The two large states are each making moves for renewable H2 leadership in the country.

Rivalry is nothing new to California and Texas, and one of the newest areas of competition between the two states is for leadership in American hydrogen fuel.

Both states want to benefit from the renewable energy transition as the country pursues climate change targets.

The country – and the world – has been making a growing number of moves toward zero-emission technologies and fuels. As this effort continues to increase, the promise of the American hydrogen fuel industry climbs along with it. This has left California and Texas vying for dominance in what will likely be a massive new energy market.

The US Department of Energy (DOE) identifies California, Louisiana and Texas as the country’s current leaders in H2. “Today, almost all of the hydrogen produced in the United States is used for refining petroleum, treating metals, producing fertilizer and processing foods,” said a statement from the department as quoted in a Forbes report.

That said, the spiking demand for H2 to power fuel cell electric vehicles (FCEVs) has opened a highly promising new market in California. That state has been making an active push within this market, providing carbon credits within its cap and trade regulations. In that way, H2 producers and fuel cell providers enjoy incentives for establishing themselves within the state.

The state’s regulations now also align with a growing demand for American hydrogen fuel.

In September 2020, state Governor Gavin Newsom signed an executive order requiring all new passenger car and truck sales in the state must be zero-emission vehicles by 2035. Several international automakers have announced their intentions to roll out FCEVs as long-haul trucks. That said, the Toyota Mirai FCEV passenger car recently became the second generation of that model, and the first arrivals to California hit the roads this month.

DOE data also showed that 45 of the 48 hydrogen fueling stations in the United States are located in California. The state has 50 laws and incentives for using this renewable energy, compared to the seven in place in Texas.

That said, Texas has taken a different angle in its journey toward American hydrogen fuel leadership. The state’s focus is on the industrial use for the fuel. While California has the country’s hottest demand for green H2, Texas is the US center for commercial H2 production in the refining and manufacturing industries.

California And Texas Vie To Be America’s Hydrogen Capital

Jim Magill Forbes Magazine Contributor Green Tech I write about energy and emerging technologies in the energy sector.

California and Texas have enjoyed a friendly – and at times not so friendly – rivalry as to which state offered the highest standard of living, featured the best climate for doing business and supplied the most fertile ground for technological innovation and progress.

As the transition of the U.S. energy industry towards a lower- or zero-carbon future accelerates, this competition is destined to move into a new realm, with the Golden State and the Lone Star State vying to see which one becomes the dominant player in a growing hydrogen energy market.

According to the U.S. Department of Energy (DOE) the major hydrogen-producing states are California, Louisiana, and Texas. “Today, almost all of the hydrogen produced in the United States is used for refining petroleum, treating metals, producing fertilizer and processing foods,” the department states.

However, in California a new market for hydrogen is opening up, one driven by the demand for the gas to power fuel-cell electric vehicles. The state has been actively encouraging the growth of this market, offering carbon credits allowed under its cap and trade regulations, which act as an incentive to providers of hydrogen and other clean-energy technologies to establish and grow out their businesses in California.

In addition, last September, California Governor Gavin Newsom signed an executive order requiring that by 2035, all new cars and passenger trucks sold in California be zero-emission vehicles. A number of international truck manufacturing companies have announced plans to introduce hydrogen fuel-cell powered long-haul trucks, while passenger cars fueled by hydrogen, such as the Toyota Mirai, are already on the market. MORE FOR YOU Will Biden Revive Hydrogen Rail As A Means Of Transport In The U.S.?6 Best External Hard Drives To Keep All Your Data SafeHow To Invest In A Clear Winner From The Texas Power Grid Collapse: Battery Storage

Of the 48 hydrogen fueling stations in the U.S., 45 are located in California, according to the DOE. In total, California has 50 laws and incentives related to the use of hydrogen, compared with Texas, which has seven.

“The main thing that’s changed in California is the long-haul trucking market has moved toward hydrogen,” Raghu Kilambi, CEO Powertap Hydrogen Fueling Corp., said in an interview. “There’s a distinct advantage over diesel from the point of view of cost of hydrogen, forgetting even the green impact.”

