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Hydrogen in the Golden State

An IHS Markit study considering the potential role of hydrogen in a low-carbon economy

All eyes are on California, as it aspires to lead the United States to a low and eventually net-zero carbon future. Multiple policy initiatives are driving decarbonization across the state’s power, transportation, and natural gas end-use sectors.

To meet its long-term GHG reduction goals, California will need new options. Hydrogen is an alternative that could enable the state to rapidly reduce greenhouse gases in the short term while providing a long-term energy storage solution. It can be used in all energy sectors— power generation, heat, industrial uses and transport—using existing natural gas infrastructure. If California is successful in hydrogen adoption, it could serve as a model for the United States as a whole.

Download IHS Markit California Hydrogen Study: Context
Download IHS Markit North America Hydrogen California Case Study: Deliverables

Study Deliverables

Technology Status

  • Technologies for the manufacture of hydrogen, comparing the capital expenditure requirements, operating and maintenance costs, and efficiency
  • Comparison of manufacture by electrolysis using zero-carbon renewable electricity (“green hydrogen”) and by steam-reforming of methane (“blue hydrogen”) with carbon capture and storage


Practical issues surround the rollout of hydrogen into the energy mix:

  • Suitability of existing gas distribution for injection of hydrogen or conversion to pure hydrogen
  • Need for hydrogen storage and suitability of various solutions
  • Safety aspects of hydrogen use in different circumstances
  • Conversion of equipment and consumer appliances to use hydrogen
  • Refueling network requirements for transportation sector
  • Appropriate regulatory frameworks will be needed to encourage development of hydrogen
  • Market competition (e.g., battery electric vehicles in the mobility sector, and heat pumps for space heating)

Tipping Points

Tipping points that could trigger hydrogen’s launch from a niche fuel to a significant part of a zero- or ultra-low carbon future, as costs fall with increasing volume, by application:

  • HGV transport for fleet vehicles
  • Blending of hydrogen into existing gas infrastructure
  • Methane grid conversion to pure hydrogen
  • Industrial use in refineries and ammonia production
  • Curtailment management
  • Provision of long-term or high volumes storage
  • Seasonal renewable energy generation management

Global Policies Supporting Hydrogen

  • A review of existing policies that countries have enacted to support the development and integration of hydrogen into their long-term carbon goals
  • Suggested policy models that may be suitable for adoption by California, other US states or the total United States

Key policy components will likely include:

  • For “green hydrogen” in the electricity sector – Approaches to the issue of accepting curtailment versus pursuit of a dedicated facility approach for hydrogen
  • Whether to pursue a geographically pure hydrogen strategy or a strategy of carbon reduction by blending, or to combine both
  • What scale of production to aim for, over what time frame, with different answers likely for “blue hydrogen” and "green hydrogen”
  • A specific sector focus versus a broader approach, incorporating, for example, mobility, industrial uses, and supply/distribution to heating markets

Current, Pending and Future Legislation

California has mandated a 40% reduction of economy wide Green House Gas (GHG) emissions from 1990 levels by 2030. The state has also enacted other policies that encourage decarbonization. These include the 50% renewable portfolio standard for electricity by 2030, the low-carbon fuel standard for transportation fuels (which requires a 10% reduction in GHG intensity from 2007 to 2020) and programs that target short-lived climate pollutants such as methane.

As current clean energy goals near, political aspirations ratchet up. Senate Bill 100, revived in July 2018 by the state assembly, would require all load-serving entities to pursue a 100% carbon-free power supply by 2045. Passage by the assembly and the governor’s signature remain the only items needed for this ambitious bill to become law. Governor Brown has also committed the state to doing its part to avoid temperature rises above 2 degrees Celsius by 2050 as part of the Under2Coalition. State policy will likely follow to reduce GHG emissions by at least 80% below 1990 levels by 2050.

Decarbonizing the Gas Grid

Gas grid owners and operators are looking at ways to decarbonize gas and ensure the future of their assets

  • Natural gas is a low carbon fossil fuel, but not low enough for 80% decarbonization by 2050
  • Grid operators could consider turning to green gas as a possible supplement or replacement for natural gas
  • To date, biogas is typically used on-site for small-scale power (e.g., landfills in post closure and waste digesters)
  • California is considering legislation (SB 1440) for a minimum biogas requirement by 2030
  • Biogas and biomethane are constrained by feedstock availability
  • Power to hydrogen, or power to gas, may become a much more important source of green gas
  • Clean gas from steam reforming of natural gas plus carbon capture and storage could work synergistically with green gas
  • A choice may be needed between blending gases in the grid or converting parts of grid to hydrogen

Methodology: Quantitative Analysis

We assess maximum potential scale and volume of hydrogen for 2030, 2040 and 2050, assuming favorable costs and policy support. The hydrogen outlook will be consistent with IHS Markit energy scenarios:

  • For the power sector, we will ensure consistency with California’s current goals for renewable deployment, greenhouse gas reduction and alternative forms of storage, while recognizing California’s interconnection to the balance of the western North American power grid
  • For the residential/commercial, industrial and transport sectors, we assess the scope of hydrogen and discuss infrastructure needs

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