Nikola this morning revealed how it plans to create some of the hydrogen network to fuel its fuel-cell electric vehicles: with natural-gas-based hydrogen production plus a plan for carbon capture—so called “blue” hydrogen—and a plan that might make it eligible for the federal government’s top hydrogen incentives.

One of the main partners for this is expected to be KeyState Natural Gas Synthesis, called KeyState. The two companies confirmed that they are working on an agreement to expand hydrogen supply through these means.

“This will be key to our supply strategy and will help develop our refueling network at scale,” Nikola’s president of Energy, Carey Mendes, said. “Additionally, the low carbon, clean hydrogen will allow us to maximize value under the Inflation Reduction Act and future downstream fuel and dispensing incentive programs.”

Indeed, the company appears to be aiming to qualify for the top hydrogen incentive offered up by the IRA and its Clean Hydrogen Production Tax Credit. The law allows a $3.00 incentive per kilogram of hydrogen produced, if the hydrogen production ultimately emits less than 0.45 kg of carbon dioxide equivalent per kg of hydrogen—an approximate carbon-capture rate of 95% or higher. That’s triple the incentive of hydrogen with an 83% to 95% carbon-capture rate. 

True Zero hydrogen fueling pump, run by First Element Fuels, opened in Thousand Oaks, CA, Mar 2018

True Zero hydrogen fueling pump, run by First Element Fuels, opened in Thousand Oaks, CA, Mar 2018

The use of the term “clean hydrogen” used by the Inflation Reduction Act and the developing industry around hydrogen tends to be a touchy point for environmentalists, as so far on regulatory terms “clean” can apply either to “blue” hydrogen such as this or to “green” hydrogen made with electrolysis and renewable wind or solar energy. 

The companies confirmed this hydrogen will be made through autothermal reforming, which produces hydrogen by exposing heated, high-pressure methane to a catalyst. The plant will use an autothermal reforming process, which is more efficient than steam methane reforming, but ultimately not as efficient as electrolysis. 

A key piece of the project is that KeyState plans to “have the capacity to store the CO2 associated with the hydrogen production,” and capture the carbon “with onsite geological carbon sequestration.” It will get the natural gas onsite, and use what it claims to be zero-carbon electricity—both measures that may get it within the calculations to qualify for that top “clean hydrogen” tier.

BMW iX5 Hydrogen prototype

BMW iX5 Hydrogen prototype

Carbon capture itself is a controversial practice. And a 2021 study looking at “blue” hydrogen such as this found that, by greenhouse-gas emissions, it’s potentially dirtier than burning coal or diesel. That said, some facilities that capture waste methane emissions from landfills have argued that they qualify as “green hydrogen” and displace more CO2 than electrolysis.

Nikola couldn’t yet confirm any credit amount to Green Car Reports, and it said that it will know more once the detailed engineering study is complete for the project. But it did release the following statement, again hinting it’s aiming for the top incentive: “The project aims for, and is believed to be well-placed, to qualify for various regulatory credits given it intends to reduce energy carbon intensity in line with the DOE clean hydrogen standards.”

This marks a major return to natural gas for Nikola. Its first Nikola One semi shown in 2016 was an electric truck with an onboard natural-gas-turbine range extender.

Nikola One natural gas-electric semi truck

Nikola One natural gas-electric semi truck

Through the KeyState plan, Nikola may be supplied with up to 100 tons of hydrogen per day—enough to fuel up to 2,500 Nikola trucks and claimed to displace more than 51 million gallons of diesel fuel annually.

The Pennsylvania facility where this will first ramp up will be up and running starting in 2026 and also produce ammonia and urea. According to the Utility Dive, oil refineries and ammonia facilities use 90% of current U.S. hydrogen production, so the siting is opportunistic in multiple ways.

Nikola Tre BEV

Nikola Tre BEV

Following the securities fraud conviction of its founder Trevor Milton, Nikola is building a somewhat more modest version of its original plan that focuses around hydrogen fuel-cell commercial trucks, fueled by a proprietary hydrogen network. sourcing its core hydrogen fuel-cell components from Bosch, after a potential partnership with GM fell apart amid. The Nikola Tre semi recently completed a testing program with Anheuser-Busch in California, and it’s continuing pilot testing with Total Transportation Services. Nikola, meanwhile, has started delivering battery-electric versions of the Tre, while it works on beta fuel-cell versions of the truck.

Nikola said earlier this month that it is planning to build 60 hydrogen fueling stations by 2026, aided partly by lower costs enabled by IRA incentives. With KeyState, it’s also planning to support an application for the DOE Hydrogen Hubs program that looks at the entire hydrogen ecosystem. So with all the right incentives in place, Nikola’s bigger-picture vision for hydrogen-powered fuel-cell semis might still be in sight.