Rethinking federal investments: We need virtual power plants, not hydrogen hubs

Rethinking federal investments: We need virtual power plants, not hydrogen hubs
(Solar rooftop homes in Austin, Texas. Image: 123rf)

The Department of Energy is providing taxpayer money to electric utilities like Xcel Energy to set up Hydrogen Hubs to enable 100% clean energy. Hydrogen Hubs are a complete waste of federal dollars. Instead, these dollars should be spent on virtual power plants.

The federal government needs to learn the lesson from community solar garden growth in Minnesota. Due to the high growth of CSGs, Xcel is having trouble interconnecting rooftop solar because there is no distribution system capacity. Hydrogen-powered combustion turbines will similarly take up the limited transmission grid capacity.

Additionally, states like Minnesota for Xcel Energy’s hydrogen hub do not make sense because Minnesota has not fully explored the potential for behind-the-meter solar and storage. Even in states like California, which is known for mandates for solar and storage, there are reports that few are buying hydrogen-powered fuel cell cars compared to electric vehicles.

Finally, if the grid realities are less convincing, there is a risk of “greenwashing” and spikes in electricity prices and emissions with clean hydrogen. US Congress representatives and clean energy organizations are asking the Treasury Secretary to ensure that hydrogen production does not come at the expense of existing renewables. Hence, the federal government should stop wasting our taxpayer money on hydrogen hubs and instead put more money into VPPs.

We need VPPs, not hydrogen hubs

Clean hydrogen, which is hydrogen production from renewable energy sources like solar and wind, can reduce harmful emissions from dirty power plants, which are rarely used, and promote the health of electric grid consumers. Hydrogen funding makes sense in a state like California, which has mandated by legislation a carve-out for behind-the-meter solar and storage in addition to driving the bus on utility-scale renewables.

This storage mandate is the main reason why, by the end of 2023, California is expected to interconnect 8,500 MW of energy storage to the transmission and distribution grid. 80% of that 8,500 is utility-scale (so utilities still have a share of the ratepayer pie), but the remaining 20% is the residential, commercial and industrial sectors. In contrast, Minnesota has no utility-scale energy storage in operation today and less than 20 MW of behind-the-meter storage. Additionally, California has 1.5 million rooftop solar systems installed, but Minnesota had only 19,000 at the end of 2022.

Without an energy storage mandate, renewables will be curtailed in California. The California Independent System Operator (CAISO) stated that sometime in April 2017, CAISO had 64% of its electricity load served by solar and wind generation. Hydrogen funding makes sense during those situations of high renewable energy production; otherwise, curtailments could exceed 30% of solar production, as it happened in CAISO on March 11, 2017, for an hour.

And states like Minnesota and North Carolina do not have a carve-out for behind-the-meter energy storage or an energy storage mandate like California. So, renewable curtailments should be first addressed by a legislative mandate to add more energy storage with a carve-out for behind-the-meter energy storage. 

Hydrogen hubs are not going to help, but VPPs will. VPPs are a better alternative because they provide resiliency, the ability of the electric grid to bounce back from an outage. Hence, the feds should be supporting VPPs like they are doing in Puerto Rico.

Hydrogen hubs will take up the limited transmission grid capacity

To understand the fallacy of pursuing hydrogen, one can draw parallels to Community Solar Gardens (CSGs) in Minnesota, which are neither rooftop solar nor utility-scale solar. These CSGs are typically 1-5 MW solar facilities. CSGs don’t go through the often complicated and clogged generator interconnection queues at the grid operators because they are distribution-connected. Minnesota has more than 1,300 MW of solar capacity installed with 65% CSGs.

Due to the high growth in CSGs, Xcel Energy is unable to process rooftop solar because there is no capacity on the distribution circuits in places like Northfield, which is an hour south of the Twin Cities. Even though Xcel Energy was fined $1 Million by the Minnesota Public Utilities Commission (PUC) in 2021, Xcel is not processing applications for rooftop solar from residential customers faster because of the CSG backlog in interconnection studies.

Additionally, the generator interconnection queue at the Midcontinent Independent System Operator (MISO) is already clogged. Hydrogen-fueled combustion turbines would add to this constrained queue and compete for the limited transmission capacity. These combustion turbines compete with demand response in the integrated resource planning models that major utilities run to meet peak demand.

Selecting hydrogen CTs instead of demand response will add more pressure on the transmission grid capacity. Forget demand response. Solar capacity was eliminated in Duke Energy’s carbon plan. Xcel’s resource plan is due in February 2024, and solar advocates should watch if Xcel’s hydrogen plans are similarly coming at the expense of solar.

US Congress Representatives raise concerns regarding Clean Hydrogen Production Tax Credit implementation

I am not the only one concerned about hydrogen funding. On December 8, forty-six US Congress representatives, along with several organizations in the renewable energy, environmental and citizen advocacy, including hydrogen companies, wrote a letter to the US Treasury Secretary expressing support for the Clean Hydrogen Production Tax Credit but warning about what could go wrong in implementation.

Specifically, the Congress representatives and the supporting organizations state that they are concerned about electricity price hikes if hydrogen production is not sustainable. The letter states that under 3 conditions, hydrogen production is sustainable – 1) Additionality, 2) Deliverability and 3) Hourly time-based matching. Under the Additionality condition, the Treasury needs to ensure that any clean hydrogen is created using new renewables that do not exist. Applying the Additionality condition to Xcel Energy, clean energy advocates should ensure that hydrogen production in Xcel’s resource plan in 2024 is coming from new renewables, not existing ones.

Under the Deliverability condition, the clean energy produced should be near the hydrogen production site. Applying the Deliverability condition to Xcel Energy, the hydrogen production site must be closer to a new renewable generation site. Finally, under the Hourly time-based matching condition, hydrogen must be produced during the same hours the renewable energy is produced. Applying the Hourly time-based matching condition to Xcel Energy’s resource plan, clean energy advocates should ensure the hourly production profiles for solar and hydrogen match.

Clean hydrogen is indeed a worthwhile goal, but the current state of Minnesota is not conducive to its immediate implementation. While California may find value in investing in hydrogen hubs, Minnesota, with its ongoing challenges in rooftop solar penetration, should prioritize taxpayer funds differently. Beyond the grid reality, there’s a looming risk of electricity price hikes associated with clean hydrogen if the criteria of additionality, deliverability, and hourly time-based matching are not rigorously met.

Therefore, in Minnesota, it is imperative for the Federal government to reallocate hydrogen hub funds toward the development of behind-the-meter solar and storage. This strategic shift will not only align with the state’s current energy landscape but also promote grid resilience, local energy production, and contribute to our overarching sustainability goals.