HOUSTON — One gas dominated conversations at the global energy conference here last week — and it wasn’t hydrogen.
As speaker after speaker at CERAWeek by S&P Global touted natural gas, the tone around hydrogen suggested it could be a tool to help the fossil fuel industry grow and to make products like fertilizer without necessarily transforming the U.S. energy landscape.
Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy Association, said the industry has reached an inflection point. People in the hydrogen business are looking at where the gas is already being used and where demand already exists — including in industries such as oil refining.
“You can be cleaner and better, and also make money and serve industries that are already in place,” Wolak said in an interview.
Wolak said shifting the hydrogen industry’s focus away from turning the gas into an end-use fuel could still help the industry grow from the roughly 10 million metric tons produced annually in the United States to more than 20 million metric tons per year over the next decade.
Hydrogen can be made several ways, including by distilling it from natural gas or with a device that splits water molecules through a process called electrolysis. The way hydrogen is made has been color-coded, with hydrogen made from natural gas known as “gray” hydrogen and electrolysis powered by renewables known as “green” hydrogen.
Renewable energy sources and low-carbon fuels were pushed out of the spotlight for much of CERAWeek, as executives and government leaders echoed President Donald Trump and his administration’s goal to increase U.S. fossil fuel production.
Wolak spoke with POLITICO’s E&E News last week at CERAWeek about the future of the hydrogen industry.
Natural gas seems to be the darling of CERAWeek. Where do you think hydrogen stands now both as a topic at the conference and as part of the energy mix?
I remember being at CERA a long time ago when [liquefied natural gas] was sitting in a corner. No one cared about it because it was nascent. So the fact that CERAWeek this year is heavily focused on gas is a sign of the political times.
I think what hydrogen is in CERAWeek and in the country right now is determining where it sits as an accessory of the [2022 Inflation Reduction Act]. It has unique features that bridge both renewables and the elements of the IRA that were focused on the pieces of the hydrogen infrastructure that were close with the oil and gas world.
If we’re going to be using more and more petroleum-based products around the world, because global demand for all kinds of petrochemicals and refined products is going to grow, you’re going to have a need for more hydrogen, and that will mean incremental investments in hydrogen production technologies.
How have conversations about hydrogen changed over the past few years?
I’ve been in the industry for about 18 years. When I took this job three years ago and I started looking at where the association, where the members were, my vantage point was hydrogen as the end-use molecule. It was going to be used in vehicles, it was going to be used as a discrete type of fuel.
And what I learned and have come to appreciate is that the value of hydrogen as a component of things that are in demand around the world is hugely valuable. Tax credits become the enabler to produce that.
That wasn’t the thought process necessarily when it was incubated within the IRA, but it plays very well into what this administration wants to see of U.S. innovation. So now we’re in a mode of how do we shift to where the conversation is more around the things the business energy community wants to hear versus an environmental discussion.
When you look at 45V — a tax credit aimed at helping the green hydrogen industry — that seems like an item that might be cut. Why should it be kept?
It is not just the green hydrogen world that cares about [45V]. We wouldn’t have had members of the [American Petroleum Institute] and other trade associations that represent the oil and gas community saying, “No, this is a good thing to keep.” There’s a sense that there’s an optionality that they want to have in their businesses. And even though it was enabled and fostered by the Biden administration, it’s in policy. We want the right and the ability to use it because we want to potentially make investments that do utilize this, and we might want to make money with it.
Is there a branding shift within the hydrogen industry as we move into the Trump administration to sell it more as an accessory to oil and gas and not as a low-emission fuel source?
It is a branding shift, but it’s also a recognition that there is diversity and variability in what hydrogen can do. And so yes, we’re having a different conversation, and the conversation I think should have rightly been about the product in a competitive environment with environmental benefits being secondary or as a consequence. But the starting point of many of the conversations about energy three or four years ago were always to prove that it’s cleaner.
With almost all hydrogen now made from natural gas, how do you expect higher gas prices to affect the hydrogen industry?
If [natural gas] prices increase, the value of the hydrogen and the relative input cost of the methane going in is going to be based upon what the market demand is for the end products. If those end products around the world are increasing because natural gas costs, the impact is neutralized as long as consumers are willing to continue to buy products at a higher price.
Where do you see demand for hydrogen products in the next two or three years?
The concept of build it and they’ll come, I think, was of part of the sense of the hydrogen industry. We’ve been working on these technologies for 20 years. And in the period slightly before and after Covid, [the industry] became like, “We’re ready to go.” And then you had the IRA and it was like “Wow, we’re now ready to go — look at all the things we can do.”
There was this expectation that all of this was going to happen simultaneously. It wasn’t really practical, but there was so much readiness, and then you had this catalyst [with the Inflation Reduction Act]. There was a sense that we’re going have all these pipelines and things.
To some people, broader hopes about hydrogen have given way to hydrogen having a limited role in the energy mix. How do you see it?
I think we are in a sobering maturity of the business right now. Some of what we’re going through is saying, “Let’s get down to the basics.” We need transaction-based activities that definitely need government enabling. We want to have competitive products, but what is going to rise to the top are those items that are closer to value.
We were in a mix of all [the end uses of hydrogen] having equal weight to success when they never really had that equal weight. Where we are now is a recognition of what will get done is going to be driven by market demand, driven by offtake.
We may see high volumes of hydrogen being used in limited-use applications versus a diverse use of hydrogen in a broad set of applications. And from my standpoint, from an industry standpoint, that’s industry growth.
This interview has been edited for clarity and length.
