Craft an executive order to align agency priorities and establish a zero-emission hydrogen roadmap to support the U.S. Department of Energy Hydrogen Hub grant application.

An executive order or action from the Governor’s Office could direct one regulatory agency to serve as the central authority or facilitator to govern and support implementation of zero-emission hydrogen projects in the state. An executive order or gubernatorial roadmap could rely on existing legislative authority related to electrolytic hydrogen. The Governor’s Office of Business and Economic Development (GO-Biz), the University of California, Renewables 100, and the State Building Trades Council of California launched the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) as a non-profit public private partnership dedicated to accelerating the development and deployment of California’s renewable hydrogen market. ARCHES’ first task is to lead California’s effort to secure federal funding under the Regional Hydrogen Hub Program. In addition to GO-Biz, the California Air Resources Board could serve as a central coordinator, given the agency’s experience implementing the Low Carbon Fuel Standard and regulating emissions from electricity and power-generating equipment, or the Energy Commission, given their role in deploying hydrogen fuel cell vehicle infrastructure. 

Require more electrolytic hydrogen production or establish a Renewable Portfolio Standard for hydrogen production

The legislature could require all future hydrogen projects to be zero-emissions or create a market-based system that sets production standards for a company’s hydrogen production portfolio to be near-zero emissions. The legislature could also revisit Senate Bill 1505, which already required 33.3 percent of the hydrogen produced for (or dispensed by) fueling stations that receive state funds be made from eligible renewable energy resources. The legislation, passed in 2006, was never fully implemented due largely to the lack of electrolytic hydrogen supplies in California.  The legislature could collaborate with the California Air Resources Board, California Public Utilities Commission, and the California Energy Commission to revisit the SB 1505 requirements and see if a program similar to the Renewable Portfolio Standard might best support zero-emission electrolytic hydrogen.

Move away from “color coding” hydrogen and utilize a lifecycle approach to define carbon intensity for hydrogen production pathways

The hydrogen color code system inadequately distinguishes fossil-based hydrogen (gray or blue) from zero-emission hydrogen (green). The California Air Resources Board could enhance their emissions accounting system to ensure that the hydrogen source is indeed zero-emission. By applying a lifecycle carbon intensity methodology to all hydrogen projects, the Air Resources Board would better understand how electrolyzers can drive down emissions. California already has established similar lifecycle-emission based accounting as part of the Low Carbon Fuel Standard, in which zero-emission electricity generation and hydrogen production for low-carbon transportation fuel are credit-generating activities. The agency could base a similar methodology applied to all types of hydrogen production on its existing CA-GREET3.0 model (Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation), which assesses lifecycle greenhouse gas emissions. Since many project developers are taking an all-of-the-above approach to producing hydrogen in a way that may use both fossil and renewable resources, utilizing a lifecycle carbon intensity methodology will allow for greater transparency and accountability. 

Develop zero-emission hydrogen master plans for local land use siting and permitting assistance

The role of state and local government coordination and collaboration in accelerating electrolyzer approval is critical. With local governments controlling land use and zoning decisions, undertaking a Master Plan effort may accelerate electrolyzer projects and reduce costs. Projects will require the approval of local planning commissions. The bulk of electrolyzer projects that incorporate large-scale solar or wind will be in smaller, rural cities with more available land. Yet few resources are available for local governments and relevant agencies to plan for and permit zero-emission hydrogen facilities. Most smaller cities, counties, and utilities need capacity and technical assistance in order to develop a plan for any zero-emission hydrogen production. The California Energy Commission could work with cities and counties to develop master plans that incorporate best practices and local strategies for supporting electrolyzers. The Energy Commission could convene state agencies involved in hydrogen transportation and end-use, including the State Fire Marshal and local fire departments (safety approvals and training guidelines), and the California Department of Food and Agriculture Division of Measurement Standards (setting standards for certifying hydrogen dispensers for transportation). In a master plan, lead agencies could identify environmental issues, infrastructure planning, as well as work on permit streamlining. 

