Will 2023 be hydrogen’s year?

GUEST COLUMN

Scott Nyquist debates both sides of the hydrogen argument in this week’s ECHTX Voices of Energy guest column. Photo courtesy of Aramco.

Yes and no.

Yes, because there is real money, and action, behind it.

Globally, there are 600 projects on the books to build electrolyzers, which separate the oxygen and hydrogen in water, and are critical to creating low-emissions “green hydrogen.” That investment could drive down the cost of low-emissions hydrogen, making it cost competitive with conventional fuels—a major obstacle to its development so far.

In addition, oil companies are interested, too. The industry already uses hydrogen for refining; many see hydrogen as supplemental to their existing operations and perhaps, eventually, supplanting them. In the meantime, it helps them to decarbonize their refining and petrochemical operations, which most of the majors have committed to doing.

Indeed, hydrocarbon-based companies and economies could have a big opportunity in “blue hydrogen,” which uses fossil fuels for production, but then captures and stores emissions. (“Green hydrogen” uses renewables; because it is expensive to produce, it is more distant than blue. “Gray hydrogen” uses fossil fuels, without carbon capture; this accounts for most current production and use.) Oil and gas companies have a head start on related infrastructure, such as pipelines and carbon capture, and also see new business opportunities, such as low-carbon ammonia.

Houston, for example, which likes to call itself the "energy capital of the world,” is going big on hydrogen. The region is well suited to this. It has an extensive pipeline infrastructure, an excellent port system, a pro-business culture, and experience. The Greater Houston Partnership and McKinsey—both of whom I am associated with—estimate that demand for hydrogen will grow 6 to 8 percent a year from 2030 to 2050. No wonder Houston wants a piece of that action.

There are promising, near-term applications for hydrogen, such as ammonia, cement, and steel production, shipping, long-term energy storage, long-haul trucking, and aviation. These bits and pieces add up: steel alone accounts for about 8 percent of global carbon-dioxide emissions. Late last year, Airbus announced it is developing a hydrogen-powered fuel cell engine as part of its effort to build zero-emission aircraft. And Cummins, a US-based engine company, is investing serious money in hydrogen for trains and commercial and industrial vehicles, where batteries are less effective; it already has more than 500 electrolyzers at work.

Then there is recent US legislation. The Infrastructure, Investment and Jobs Act (IIJA) of 2021 allocated $9.5 billion funding for hydrogen. Much more important, though, was last year’s Inflation Reduction Act, which contains generous tax credits to promote hydrogen production. The idea is to narrow the price gap between clean hydrogen and other, more emissions-intensive technologies; in effect, the law seeks to fundamentally change the economics of hydrogen and could be a true game-changer.

This is not without controversy: some Europeans think this money constitutes subsidies that are not allowed under trade rules. For its part, Europe has the hydrogen bug, too. Its REPowerEU plan is based on the idea of “hydrogen-ready infrastructure,” so that natural gas projects can be converted to hydrogen when the technology and economics make sense.

So there is a lot of momentum behind hydrogen, bolstered by the ambitious goals agreed to at the most recent climate conference in Egypt. McKinsey estimates that hydrogen demand could reach 660 million tons by 2050, which could abate 20 percent of total emissions. Total planned production for lower-emission green and blue hydrogen through 2030 has reached more than 26 million metric tons annually—quadruple that of 2020.

No, because major issues have not been figured out.

The plans in the works, while ambitious, are murky. A European official, asked about the REPowerEU strategy, admitted that “it’s not clear how it will work.” The same can be said of the United States. The hydrogen value chain, particularly for green hydrogen, requires a lot of electricity, and that calls for flexible grids and much greater capacity. For the United States to reach its climate goals, the grid needs to grow an estimated 60 percent by 2030.That is not easy: just try siting new transmission lines and watch the NIMBY monsters emerge.

