The past year has transformed the North American energy landscape, bringing seismic shifts, groundbreaking innovations, and industry-defining moments. As we enter 2024, DNV’s experts will write a series of blogs to dissect the major trends and developments from 2023 and provide insight on what we can expect in 2024.
The hydrogen and clean fuels industry in the United States (U.S.) and Canada experienced a remarkable surge in 2023, marked by significant policy shifts, technological advancements, and key project milestones. This is just the beginning: a June report from the Deloitte Center for Sustainable Progress identified the potential of the green hydrogen market, growing from USD 642 billion by 2030, to USD 980 billion by 2040, and USD 1.4 trillion by 2050.
Policy
The Inflation Reduction Act and Clean Hydrogen
A cornerstone of the U.S. policy landscape in 2023—with reverberations globally—was the Inflation Reduction Act (IRA). This landmark legislation has been a game-changer for clean hydrogen production, primarily by offering substantial tax credits. For instance, the IRA provides a tax credit of up to USD 3 per kilogram for clean hydrogen production, depending on the carbon intensity. This incentive is a significant boost for green hydrogen projects, as it substantially lowers the production costs, making clean hydrogen more competitive against traditional hydrogen sources.
To receive clean hydrogen credits under the IRA, a project must undergo a Life Cycle Analysis (LCA), a comprehensive assessment that calculates the environmental impacts associated with the entire life cycle of hydrogen production, from raw material extraction through processing, distribution, use, and disposal. This transparency is crucial for the verification process, allowing third parties to assess the accuracy of claims made about the environmental benefits of a particular hydrogen production process. It ensures that credits are awarded based on verifiable, objective data.
For producers, an LCA signals to the market that their product as environmentally preferable. This differentiation can be a key factor in attracting investments, entering new markets, and qualifying for clean hydrogen credits, which can provide financial incentives for producers. DNV’s service specification for Validation of attribute claims for low carbon and renewable hydrogen and ammonia, SE-654, provides producers with an independent assessment of their environmental claims. It uses GREET model tools that enable us to calculate the LCA footprint from “well to tank” for any hydrogen production route, transportation, compression, and storage, as well as any derivatives.
Hydrogen in the U.S.
In addition to the IRA, The U.S. government cemented its commitment to hydrogen and clean fuel technologies in 2023, aligning with the goal of achieving a carbon-neutral power sector by 2035 and net zero emissions by 2050. In addition to the IRA, policy actions included further investments in renewable energy integrations and infrastructure enhancements. Most significant was the Department of Energy’s (DOE) USD 7 billion program to develop regional clean hydrogen hubs across the nation. These hubs are designed to integrate hydrogen production, consumption, and distribution networks, aiming to facilitate the use of hydrogen as a clean energy source. After a thorough evaluation process, the DOE selected specific projects for funding negotiations in October 2023. The development of these hydrogen hubs is crucial for reducing clean hydrogen costs and establishing a sustainable hydrogen market in the U.S.
The Clean Hydrogen Manufacturing Initiative, supported by the bipartisan Infrastructure Law, dedicated USD 750 million to enhance clean hydrogen technologies, including electrolyzers. This initiative is a part of the broader effort to strengthen domestic hydrogen production and infrastructure. Additionally, the administration committed an extra USD 1 billion for demand-side support, focusing on overcoming market barriers and encouraging the use of clean hydrogen.
Hydrogen in Canada
In Canada, 2023 focused on integrating clean hydrogen into its broader climate strategy. The updated Canadian Hydrogen Strategy aligns with its goal to achieve net-zero emissions by 2050. The government has earmarked significant investments for developing hydrogen infrastructure and research, particularly in provinces like Alberta, Ontario, and British Columbia. DNV is currently undertaking a hydrogen blending feasibility study for two companies in British Columbia, the largest of its kind in North America.
Technological Advancements and Major Projects
Safety
One aspect of convergences in the energy transition is safety. Customers who are migrating from handling one type of energy to another need to think clearly on how to manage the change process and maintain high levels of safety. DNV has been an industry leader for risk-based methods for process safety management. Our in-depth knowledge of materials such as hydrogen, ammonia, CO2, and methanol gives us the ability to provide insights to customers on best practices and how best to leverage our simulation tools. One of our customers, a major player in the midstream gas and LNG sector, requested our support on how to make the leap from natural gas to clean ammonia. Our safety studies and research into safety regulations and practices in the ammonia industry provided the framework for decision making and gave the customer the confidence to pursue further investments in this space.
Clean Hydrogen Production
Last year saw major strides in electrolyzer technology, crucial for green hydrogen production. Electrolyzer efficiency improved, with several projects achieving notable reductions in electricity consumption. For example, a project in California reported a 20% increase in efficiency compared to previous years when using the new technology.
