California Clean Hydrogen Bill targets alternative energy sources for expansion

A new “Clean Hydrogen Bill” (SB 1075, Skinner) was introduced in the California Legislature as a means to meet the state’s goals for reducing greenhouse gas emissions and mitigating climate change. If passed, this bill would significantly increase the focus on “green hydrogen” as an alternative fuel in the California economy, opening up significant business opportunities for companies engaged in the alternative energy sector.

SB 1075 would create the “California Clean Hydrogen Hub Fund” (“Hydrogen Fund”), making state grants available for “green hydrogen projects.” It should be noted that “green hydrogen” is do not produced from traditional fossil raw material sources. Instead, eligible production paths include:

  • Green Electrolytic Hydrogen (e.hydrogen gas produced by electrolysis which does not include hydrogen gas produced by steam reforming or any other conversion technology that produces hydrogen from fossil fuel feedstock);
  • Steam methane reforming, autothermal reforming, methane pyrolysis, and other pathways that convert biogas, biomethane, ethanol, and other renewable gases and liquids to hydrogen;
  • Gasification, pyrolysis, thermochemical conversion and other conversion pathways of biomass, including the organic portion of municipal solid waste and some organic waste feedstocks;
  • Hydrogen waste or by-products recovered from industrial processes using non-fossil fuels; and
  • Photochemical or photobiological separation of water.

The Bill would revise the definition of “eligible renewable energy resource” for the purposes of the California Renewable Portfolio Standard Program to include installations that use biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts or less, digester gas, conversion of municipal solid waste, landfill gas, ocean waves, ocean thermal or current tides, and any additions or improvements to the facility using this technology (and meet certain other criteria). However, a facility engaged in the combustion of municipal solid waste would not be considered an eligible renewable energy resource.

the Bank of California for Infrastructure and Economic Development (“Bank”) would subsidize new technologies and start-up projects by making loans, issuing bonds and providing financial assistance for eligible projects that “demonstrate and scale production, processing, delivery, storage and end-use of clean hydrogen” and “advancing progress toward a goal of producing or using 15,000 tons per day of clean hydrogen in California by 2030.”

The bill also requires:

  • the Bank to develop criteria, priorities and guidelines for awarding grants under the Hydrogen Fund in accordance with specified Federal Government priorities and requirements Infrastructure Investment and Employment Act;
  • Governor to appoint (by April 1, 2023) a Clean Hydrogen Center Director to coordinate efforts related to the production, processing, delivery, storage and end use of clean hydrogen ;
  • the National Air Resources Board (“State Board”) (by December 31, 2023), to identify the role of hydrogen, and in particular green hydrogen, in helping California meet the law’s and other climate goals of State ;
  • the Council of State, in consultation with the California Energy Commission (“Energy Commission”) and public utility commission (“PUC)” (by June 1, 2024) to assess the steps necessary for the effective deployment, development and use of hydrogen as an alternative fuel;
  • the Energy Commission, as part of the 2023 and 2025 editions of the State’s Integrated Energy Policy Report, to study and model the potential growth of hydrogen and its role in the decarbonization, as defined, of the sectors electricity and transport economy, and contribute to achieving specified goals;
  • the State Council, by June 1, 2024, in conjunction with the Energy Commission and the PUC, to jointly develop recommendations to the Legislative Assembly on definitions of different hydrogen categories and end uses of these hydrogen categories and authorize the use of the recommendations to the Legislative Assembly to inform the oversight and administration of their respective hydrogen programs and eligibility rules.
  • the Council of State (by June 1, 2024) to (among others):
    • jointly develop prohibitions of double counting (g., emission offsets) of the environmental attributes associated with the production, distribution and use of hydrogen; and
    • calculate lifecycle carbon dioxide intensity values ​​for hydrogen pathways that reflect the fuels, feedstocks, and production processes used to produce them.

While the total amount of money to be allocated to the Hydrogen Fund is currently unclear, California hopes to include money received from federal appropriations. The bill explicitly states that the Legislature seeks to advance clean hydrogen policies to attract federal funds for a regional clean hydrogen center focused on renewable energy in California.

As further explained in the bill, the Federal Infrastructure Jobs and Investments Act includes $8 billion to support at least four regional clean hydrogen centers across the United States. The law requires hubs to demonstrate a diversity of hydrogen end uses, including in power generation, industrial operations, residential heating and transportation. The law allocates an additional $1 billion to support research, development and deployment on several electrolysis technologies. The US Department of Energy subsequently identified nine regional clean hydrogen clusters, including California. California is the only state identified as a cluster itself, while the other eight include regions or combinations of states.

California sees the deployment of green hydrogen power as a key element in achieving its decarbonization goals. Proponents of the bill see large-scale green hydrogen development as a way to help decarbonize energy-intensive industries, including cement and steel production, industry, thermal power plants, agriculture and the transport sector, including light, medium and heavy vehicles. , freight movement, rail, shipping, mining and aviation, and accelerating progress toward the state’s climate, clean air and clean energy goals.

We follow SB 1075 as it progresses through the state legislative cycle. Stakeholders should also look for future updates as we analyze the significance of this bill to California businesses and their investors/lenders.

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