Permitting can be a nightmare, often requiring separate approvals from local, state, interstate, and federal authorities, and from different authorities for each (air, land, water, endangered species, and on and on); money does not solve this. Even a state like Texas, which isn’t allergic to fossil fuels and has a relatively light regulatory touch, can get stuck in permitting limbo. Bill Gates recently noted that “over 1,000 gigawatts worth of potential clean energy projects [in the United States] are waiting for approval—about the current size of the entire U.S. grid—and the primary reason for the bottleneck is the lack of transmission.”

Then there is the matter of moving hydrogen from production site to market. Pipeline networks are not yet in place and shifting natural gas pipelines to hydrogen is a long way off. Liquifying hydrogen and transporting is expensive. In general, because hydrogen is still a new industry, it faces “chicken or egg” problems that are typical of the difficulties big innovations face, such as connecting hydrogen buyers to hydrogen producers and connecting carbon emitters to places to store the carbon dioxide. These challenges add to the complexity of getting projects financed.

Finally, there is money. McKinsey estimates that getting on track to that 600 million tons would require investment of $950 billion by 2030; so far, $240 billion has been announced.

Where I stand: in the middle.

I believe in hydrogen’s potential. More than 3 years ago, I wrote about hydrogen, arguing that while there had been real progress, “many things need to happen, in terms of policy, finance, and infrastructure, before it becomes even a medium-sized deal.” Now, some of those things are happening.

So, I guess I land somewhere in the middle. I think 2023 will see real progress, in decarbonizing refining and petrochemicals operations and producing ammonia, specifically. I am also optimistic that a number of low-emissions electrolysis projects will move ahead. And while such advances might seem less than transformative, they are critical: hydrogen, whether blue or green, needs to prove itself, and 2023 could be the year it does.

Because I take hydrogen’s potential seriously, though, I also see the barriers. If it is to become the big deal its supporters believe it could be, that requires big money, strong engineering and construction project management, sustained commitment, and community support. It’s easy to proclaim the wonders of the hydrogen economy; it’s much more difficult to devise sensible business models, standardized contracts, consistent incentives, and a regulatory system that doesn’t drive producers crazy. But all this matters—a lot.

My conclusion: there will be significant steps forward in 2023—but take-off is still years away.

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Scott Nyquist is a senior advisor at McKinsey & Company and vice chairman, Houston Energy Transition Initiative of the Greater Houston Partnership. The views expressed herein are Nyquist's own and not those of McKinsey & Company or of the Greater Houston Partnership. This article originally ran on LinkedIn.

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Eclipse Energy lands Weatherford investment to scale clean hydrogen tech

clean energy collab

Oil and gas giant Weatherford International (NASDAQ: WFRD) has made a capital investment for an undisclosed amount in Eclipse Energy as part of a collaborative partnership aimed at scaling and commercializing Eclipse's clean fuel technology.

According to a release, joint projects from the two Houston-based companies are expected to launch as soon as January 2026. The partnership aims to leverage Weatherford's global operations with Eclipse Energy's pioneering subsurface biotechnology that converts end-of-life oil fields into low-cost, sustainable hydrogen sources.

“We strongly believe the subsurface is the most overlooked climate asset,” Prabhdeep Singh Sekhon, CEO of Eclipse Energy, said in the release. “This partnership demonstrates how traditional oilfield expertise and frontier biotechnology can come together to transform the energy transition. Weatherford’s global reach and deep technical knowledge will accelerate our ability to scale our low-carbon technology rapidly and cost-effectively.”

Eclipse Energy, previously known as Gold H2, completed its first field trial this summer, demonstrating subsurface bio-stimulated hydrogen production. According to the company, its technology could yield up to 250 billion kilograms of low-carbon hydrogen, and it could also extend "beyond hydrogen, laying the foundation for the next generation of subsurface clean energy fuels."

Last month, Eclipse Energy won in the Energy Transition Business category at the 2025 Houston Innovation Awards. The company closed an $8 million series A this year and has plans to raise another round in 2026.

CenterPoint and partners launch AI initiative to stabilize the power grid

AI infrastructure

Houston-based utility company CenterPoint Energy is one of the founding partners of a new AI infrastructure initiative called Chain Reaction.