Establish a “zero-water-waste” initiative to invest in research advancing the use of reclaimed, brackish, or non-potable wastewater in electrolyzers

Electrolytic hydrogen projects require substantial water supply to provide the feedstock for hydrogen production, adding significant costs. Electrolyzers consume about 9 kilograms of water per every 1 kilogram of hydrogen produced. Policymakers need a statewide strategy to ensure California electrolyzer projects use water responsibly. The California Energy Commission, in coordination with the Natural Resources Agency, could spearhead a statewide initiative to assist electrolyzer project developers in utilizing reclaimed municipal wastewater and impaired groundwater. Electrolyzers need high-quality water which requires water treatment. Low-quality water can lead to faster degradation of equipment. Water impurities such as iron, chromium, or copper can adversely affect many electrolyzers. Because high filtration costs and ecosystem impacts make desalinated seawater unlikely for electrolysis, reclaimed wastewater may provide an opportunity instead.

Establish strong air emission limits for hydrogen combustion to reduce nitrogen oxide impacts, especially in environmental justice communities

Even where hydrogen is created from zero-emissions electrolysis, end uses of hydrogen vary in their environmental impacts. Some end uses of hydrogen rely on combustion, including turbines at power plants and boilers that provide high heat for industrial processes. Many industrial facilities that either combust hydrogen today or could combust hydrogen as a replacement for fossil fuels are located in environmental justice communities. The Air Resources Board and regional districts could implement Best Available Retrofit Control Technology (BARCT) standards to address the disproportionate impacts of air pollution in disadvantaged communities. 

Establish statewide “High Road” job standards to support a just transition for the fossil fuel workforce

Zero-emission hydrogen could provide a transition to a clean energy economy for workers in fossil fuel industries. The California Workforce Development Board could work with labor unions, apprenticeship programs, and electrolyzer project developers to create high road job standards for the zero-emission hydrogen economy. California developed a High Road Clean Energy Jobs Action Plan to develop a pipeline for training the state’s future clean energy workforce. The legislature could direct funds from either the General Fund or California Climate Investments toward (1) developing labor standards, (2) funding community-based organizations for outreach efforts, and (3) operationalizing a high road training partnership for a hydrogen workforce in areas where electrolyzer projects might be installed first, such as in the Inland Empire and Central Valley. The state could continue to work with the State Building & Construction Trades Council to set standards for hydrogen storage, transportation, and distribution through safe and high-quality pipeline systems. Local government and labor unions can also support workforce development via Community Workforce Agreements among local governments, labor unions, and project developers.

Establish equity principles for hydrogen and comprehensively integrate the principles into land use decisions

State agencies and the ARCHES entity must support environmental justice groups involvement in the local permitting processes related to hydrogen infrastructure projects. Projects will be permitted and approved at the local level, so the state must work proactively with local governments to uplift and address community concerns. Agencies and local governments could establish best practices for incorporating community concerns and formalize mechanisms for receiving input from unbiased commissions such as the California Public Utilities Commission or California Energy Commission. The California Air Resources Board and regional air districts could utilize the state’s CalEnviroScreen 4.0 screening model to assess cumulative impacts and risks to disadvantaged communities. As a part of the ARCHES Hydrogen Hub governance model, the state legislature could also set aside funding for community-based organizations to have an outreach and education role in incorporating environmental justice principles into hydrogen policies. This model has proven successful in the Solar on Multifamily Affordable Housing (SOMAH) Program, which partners with and provides resources to community-based organizations to help communicate program benefits to tenants and communities. 

Eliminate use of Low Carbon Fuel Standard credits to deem fossil-based hydrogen production as “renewable” through the use of “book-and-claim” accounting

At present, a large quantity of the “renewable hydrogen” in California’s marketplace is produced from fossil-based methane reforming and coupled with the purchase of biogas credits. The legislature could work with the California Air Resources Board to eliminate opportunities to define fossil-based hydrogen as “renewable” through the purchasing of credits in the Low Carbon Fuel Standard (LCFS) market. Some participants argued that the current regulatory framework of the LCFS program does not encourage electrolytic hydrogen. Environmental groups have advocated for eliminating the process known as “book-and-claim accounting” and fully incorporating the value of avoided methane costs within the LCFS program. Book-and-claim accounting means that a fossil-based hydrogen project can buy renewable power or environmental credits generated outside of California (such as a dairy manure biogas project) and still attain a zero-carbon intensity score under the LCFS program. Additionally, fully accounting for impact of methane emissions within LCFS will further support electrolytic pathways and move away from dairy digester credits. The LCFS program is scheduled to be revisited in 2023, providing an opportunity to eliminate labeling hydrogen as renewable whenever it is derived from fossil fuels, landfill, or dairy biomethane.

