Is 'Green Hydrogen' the Future? This Minnesota Gas Utility Thinks So. The carbon-free fuel is expected to avoid 1,200 tons of carbon emissions annually. But critics say it's expensive and inefficient.

A Minnesota gas utility says it is successfully blending "green" hydrogen into its natural gas pipeline system in one of the first such tests in the country.

Since last spring, CenterPoint Energy customers near downtown Minneapolis have been burning a bit of hydrogen alongside the usual mix of methane gas in their stoves and furnaces.

The utility completed a $2.5 million hydrogen production pilot facility last year and began injecting the carbon-free fuel into its system in small amounts in June. Hydrogen accounts for no more than 5% of the overall blend at any time.

"The good news is that this facility has integrated well with our distribution system," CenterPoint spokesperson Ross Corson said of the facility's first months of operation.

The pilot project is a chance for the utility to iron out operational challenges. It's already made several adjustments, including changes to a water circulation system and the way in which it removes moisture before injecting the gas into its pipelines.

But even a technical success for the project is unlikely to resolve broader questions in Minnesota and beyond about the role of hydrogen in a clean energy economy. Some experts and climate advocates have argued that blending hydrogen into the natural gas system is an inefficient and expensive climate solution compared to switching to electric appliances, and that hydrogen should be reserved for industrial uses and other difficult-to-decarbonize sectors.

Related: Toyota Transforms Some Classic Cars to Run on Electricity and Hydrogen

Inside CenterPoint's plant

Most hydrogen today is produced from a chemical process involving fossil fuels that releases significant carbon emissions. "Green" hydrogen is produced by using electricity to split water molecules into hydrogen and oxygen. If done with renewable electricity it can be a zero-emission fuel source.

"The color wheel of hydrogen is complex and a little bit overwhelming, but green hydrogen, as long as it's generated using renewable electricity, is the gold standard," said Joe Dammel, buildings program manager for the St. Paul clean energy advocacy group Fresh Energy, which publishes the Energy News Network.

CenterPoint's small plant sits on the site of a former coal gasification plant that began operating when CenterPoint was called the Minneapolis Gas Light Company. The company chose the site due to its central location in its pipeline system and the availability of space. The grounds now host the green hydrogen center and a parking lot for workers taking courses across the street at a CenterPoint training center.

John Heer, the utility's director of gas storage and supply planning, oversees the facility. Making green hydrogen is not a huge technical feat and involves electrolysis, Heer said.

City water is purified before being piped into a 1-megawatt electrolyzer that processes two gallons a minute. The facility disperses oxygen through fans outside the plant. "We're learning by doing," Heer said. "We need to know how it works before we can scale it in a larger facility."

The facility gets electricity from Xcel Energy's grid and offsets its electricity use with wind energy renewable credits, also purchased from Xcel. Critics have disputed whether hydrogen facilities that use renewable energy indirectly through offsets should qualify as "green."

Costs and risks

Part of the pilot is determining how hydrogen changes the characteristics of natural gas in pipelines. Hydrogen is less dense than methane and only carries about one-third as much energy per cubic foot. The molecules are the smallest in the universe and can exacerbate pipeline cracks and cause embrittlement, increasing leakage and explosion risks above certain concentrations, according to the National Renewable Energy Laboratory.

In July, a California Public Utilities Commission study found that 5% blends of hydrogen and natural gas are safe but going above that amount could require modifications to stoves and water heaters. Moreover, since green hydrogen carries less energy content, more of it would be required to replace natural gas, the report said.

Even if produced from fully renewable sources, hydrogen is unlikely to replace natural gas for various reasons, Dammel said. The manufacturing process absorbs more energy than it produces, with roughly a 30% to 35% loss. Larger green hydrogen plants will need to compete for clean electricity at a time when demand for wind and solar power has skyrocketed.

"We think that just adding hydrogen to the distribution system to substitute for fossil gas has economic and technical limitations," Dammel said. "It's not going to be a 100% substitute for every molecule of fossil gas that's right now in the system."

To replace all the nation's natural gas consumption with green hydrogen would be an enormous undertaking, demanding hundreds of billions of dollars in investment in renewable energy, electrolysis technology, pipeline infrastructure and storage.

Critics also say green hydrogen production requires much water, a potential problem in more arid regions than Minnesota. Yet one study and market data suggest that its manufacture consumes far less water than plants using coal, nuclear, natural gas, biomass or solar.

For now, clean energy advocates believe the best application for green hydrogen will be heavy-duty industrial applications where using electricity cannot cost-effectively replace natural gas, Dammel said.

Hydrogen's future

The biggest hydrogen markets currently are petroleum refiners, fertilizer companies, food processors and metals treatment firms. Hydrogen's advocates, however, believe that in addition to manufacturing it can revolutionize the transportation sector.

Hydrogen is expected to get a boost in 2023 from the federal government. The Infrastructure Investment and Jobs Act, signed in 2021, includes $9.5 billion in incentives for clean hydrogen. The Department of Energy's Hydrogen Shot program has set a goal of reducing the cost of 1 kilogram of hydrogen to $1 in one decade.

In September, the Energy Department released a 112-page clean hydrogen roadmap that calls for funding regional hydrogen hubs, support for manufacturing plants, and research into reducing the cost of electrolysis.

The Inflation Reduction Act includes a tax credit for green hydrogen that will soon provide up to $3 a kilogram credit for producers. The U.S. Treasury Department is expected to decide soon what criteria need to be met, with some environmental groups lobbying for on-site renewable generation to be a requirement.

"It costs more to produce hydrogen than to use natural gas today, so $3 a kilogram is kind of a big deal," said Heer, the utility spokesperson. CenterPoint also wants to build a larger, second hydrogen plant but the timing on that has yet to be determined. The pilot is expected to avoid 1,200 tons of carbon emissions annually.