Air Products and AES announced a deal for a green hydrogen project

December 12, 2022
John Dalton

Likely driven by the attractive production and investment tax credits in the Inflation Reduction Act, last week Air Products and AES announced a deal for a green hydrogen project capable of producing over 200 Metric Tons per day, which will require about 1.4 GW of wind and solar generation. This facility which will be located at the site of a former coal plant (potentially enabling the project to qualify for additional production tax credits) northwest of Dallas close to the Oklahoma border would be able secure renewable energy supply from both ERCOT and SPP. This is the type of deal that offshore wind (OSW) developers are envisioning as a potential offtake opportunity for the Gulf of Mexico. With little likelihood of state-mandated OSW procurement in Texas or Louisiana, green hydrogen is viewed as a potentially promising market. Air Products operates the world’s largest hydrogen pipeline (Gulf Coast Pipeline presented in figure) running 600 miles, from the Houston Ship Channel to east of New Orleans, Louisianna and connects 25 hydrogen production facilities. This pipeline, a green hydrogen trading system and US Treasury rules allowing annual compliance (rather than hourly matching of renewable energy and hydrogen production) would eliminate the need for storage when using OSW generation to produce green hydrogen. However, electricity is likely to represent 80% of the cost of green hydrogen, requiring that the OSW generation be competitively priced with other renewable energy resources.