deployment, and the price isn't expected to drop enough for large-scale commercialization until the 2030s.

By racing into blue hydrogen production now, massive public and private investment will be pumped into a fossil-fuel based system that may not lower carbon emissions significantly and that could become obsolete in a decade or so if green production is broadly adopted. That, in turn, would leave stranded assets as governments and investors scramble yet again to shift the foundations from blue to green, said Western Environmental Law Center Executive Director Erik Schlenker-Goodrich.

"Methane-based hydrogen production is a very risky investment bet with state resources or private-sector capital," Schlenker-Goodrich told the Journal. "Blue hydrogen may be cost competitive in the short-term, but that could be reversed by 2030 compared with green hydrogen. We could invest billions in New Mexico in a scheme that could be outdated by other technologies in a decade."

Perhaps more importantly, blue hydrogen has yet to be proven effective in lowering carbon emissions. For one thing, it's uncertain how much carbon can actually be trapped with capture technology, and then sequestering it permanently underground without leakage must yet be demonstrated.

In addition, methane venting and leaking in the natural gas production process is still a widespread problem that the state and federal regulators are now working to eliminate through new rules and regulations. If those leaky upstream and mid-stream processes of extracting, processing and transporting gas to hydrogen plants are included, the life-cycle production of hydrogen through SMR and carbon capture may prove at least as carbon-intensive as just using natural gas for power generation.

In fact, a new study by researchers from Cornell and Stanford universities published in August in the journal Energy Science & Engineering found that the greenhouse gas footprint from blue hydrogen is actually 20 percent greater than burning natural gas or coal for heat, and about 60 percent greater than burning diesel oil for heat.

"The use of blue hydrogen appears difficult to justify on climate grounds," the authors said.

Other research also questions the wisdom of using hydrogen in many applications that are better served through electrification based on renewable generation. Hydrogen, for example, is much less efficient for passenger cars and small commercial vehicles than electric batteries.

And blending hydrogen with natural gas to lower carbon emissions in homes and businesses when heating, cooling or cooking has limited advantages compared with electrification. That's something gas utilities are now exploring, but only a limited amount of carbon can be transported in gas pipelines or used in appliances, because hydrogen tends to degrade the materials applied in gas-based infrastructure. To deploy hydrogen at higher levels for those purposes could mean wholesale replacement of current pipelines and systems.

"Hydrogen is a niche product that's applicable in some things," said Noah Long of the Natural Resources Defense Council. "It's not a core decarbonization technology and should not be considered as central to reaching a zero-carbon economy. If there is a role for blue hydrogen, it's a narrow one with inherent risks of producing it from gas."

Cart Before The Horse

Hydrogen enthusiasts say blue hydrogen's life-cycle emissions can be substantially reduced by capturing methane emissions at all stages of natural gas production.

Indeed, Libertad Power is basing its production model on partnerships with natural gas operators who commit to applying all needed infrastructure to eliminate methane emissions when supplying gas to Libertad's hydrogen plant, said Libertad Managing Partner Joseph Merlino.

"Facilities can be designed to not leak at all," Merlino told the Journal. "That's an important starting point for our process — no methane emissions ... It will be highly decarbonized gas coming to our hydrogen plant."

Carbon capture with SMR is also highly efficient, because operators don't burn the gas to power the SMR process, Merlino said. Rather, it's a chemical interaction that separates hydrogen molecules in the methane without combustion, and that tends to concentrate the carbon released in the process, making it much easier to capture.

"This technology is well-advanced, and there are some commercial systems in operation that indicate a carbon-capture rate well above 90 percent," Merlino said. "All providers of the technology tend to agree on that."

In any case, forthcoming state standards and regulations will be designed to measure the carbon intensity of the entire life-cycle process for hydrogen production to determine how much operators actually lower emissions, said Environment Secretary Kenney. And those rules and regulations will be developed alongside state efforts to develop new clean transportation standards, new methane regulations to reduce and eventually eliminate emissions in the oil and gas industry, plus the governor's 2019 executive order for New Mexico to reduce carbon emissions statewide by a total of 45 percent below 2005 levels by 2030.

Basing state standards on carbon-intensity measurements allows policymakers to discard the blue and green color code to instead determine actual emissions reduction in a "technology-neutral" way, Kenney said.

Environmentalists, however, say the state should first fully develop its methane rules and clean transportation standards before approving hydrogen legislation. It also needs to fully codify Lujan Grisham's executive order on economy-wide carbon reduction to have a full legal framework in place to determine if forthcoming hydrogen production complies with state laws.

"You need strong standards in place to begin with on methane and other emissions, and we're not anywhere near that yet," said Noah Long of the NRDC.

Without fully codifying standards and regulations, those things can be rolled back under future state governments, added Western Environmental's Schlenker-Goodrich.

"It seems there's a real rush here to move New Mexico forward as a hydrogen hub," Schlenker-Goodrich said. "But without the necessary emissions standards and framework in place first, they're putting the cart before the horse."

(c)2021 the Albuquerque Journal (Albuquerque, N.M.) Distributed by Tribune Content Agency, LLC.