Biden EPA assumes 10x reduction in ‘green hydrogen’ costs to justify power plant greenhouse gas regulations

The Biden administration has proposed sweeping new rules aimed at reducing greenhouse gas emissions from new and existing fossil-fueled power plants that will seriously jeopardize the reliability and affordability of the electric grid.

However, the administration claims that its plan will not meaningfully increase electricity prices, but these assertions are based, in part, on the administration’s unsupported assumption that the cost of so-called “green hydrogen” will experience a 10x reduction in costs, falling from $5 per kilogram (kg) today, to $0.50 per kg in the future.

What is “green” hydrogen?

There are many ways to make hydrogen. The most affordable way is to reformulate natural gas, but this method is disfavored by wind and solar advocates because it uses natural gas. Instead, these groups want “green hydrogen,” which is made by using electrolysis to split water into hydrogen and oxygen using electricity generated from wind turbines or solar panels.

The U.S. Department of Energy notes that the cost of “green hydrogen” is currently $5 per kilogram, but EPA is using a far lower number, a mere $0.50 per kg, to make it appear as if its rules will not increase costs for consumers. EPA’s claim is farfetched, and the result will be massively expensive electricity due to enormous fuel prices.

What does it mean for electricity prices?

To demonstrate the impact of EPAs assumptions on electricity prices, I’ve converted the cost of hydrogen from kilograms, a unit that is entirely unhelpful for understanding fuel costs, to million British thermal units (mmBtu), the standard format for reporting energy content.

One pound of hydrogen has 61,000 Btu of energy.

There are 2.20462 pounds per kilogram.

This means there are 134,481.8 Btu per kg.

Divide this by 1 million to get a heat content of 0.134481 mmBtu per kg.

1/0.134481= 7.4 kg of hydrogen needed to produce 1 mmBtu.

We then apply this to a power plant’s heat rate, which is the amount of energy used by an electrical generator/power plant to generate one megawatt-hour (MWh) of electricity. Combined cycle (CC) plants generally require 6.6 mmBtus of energy to produce one MWh of electricity, and combustion turbine (CT) plants generally require 10 mmBtu.

This means it would require about 48.84 kgs of hydrogen to produce 1 MWh of electricity at a CC plant and about 74 kgs of to produce one MWh of electricity at a CT plant. We can figure out the cost per MWh by multiplying these figures by the assumed cost of hydrogen.

Biden’s hydrogen assumptions vs reality.

There are large discrepancies between the cost of green hydrogen today and the costs used in the Biden EPA’s assumptions supporting its proposed regulations. Based on today’s green hydrogen prices, it would cost $243.93 per MWh in a CC plant, but the administration claims it will only cost $24.39, which is similar to the cost of coal or natural gas.

For CT plants, the cost of green hydrogen fuel would be $369.69 per MWh at today’s costs, but EPA assumes costs of $36.96 per MWh.

EPA does not offer a satisfactory explanation of why prices drop so dramatically. One reason cited by EPA for falling prices are subsidies paid out as a result of the Inflation Reduction Act, but subsidies don’t change how much a good or service costs; it simply shifts who pays for it.

The agency also fails to account for the cost of the massive hydrogen infrastructure that would be needed to use green hydrogen at scale, an enormous shortcoming in its analysis.