Strategic GH2 Site Selection in the U.S.: Opportunities from the Inflation Reduction Act (IRA)
Selecting a strategic location for a large production or manufacturing facility is critical, particularly within the U.S. energy market. The landscape of the US energy market requires careful navigation and consideration of various factors, such as regional power supply, renewable resource availability and regulatory constraints. The significance of these considerations becomes even more pronounced when establishing a green hydrogen (GH2) production facility. GH2 is regarded as a potential cornerstone in the nation's transition towards sustainable energy solutions due to its unique attributes. Due to its distinctive characteristics, green hydrogen (GH2) is considered a vital component in the United States' shift towards sustainable energy alternatives. With the introduction of the Inflation Reduction Act (IRA) in 2022, green hydrogen is among the many technologies poised to provide both tax incentives and increased access to renewable energy.
Unlike conventional renewables, GH2 will offer a fuel source for renewable baseload power supply, addressing the intermittent nature of wind and solar power, thus ensuring long-term grid stability. Recognized as a pivotal solution in meeting energy demands and striving for net-zero emissions by 2050, GH2 stands at the forefront of decarbonization efforts, underlining its significance in shaping a cleaner and more resilient energy future. Its versatility extends across various sectors, serving as a chemical feedstock, heat source, reagent for synthetic fuel production, and an alternative for electricity generation. As industries seek to embrace cleaner energy alternatives, GH2 presents a viable opportunity to drive sustainable development, while addressing the challenges of climate change.
Additionally, with the ongoing retirement of coal-fired power plants nationwide and multiple generation companies delaying planned retirements last year, there's an increasing urgency for reliable and resilient energy sources. Aggressive decommissioning of coal generation, juxtaposed with escalating demand for renewable energy, underscores the critical role of innovative solutions like GH2 in ensuring the reliability and sustainability of the nation's energy grid.
Location, Location, Location!
The United States energy market presents a diverse landscape characterized by regional variability in energy resources, regulatory frameworks, and market structures. When it comes to site selection for large power demand projects, considerations such as proximity to energy resources, existing infrastructure, and regulatory requirements play a crucial role. Moreover, factors such as population density, land availability, and environmental considerations also influence site selection decisions, as developers seek to balance energy needs with community interests and environmental sustainability. Understanding the nuances of the US energy market, including regional differences in energy supply and demand dynamics, is essential for identifying optimal locations for energy projects and maximizing their long-term viability.
In the context of site selection for green hydrogen facilities, the focus shifts towards prioritizing locations with access to abundant renewable energy sources and low-carbon electricity generation. Without utilizing the tax credits included in the 2022 Inflation Reduction Act (IRA), hydrogen is likely not cost-effective enough to play a role in the US, and the World’s decarbonization journey. Therefore, in the transition to clean energy, there is a heightened need for green hydrogen facilities to be situated in regions with ample availability of green energy to meet the hourly matching requirements to qualify for maximum IRA tax credits. This necessitates careful assessment of renewable energy potential, grid connectivity, and regulatory support when evaluating potential sites for green hydrogen production.
Schneider Electric has already tackled a diverse range of strategic site selection projects, each tailored to the unique needs of the clients and the complexities of the United States' energy market. These projects address critical questions such as:
- Where are the most cost-effective power sources located in the US?
- Which regions offer sufficient power capacity for our needs?
- How can we ensure our energy sources align with IRS guidelines or our company's sustainability goals?
In one project, a client sought Schneider Electric's assistance in establishing a 400MW green hydrogen (GH2) production facility. Our team was tasked with aligning the solution with budgetary constraints and integrating long-term renewable energy sources. The team navigated regulatory landscapes and power supply availability to deliver a meticulously crafted, cost-effective solution that met immediate needs while paving the way for sustainable energy production.
In another project, a client based in Texas aimed to establish a GH2 facility in Corpus Christi, targeting IRS standards to utilize the IRA incentive for a 120MW facility. Schneider Electric embarked on identifying the optimal size and load requirements, factoring in the unique regulatory environment and regional energy resources. Through analysis and strategic planning, the client was guided toward a location that not only fulfilled production needs but also aligned with long-term sustainability goals.
Furthermore, Schneider Electric facilitated the establishment of a GH2 facility within 500 miles of Los Angeles, California, capitalizing on the state's stringent emissions regulations enforced by CARB and LFCS. The focus shifted toward evaluating long-term costs and balancing brown power with renewable energy sources. Concurrently, collaboration with local utilities addressed overwhelming load requests, shedding light on challenges related to building generation capacity to meet the growing demand for GH2 production.
How can Schneider Electric help with the site selection for GH2 facilities?
Schneider Electric distinguishes itself through its extensive expertise and comprehensive experience in energy markets, both domestically within the United States and internationally. With a focus on convergence services, Schneider Electric specializes in developing innovative solutions for our clients’ energy supply and renewable energy requirements across various regions. Our services cater to clients of all sizes and levels of experience, encompassing a diverse range of needs. Whether our clients are investing in Green Hydrogen (GH2) projects, are large corporations with significant resources, or are major players in power plant construction, our team is adept at delivering tailored solutions to meet their specific objectives.
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If you’re interested in identifying new opportunities while managing contract and supply risks, Schneider Electric’s Sustainability Business is here to assist. Contact us today to learn more and kickstart your sustainability journey.
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More information on the IRA from our Team:
A New Way to Make CFOs Care About Climate Change | TIME
Sources
https://www.marketsandmarkets.com/Market-Reports/green-hydrogen-market-92444177.html