One of the benefits of selling hydrogen fuel is the ability to participate in a carbon credit exchange program. The concept of carbon credits is quite simple. Once you understand how carbon credits work for hydrogen fuel stations, you’ll see the financial potential for expanding your product portfolio. The concept of carbon credits begins with a carbon marketplace.
How does the carbon marketplace work?
Over time, people have become increasingly concerned about our nation’s air quality. Higher carbon emission levels increase the intensity of the greenhouse effect, resulting in higher temperatures globally. Carbon emissions also negatively impact breathability, with higher levels leading to respiratory health complications. Many elements contribute to carbon emissions, but two of the largest are manufacturing facilities and the transportation industry.
Some federal and state governments have set goals to reduce carbon emissions and achieve cleaner air standards. To motivate businesses to help achieve these goals, these entities limit how much carbon emissions the company can create or contribute to annually. Sometimes these limits are strictly enforced in a “cap-and-trade” environment. Other times participation is voluntary and incentivized in a “voluntary market.”
What are carbon credits?
While details differ depending on the specific program, there are essentially two components businesses need to be aware of. Companies that produce LESS than the limit are provided with carbon offsets as a reward. They can sell the carbon offsets to businesses producing MORE than the limit. In this way, the excessive producer pays the penalty via the purchase of the offset to get a credit towards their production limit. The terms “offset” and “credit” are technical, and most people refer to both as “carbon credits.”
How do carbon credits work for hydrogen fuel stations?
An example of carbon credits for hydrogen fuel stations is California’s Low Carbon Fuel Standard (“LCFS”) program. In 2018, the program was implemented to encourage the adoption of zero-emission vehicles (“ZEVs”) in the state to reduce carbon emissions and meet state goals.
Early on, legislators realized one of the biggest challenges for mainstream adoption of ZEVs, including hydrogen-fueled vehicles, is “range anxiety.” Without an adequate refueling infrastructure, consumers are reluctant to purchase these vehicles. Executive Order B-48-18 established a goal to have 200 retail hydrogen stations within California by 2025. LCFS provides Hydrogen Refueling Infrastructure (“HRI”) credits to hydrogen refueling stations based on the amount of fuel sold.
On the flip side, the LCFS policy requires “deficit generators,” or providers of petroleum-based fuels, to purchase HRI credits based on their sales. The price of an HRI credit will fluctuate based on supply and demand. As of May 12, 2022, 63 hydrogen fuel stations were approved to earn HRI credits. Early hydrogen fuel providers will generate more revenue for selling their credits since there are fewer businesses for petroleum refuelers to buy them from.
Other states have similar programs to encourage the adoption of zero-emission technologies.
Would you like to learn more about how carbon credits may be financially beneficial for your business?
The Andretti Group PowerTap Hydrogen allows fuel station owners to produce hydrogen fuel on-site, with a production unit taking up less than 1,000 square feet of space. Our units can produce over 1,250 kg of pure hydrogen each day using only city water, natural gas, and electricity. With PowerTap Hydrogen, it’s possible to produce fuel at less than $2 per kilogram–that’s about $9 to $11 less than purchasing hydrogen fuel from a wholesaler or creating it onsite via alternative solutions.
It’s only a matter of time until your customers need hydrogen fuel. If you’re interested in diversifying your current product mix or would like to begin a journey in the exciting future of alternative energy solutions, contact our team at PowerTap Hydrogen today. We’d love to show you how easy it is to be a part of the hydrogen fuel revolution.