On June 3, 2020, the California Energy Commission (“CEC”) issued a final report in its study of renewable hydrogen transportation fuel production titled Roadmap for Deployment and Buildout of Renewable Hydrogen Production Plants in California (“Roadmap”).  The Roadmap finds that, with appropriate policy support, the renewable hydrogen sector could achieve price parity with conventional fuel on a fuel-economy adjusted basis by the mid- to late 2020s.

The Roadmap’s Findings

The Roadmap, prepared by the University of California Irvine’s Advanced Power and Energy Program, provides an analysis of and framework for the buildout and deployment of renewable hydrogen production plants in California.  It is intended to guide future state policy and funding decisions to support the “successful buildout of a robust renewable hydrogen sector as a key part of California’s zero-carbon economy.”  Roadmap at 1.  The Roadmap includes a number of important findings, including the following:

• Although transportation is expected to be the primary source of demand for renewable hydrogen, petroleum refining, power generation and storage, heat, industrial processes, and ammonia production are all additional sources of potential demand.  The Roadmap projects a high-case demand for renewable hydrogen of more than 400 million metric tons per year in 2030 and more than 10 times that amount in 2050.

• All classes of hydrogen production technology assessed in the Roadmap (electrolysis, anaerobic digestion, and thermochemical conversion) are projected to show significant improvement in cost and performance, with electrolysis showing the greatest potential.

• The dispensed price of hydrogen is likely to meet an interim target based on fuel- economy-adjusted price parity with gasoline of $6 to $8.50 per kilogram by 2025.

• Based on an analysis of locations across California in a 4-km-by-4-km grid to determine suitability for siting renewable hydrogen production plants, proximity to feedstock is the strongest factor in siting.

Roadmap Recommendations

In addition to the findings above and extensive supporting analysis, the Roadmap sets out certain recommendations for state action to promote rapid and robust renewable hydrogen market development, including:

• Extending hydrogen infrastructure support to the entire supply chain.

• Focusing on forms of support that attract private capital, such as loan guarantees.

• Taking steps to support a smooth expansion of capacity and avoid boom/bust cycles while promoting robust competitive markets by increasing market transparency and targeting incentives.

• Reducing barriers to development in California, e.g., California Environmental Quality Act, codes and standards, costs (including taxes), and other local issues. 

• Developing electric rate structures specific to transmission-connected renewable fuels facilities, e.g., electrolyzers and liquefaction facilities.

• Promoting access to the natural gas system for renewable hydrogen transport and storage, including establishing blending limits and interconnection requirements.

• Taking steps to ensure that a mixed gas/liquid supply chain does not create barriers to market access, such as providing incentives for development of open access points of entry to the supply chain.

• Ensuring that renewable hydrogen development advances social justice by maximizing job creation in disadvantaged communities while minimizing negative impacts such as traffic, noise, visual impacts and air emissions.

• Acting to ensure that program eligibility, environmental accounting, and lack of definitions are not barriers to renewable hydrogen development.

Implications
The Roadmap is a useful examination of the potential for widespread development and deployment of hydrogen production plants in California that industry participants and potential investors should carefully consider. As detailed in the Roadmap, while transportation, specifically longer-range and high-fuel-consumption applications, is expected to be the primary use, the opportunity for using renewable hydrogen exists across the California economy. Assuming appropriate governmental support, the Roadmap indicates that renewable hydrogen has the potential to play a major economic role, and can become a self-sustaining sector within the next decade.

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