Opportunities for Liquid Terminals in EPA’s Proposed Power Plant Emissions Standards
On May 23, EPA released its proposed greenhouse gas (GHG) standards for fossil fuel-fired power plants, a suite of guidelines to improve the emissions performance of applicable electric generating units. While the proposal would set new limits for certain gas, coal, and other types of power plants, the proposal also sets a pathway for the co-firing of low-GHG hydrogen. EPA’s proposal reflects the growing demand for more sustainable fuels, justifies a growing network of hydrogen infrastructure, and offers a key role for liquid terminals to play in the energy transition.
Like many industries, the power sector provides a strong opportunity for liquid terminals to benefit and contribute towards the energy transition. EPA’s proposal drives additional demand for hydrogen by setting forth a potential best system of emissions reduction (BSER) for low-GHG hydrogen. These potential pathways allow for the co-firing of low-GHG hydrogen by 30 percent by volume by 2032 and 96 percent by volume by 2038, driving efficient electricity generation and reducing GHG emissions. These pathways deliver a signal to generating companies and utilities to shift the mix of generating assets towards lower-carbon fuels, and in turn providing liquid terminals a key role in the hydrogen supply chain under the energy transition as there will be a growing need for substantial hydrogen transportation, storage, and distribution nationally.
EPA recognizes that building the infrastructure required to support the increased use of low-GHG hydrogen into the power sector will take place on a multi-year time scale. Through the Infrastructure and Investment Jobs Act (IIJA) and the Inflation Reduction Act (IRA), EPA justifies its reference to low-GHG to meet more stringent emission standards by pointing to the support provided for the production and distribution of low-GHG hydrogen through grants and tax credits.
The IIJA invests in domestic hydrogen infrastructure through several mechanisms. Firstly, there are $8 billion available for H2Hubs, a program designed to develop clean hydrogen hubs and create a network of hydrogen producers, consumers, and infrastructure to integrate low-GHG hydrogen into regional economies. Additionally, $1 billion is being invested in the Clean Hydrogen Electrolysis Program, aimed at reducing the cost of producing clean hydrogen, and $500 million in the Clean Hydrogen Manufacturing and Recycling Initiatives, supporting hydrogen-related equipment manufacturing and supply chains. These IIJA programs are designed to drive down the cost of low-GHG hydrogen production and transportation to grow the market across multiple regions.
The IRA invests in domestic low-GHG hydrogen production through a series of tax credits. Under 45V, the IRA creates a new production tax credit for qualified hydrogen under certain production methods. With 45Q, the IRA expands incentives for carbon capture and storage, increasing deployment of low-GHG hydrogen that can sequester its emissions. Additionally, the IRA expands IRC section 48 tax credits to include hydrogen fuel cells as an Energy Storage Technology. These IRA programs are lowering the cost and increasing access to low-GHG hydrogen. The increase in low-GHG hydrogen as a result of these incentives will require infrastructure to move it.
Currently, the U.S. has more than 1,600 miles of dedicated hydrogen pipelines and approximately 3 million miles of natural gas pipelines, and blending demonstrations have shown that hydrogen can be incorporated into existing natural gas streams by upwards of 30 percent. Thus, liquid terminals have an opportunity to fill the gap in the hydrogen supply chain for storage and distribution—connecting pipelines, liquefaction plants, trucks, compressors, and dispensers involved in the process of delivering fuel. Moreover, liquid terminals can store hydrogen carriers such as liquid ammonia and methanol, serving a key function in the delivery of hydrogen in all forms from producers to consumers. Under EPA’s proposed power plants emissions rule and additional rulemakings in the energy transition, liquid terminals can benefit and contribute towards hydrogen distribution and storage infrastructure.