Hydrogen is the most abundant element in the universe. Yet, there is effectively no natural hydrogen gas resource on Earth. Hydrogen gas is the smallest and lightest of all molecules. When released, it quickly rises to the upper atmosphere and dissipates, leaving virtually no hydrogen gas on the Earth’s surface. Because hydrogen gas must be manufactured from feedstocks that contain hydrogen compounds, it is considered to be an energy carrier, like electricity, rather than a primary energy resource.

Currently, the main sources of hydrogen are hydrocarbon feedstocks such as natural gas, coal, and petroleum; however, some of those feedstocks also produce CO2. Thus, to provide overall emission savings, greenhouse gas (GHG) emissions must be mitigated during hydrogen production through CCS (carbon capture and storage) or similar technology, during end use through comparatively greater vehicle efficiency, or at other stages in the life cycle of the hydrogen fuel source. It is generally recognized that demand is not static and the accessibility of resources may be problematic. Also, the costs for addressing CO2 and other GHG emissions may increase, which could deter the full utilization of fossil fuels as a primary energy source for a hydrogen economy unless suitable mitigation measures are employed.

Another source for hydrogen production is electrolysis of water. For decades, the National Aeronautics and Space Administration (NASA) has used this process in hydrogen fuel cells to produce both power and water for its astronauts in space. However, hydrogen production from conventional grid-based electricity is an expensive process, as discussed below, and at present it is the least carbon-neutral method for hydrogen production, given that more than 49 percent of U.S. electricity generation in 2007 was from coal-fired power plants. Reducing costs and emission impacts may be achievable through the application of CO2 mitigation measures for existing electricity generation technologies or through breakthroughs in advanced electrolysis technologies.

The construction of new renewable generation capacity for the exclusive purpose of producing hydrogen from electrolysis is unlikely to be desirable from an investment perspective if, in order to make the resulting hydrogen competitive, the cost of the electricity is required to be less than the wholesale price at which that electricity could be sold to the grid.

Under a CO2-constrained scenario, large amounts of existing coal-fired capacity are likely to be retired, and new nuclear and renewable generators are likely to be added, to meet the CO2 emissions target. Because a CO2-constrained scenario is defined by policies that achieve a targeted level of CO2 emission reductions, any grid-based power production would already have those target CO2 emission levels factored into prices, with wind, biomass, and other power sources having been rewarded for their contributions, and higher CO2-emitting technologies having been penalized, as appropriate.

Source: U.S. Energy Information Administration