Software companies NVIDIA and Palantir have joined CenterPoint in forming Chain Reaction, which is aimed at speeding up AI buildouts for energy producers and distributors, data centers and infrastructure builders. Among the initiative’s goals are to stabilize and expand the power grid to meet growing demand from data centers, and to design and develop large data centers that can support AI activity.

“The energy infrastructure buildout is the industrial challenge of our generation,” Tristan Gruska, Palantir’s head of energy and infrastructure, says in a news release. “But the software that the sector relies on was not built for this moment. We have spent years quietly deploying systems that keep power plants running and grids reliable. Chain Reaction is the result of building from the ground up for the demands of AI.”

CenterPoint serves about 7 million customers in Texas, Indiana, Minnesota and Ohio. After Hurricane Beryl struck Houston in July 2024, CenterPoint committed to building a resilient power grid for the region and chose Palantir as its “software backbone.”

“Never before have technology and energy been so intertwined in determining the future course of American innovation, commercial growth, and economic security,” Jason Wells, chairman, president and CEO of CenterPoint, added in the release.

In November, the utility company got the go-ahead from the Public Utility Commission of Texas for a $2.9 billion upgrade of its Houston-area power grid. CenterPoint serves 2.9 million customers in a 12-county territory anchored by Houston.

A month earlier, CenterPoint launched a $65 billion, 10-year capital improvement plan to support rising demand for power across all of its service territories.

ERCOT approves $9.4B project to improve grid, meet data center demand

power project

The Electric Reliability Council of Texas, which manages the electric grid for 90 percent of Texans, is undertaking a $9.4 billion project to improve the reliability and efficiency of statewide power distribution. The initiative comes as ERCOT copes with escalating demand for electricity from data centers and cryptocurrency-mining facilities.

The project, approved Dec. 9 by ERCOT’s board, will involve building a 1,109-mile “super highway” of new 765-kilovolt transmission lines. One kilovolt equals 1,000 volts of electricity.

According to the Hoodline Dallas news site, the $9.4 billion project represents the five- to six-year first phase of ERCOT’s Strategic Transmission Expansion Plan (STEP). Hoodline says the plan, whose price tag is nearly $33 billion, calls for 2,468 miles of new 765-kilovolt power lines.

STEP will enable ERCOT to “move power longer distances with fewer losses,” Hoodline reports.

Upgrading the ERCOT grid is a key priority amid continued population growth in Texas, along with the state’s explosion of new data centers and cryptocurrency-mining facilities.

ERCOT says about 11,000 megawatts of new power generation capacity have been added to the ERCOT grid since last winter.

But in a report released ahead of the December board meeting, ERCOT says it received 225 requests this year from large power users to connect to its grid — a 270 percent uptick in the number of megawatts being sought by mega-users since last December. Nearly three-fourths (73 percent) of the requests came from data centers.

Allan Schurr, chief commercial officer of Houston-based Enchanted Rock, a provider of products and services for microgrids and onsite power generation, tells Energy Capital that the quickly expanding data center industry is putting “unprecedented pressure” on ERCOT’s grid.

“While the state has added new generation and transmission capacity, lengthy interconnection timelines and grid-planning limitations mean that supply and transmission are not keeping pace with this rapid expansion,” Schurr says. “This impacts both reliability and affordability.”

For families in Texas, this could result in higher energy bills, he says. Meanwhile, critical facilities like hospitals and grocery stores face a heightened challenge of preventing power outages during extreme weather or at other times when the ERCOT grid is taxed.

“I expect this trend to continue as AI and high-density computing grow, driving higher peak demand and greater grid variability — made even more complex by more renewables, extreme weather and other large energy users, like manufacturers,” Schurr says.

According to the Pew Research Center, data centers accounted for 4 percent of U.S. electricity use in 2024, and power demand from data centers is expected to more than double by 2030. Data centers that support the AI boom make up much of the rising demand.

In September, RBN Energy reported more than 10 massive data-center campuses had been announced in Texas, with dozens more planned. The Lone Star State is already home to roughly 400 data centers.

“Texas easily ranks among the nation’s top states for existing data centers, with only Virginia edging it out in both data-center count and associated power demand,” says RBN Energy.