Kilambi, whose company partners with existing gas station and truck stop owners to add hydrogen to their vehicle fuel offerings, said the Irvine, California-based company chose the Golden State as its headquarter, “because it has the best government incentives, and has the largest economy.”

Texas’ hydrogen focuses on industrial use

While California is the center of demand for clean hydrogen, Texas currently is the hub for production of commercial hydrogen used in the refining and manufacturing industries. The Lone Star State produces about 3.6 million metric tons of hydrogen annually, about a third of the estimated 10 million metric tons produced nationally, with most of the production concentrated in the region comprising Houston and the Gulf Coast.

The bulk of this production, about 95%, is “gray” hydrogen, which is produced from natural gas. However, advocates for the expansion of a clean hydrogen industry in Texas point out that with carbon sequestration, utilization and storage, the gray hydrogen becomes “blue” hydrogen, a low-carbon alternative to fossil fuels. They contend that Texas, and in particular the greater Houston area, boasts a number of advantages over California toward becoming the country’s major hydrogen hub.

The Houston area is home to almost 50 steam methane reformers (SMR), plants that convert natural gas to hydrogen, as well as a 420-mile network of pipelines – the largest network of its type in the U.S. and one of the largest in the world – to transport the hydrogen. The geology of the Gulf Coast regions is also highly favorable for the construction of salt-dome caverns, which can be used for underground storage of hydrogen.

“We believe Houston can become a leader in the energy transition,” Brett Perlman, CEO of think tank Center for Houston’s Future, said in an interview. “What we can create in Houston in the next two to three years is a significant market in blue hydrogen by decarbonizing our existing industrial SMR-based infrastructure.”

Another asset that could prove favorable to the development of a hydrogen energy industry in Texas is the availability of cheap renewable energy – in particular wind energy – which can produce low-cost clean electricity that could power a future generation of electrolyzers to break down water into oxygen and “green” hydrogen.

In addition, as the center of the U.S. oil and gas industry, Texas is already home to many of the energy companies likely to play an oversized role in the development of a future hydrogen fuel industry.

“Hydrogen is produced across the United States, with the largest concentration along the Texas/Louisiana Gulf Coast,” Andy Sarantapoulas vice president of sales and business management for international industrial gases company Linde LIN +0.4%. “With the concentration of production and distribution assets, it’s unlikely the Gulf Coast will be surpassed as the largest hub.”

California remains center of hydrogen research

California, however, is not likely to give up its position as the dominant player in the hydrogen market willingly, particularly when it comes to research into new technologies. Brian Weeks, senior director of the Gas Technology Institute, said the state’s low-carbon fuel standard is incentivizing research and development not only of hydrogen technologies, but also those for renewable natural gas. Additionally, the California Energy Commission and the California Resources Board CRC -2.4% have provided direct funding for the development of hydrogen projects and technologies.

“A lot of projects that have been co-funded by the CEC and the (U.S.) Department of Energy have focused on California locations, mostly in the southern part of the state but in the north as well,” he said. “That’s why California has jumped to the lead in the U.S., because of the availability of funding.”

The Golden State, which has had a long-term focus on improving its air quality – especially in and around Los Angeles – has been promoting the development of hydrogen as a low-carbon transportation source for more than 30 years. But now the rest of the world is starting to catch up.

“Now the climate change agenda is moving more front and center in the U.S.,” Daryl Wilson, executive director of the Hydrogen Council, an international group of executives representing hydrogen-related companies. As the U.S. and the rest of the world starts to migrate toward cleaner energy sources, “there’s a huge business opportunity,” for regions outside of traditional hydrogen centers like California to thrive, he said.

“You’ve had a substantial buildout of wind farms in Texas, and the build out has been driven by … good availability from the wind resources,” Wilson said. “It’s a major business opportunity and many entrepreneurs have been active in the Texas market. That story is also part of the hydrogen story.” Follow me on Twitter. Jim Magill

I’m a Houston-based freelance writer with almost a quarter-century of experience covering the oil and gas industry. I retired in December 2019 as a senior editor with S&P…