The electrolyzer market is rapidly expanding in terms of scale and capacity to meet demand. However, the claims from manufacturers need to be assessed to assure that electrolyzers achieve the stated technology readiness level. One such project was an electrolyzer due diligence. Our technical due diligence (TDD) and bankability reports in the electrolyzer space have carved out a niche where we are recognized as a leading technical advisor. For example, we took a deep dive on a new type of alkaline electrolyzer from an allied industry on behalf of a renewable power developer. Our analysis examined the manufacturers’ claims about efficiency, production capacity, and its ability to manufacture at scale and fulfill orders on time. Over the course of 2023 we aided several financial institutions considering making investments in electrolyzer manufacturing. Being active in this sector means that the knowledge we develop in bankability assessments also enhances our owners engineering (OE) services. We have already seen several OE opportunities where we have integrated insights in the electrolyzer performance into our simulation models and developing more efficient concepts, de-risking projects at the feasibility stage.
Ammonia and Methanol
Ammonia and methanol have emerged as key players in the clean fuel market. In 2023, a pilot project in Texas successfully demonstrated the use of green ammonia in industrial applications, and in Canada a methanol production facility using carbon capture technology reached a milestone of reducing CO2 emissions by 30%. There is an emerging and growing convergence of processes to transform clean hydrogen into derivative forms to minimize the adaption needed in utilization and to also overcome challenges with transporting hydrogen over long distances. One of our customers asked us to review the most favorable bio/green methanol production pathway for a specific region in the U.S. We identified opportunities to decarbonize fuel for combustion turbines by producing green methanol at the lowest cost using local carbon dioxide, green hydrogen and /or biomass. The objective was to identify a pathway to become compliant with federal regulations setting carbon intensity targets by 2035. We also examined and incorporated reliability targets for the process and corresponding technology readiness levels.
Sustainable Aviation Fuel
Sustainable aviation fuel (SAF) has seen exponential growth in the past year. The U.S. witnessed the inauguration of its largest SAF production plant, with an annual output of 100 million gallons. This plant utilizes municipal waste as a feedstock, showcasing an innovative approach to sustainable fuel production. Last year we completed a techno-economic assessment for SAF production pathways on behalf of a midstream customer The objective of the project was to analyze the potential for producing sustainable aviation fuel (SAF) from various feedstocks and technologies in several potential locations in the US. We compared the capital and operating costs, greenhouse gas emissions, and profitability of four different SAF pathways: Fischer-Tropsch (FT), hydroprocessed esters and fatty acids (HEFA), alcohol-to-jet (ATJ), and power-to-liquid (PtL). The report identified the key drivers and barriers for SAF deployment, such as feedstock availability, policy support, demand growth, and infrastructure compatibility.
DNV's role in the hydrogen market
DNV has played a pivotal role in shaping the industry's trajectory in 2023. Studies indicate a 15% increase in global hydrogen demand, highlighting the importance of DNV's safety standards and guidelines, which have been instrumental in the successful implementation of several projects, ensuring safety and efficiency.
We continue to invest in research, development, and joint industry projects (JIPs) to build trust and de-risk the energy transition. Another great example of our ability to support the energy industry is to use our expertise to help customers with their workforce development. Operators need to be aware and competent in managing hydrogen hazards and engineering processes. We found a partner who were keen for DNV to develop a hydrogen workforce development curriculum through a JIP. The enthusiasm for this JIP is bigger than expected: 19 operators signed up for the first informational meeting where proposed work, scope and path forward were discussed, with more companies requesting an additional session now that we have completed the planning phase.
Conclusion
The hydrogen and clean fuels industry in the U.S. and Canada has seen remarkable progress in 2023, driven by favorable policies, technological advancements, and industry support. The IRA in the U.S. and Canada's strategic investments have set the stage for a transformative era in clean energy. With DNV's guidance and the industry's commitment to innovation, the future of hydrogen and clean fuels looks bright, promising a sustainable and energy-efficient future. Our capabilities are well positioned in the marketplace:
- Electrolyzer technical due diligence – it's critical that as much renewable power is converted into hydrogen to enable higher cost efficiencies and further penetration into hard to abate sectors. Our expertise in electrolyzers is enabling customers to select the right designs and vendors.
- Feasibility assessments – collectively, our engineers have deep insights of processes and transmission systems and how the integration of technologies are needed to enable the energy transition. Conversion of clean hydrogen into fuels that are easier to transport and utilize is critical to adoption and we’re focused on de-risking projects at the early stage.
- Market analysis – site selection is heavily influenced by the source of any feedstock or renewable power and the target offtakers. Making an incorrect decision for site selection may compromise the technical basis of a project. To assist our customers with overcoming this risk we have applied our knowledge in siting, and environmental and permitting capability to advise customers on optimal locations. We are developing insights into market trends by blending inputs from multiple large-scale industry databases.
- Regulatory frameworks – the tax laws and incentives available in North America are significant drivers to growth. Compliance with these requirements is based on comprehensive lifecycle analyses and clever project structuring. DNV is not a tax advisor, but we are remarkably effective at translating knowledge of regulations and incentives into technical solutions. Our international footprint is a key differentiator in being able to assist customers who are exporting clean fuels to foreign markets where there are additional regulations overlaid on a project.
- Permitting and assuring safety – safety is paramount to success and gaining public support. DNV’s has built a deeply respected reputation for strong risk management expertise with significant credibility to regulators. Combined with our environmental and permitting personnel we can effectively help customers navigate and mitigate the process safety risks.
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