Expand the Climate Catalyst fund to include electrolyzers and de-risk projects by providing financial backstops or guarantees

As with all large infrastructure projects, hydrogen investors are seeking long-term guarantee of product demand and price, creditworthy offtakers, and, where appropriate, financial assurances to mitigate outsized risks. One mechanism that could provide a financial backstop for zero-emission hydrogen projects is the state Climate Catalyst fund, housed within the California Infrastructure and Economic Development Bank (IBank) and connected to the Governor’s Office of Business and Economic Development (GO-Biz). The Climate Catalyst Revolving Loan Fund provides low-cost, low-interest finance to support eligible low carbon technology and infrastructure projects and attract private capital. Expanding the fund to include zero-emission hydrogen could support the state’s climate greenhouse gas mitigation and energy resilience efforts.  A hydrogen program within the Climate Catalyst fund could offer credit enhancement or loan guarantees to electrolyzer project financiers and developers.  

Establish a Community Development Block Grant for zero-emission hydrogen production

A Community Development Block Grant (CDBG) program has largely supported housing developments administered by the U.S. Department of Housing and Urban Development. However, the Infrastructure Investment and Jobs Act established the Energy Efficiency and Conservation Block Grant Program to reduce fossil fuel emissions and enhance efficiency. The IBank could administer a state-operated block grant using these federal funds to support the development, permitting, and construction of electrolytic hydrogen projects, ensuring they meet established zero-emission criteria. 

Require heavy industrial sources to decarbonize through regulations on thermal emissions

Two pathways exist to expedite deployment of zero-emission hydrogen as a solution for difficult-to-decarbonize industrial activities. First, the California Air Resources Board could require heavy industrial facilities to reduce emissions by transitioning to zero-emission energy sources and feedstocks. For facilities that lack decarbonization pathways through direct electrification, zero-emission hydrogen could allow for continued operation of most industrial facilities due to the similarities between fossil fuels and hydrogen. In actuality, industrial heating and processing may likely be met by a combination of direct electrification and zero-emission hydrogen, a potential least-cost decarbonization pathway. Second, the Air Resources Board could expand the Low Carbon Fuel Standard to the industrial sector or adopt an analogous program for industrial facilities that use fossil fuels and fossil-based hydrogen. A technology-neutral performance standard for high heat industrial activities could support the use of zero-emission hydrogen without directly setting mandates. Other jurisdictions have explored hydrogen markets for industrial sectors. In Germany, the government is exploring demand-side measures like quotas for low-carbon steel, pairing regulations with hydrogen roadmaps for individual subsectors and subsidies for using hydrogen as an industrial feedstock.

Conduct a market assessment for hydrogen offtake ​​to provide electrolytic hydrogen producers with an accurate evaluation

Hydrogen project developers will need to show financiers that they have a willing buyer or user of the zero-emission hydrogen. Offtake agreements are the “commercial heart” of any hydrogen project because they guarantee the revenue source. Any offtake or purchase agreement is crucial to obtain financing at an early stage and decisive for bankability in the longer run. Growing the market for zero-emission industrial hydrogen will therefore require innovations in distribution and reducing combustion emissions, as well as an accurate assessment of the current offtake market. The Energy Commission could conduct a statewide offtake market analysis to help technology developers and suppliers find matches and optimize investments. The Energy Commission could work with other agencies such as the California Transportation Commission, California State Transportation Agency, California Department of Transportation, and Metro Los Angeles to undertake an offtake assessment and market study for potential zero-emission hydrogen demand in the 710 freeway corridor. The targeted offtake analysis could help expedite projects that reduce diesel and pollution burdens from the environmental justice communities neighboring the freeway.