The Issue
Chevron’s low-carbon spending is the lowest of its integrated major peers in both absolute and percentage terms. But Chevron can’t be accused of strategic inconsistency. The company has stood by the targets for the three main pillars of its low-carbon strategy — biofuels, carbon capture and hydrogen — first unveiled in September 2021. Significant additional work and substantial government incentives will be required to stay the course on hydrogen. But the major has several promising irons in the fire at this early stage of the game.
Going Green
While many companies have claimed a “technology-agnostic” view toward hydrogen, Chevron stands out for backing that claim up with its list of projects.
In fact, it has a relatively high amount of exposure to green hydrogen for a company that professes to be uninterested in renewable power as part of its low-carbon strategy. Four of its five initial hydrogen projects have some element of renewable electricity behind them, while the fifth is a waste-to-hydrogen concept that is such an outlier, it hasn’t even been assigned a “color” on the hydrogen color wheel.
But if there is a unifying thread that ties these projects together, it is this: they all sit at the cross-section of generous fiscal incentives, geographic advantage and well defined end-uses. “Everything is so new that we have the opportunity to explore many options. But we think they’re very important proof points that at the early stage will deliver a lot of learnings. And it still fits with where we operate and what we know how to do and where our customers are,” Chevron’s vice president of hydrogen, Austin Knight, told Energy Intelligence on the sidelines of the CERAWeek by S&P Global conference in Houston.
Take Chevron’s trio of projects in California. The state’s onerous regulatory and permitting environment makes it a high-cost region to work in. But its advanced low-carbon fuel standard rules and mandates to phase out fossil fuels in transport and power, combined with federal renewable fuel credits, also provide some of the strongest support for alternative fuels.
Against this backdrop, Chevron is advancing a small green hydrogen plant at its legacy Lost Hills oil field to use excess solar power from a plant it had already built for its upstream operations, while its Richmond refinery site offers the potential for carbon-negative hydrogen derived from avoided landfill waste. The Lost Hills project will provide hydrogen to fuel vehicles in California’s Central Valley region while the Richmond project will supply it to fueling stations in the northern part of the state.
The Arches project in California counts Chevron among its more than 200 partners and has by far the greatest potential for growth. The project’s backers envision 500 tons per day of capacity by 2030, rising to 45,000 tons/d (16.4 million tons per year) by 2045 to support public transportation, heavy-duty trucking and port operations if California succeeds in reaching carbon neutrality by that year. Arches was one of seven hydrogen hubs selected to receive major cost-sharing funds from the US Energy Department. Negotiations continue to finalize terms and funding.
California’s aggressive climate plans also support Chevron’s Aces Delta project in Utah. This “unicorn” project makes green hydrogen from excess renewable power produced on the grid and can use the area’s massive underground salt caverns to store the hydrogen and dispatch it as it is needed. The project has a firm offtaker — a combined-cycle gas turbine power plant that will run up to 30% hydrogen starting next year and 100% hydrogen by 2045. Government incentives will drive that switch, with the plant’s electricity supplying southern California. Aces Delta representatives told the CERAWeek conference that the salt caverns can store more hydrogen than is envisioned in a net-zero scenario for the entire Western US, making it a potentially crucial piece of infrastructure if hydrogen should take off.
| Chevron Hydrogen Projects | |||||||
| Project | Hydrogen Type | Location | Capacity | Partners | US Government Support | Start Date | Details |
| Aces Delta | Green (excess renewables) | Utah | Up to 100 tons/d | Mitsubishi Power Americas | DOE loan: $504.4 million | H1’25 | Support Intermountain Power Agency’s up-to-30% hydrogen use at CCGT starting in 2025, en route to 100% by 2045; potential industrial and transport applications in future stages; unique salt caverns whose capacity exceeds expected US West Cost hydrogen needs in net-zero emissions scenario |
| HyVelocity | Green and blue; 14% green to start, rising over time | Texas (with ties to Louisiana) | 9,000 tons/d | AES, Air Liquide, Exxon Mobil, Mitsubishi Power Americas, Orsted, Sempra Infrastructure (core participants) | DOE cost-share grant: up to $1.2 billion (in negotiations) | NA | Targeting existing hydrogen use in industrial and chemical processes along US Gulf Coast, plus process heat, chemical manufacturing, power generation, and marine and on-road vehicle applications |
| Arches | Green (renewable electricity, biomass) | California | 500 tons/d by 2030; 45,000 tons/d by 2045 | Air Liquide, Air Products, Linde, Hyzon, Nikola Motors, Bloom Energy, Plug Power (203 total partners) | DOE cost-share grant: up to $1.2 billion (in negotiations) | NA | Targeting public transportation, heavy-duty trucking, port operations |
| Lost Hills | Green (solar) | California | 2.2 tons/d | NA | NA | Early 2026 | Leveraging produced water and existing 29 MW solar plant that powers oil production at legacy field; seeks to supply local use in California’s Central Valley |
| Richmond | Food and green waste | California | 6.6 tons/d | Raven SR, Hyzon | NA | Was Q1’24 but now indefinite given permitting delays | Avoids landfill emissions and provides volumes to support Hyzon’s fuel cell commercial truck refueling station in Richmond and Chevron’s Bay Area and Northern California fueling stations |
| Source: Energy Intelligence, Chevron, DOE, White & Case, Raven SR | |||||||
You’re My Boy, Blue
All of that said, Chevron expects most of the necessary scale to move the needle in its emerging hydrogen business to come from blue hydrogen, which is derived from natural gas in combination with carbon capture. More widespread deployment of green hydrogen would then follow.
Although Exxon Mobil is further along the road in developing plans to integrate natural gas from its Permian Basin operations into a major blue hydrogen plant on the US Gulf Coast, Energy Intelligence understands that Chevron has a similar ambition. It plans to produce more than 1 million barrels of oil equivalent per day from the Permian — about one-quarter gas — for many years, and it intends to drive its operational emissions down as much as possible, reducing the carbon intensity of any blue hydrogen project that may follow.
The HyVelocity hydrogen hub shared with partners such as Exxon, Air Liquide and Mitsubishi Power Americas could be one beneficiary. The Houston-area project, also selected by the Energy Department for cost-sharing funds, would derive 14% of its initial hydrogen production from green sources, with that percentage rising over time. But that leaves room for substantial blue hydrogen output, given its projected capacity of 9,000 tons/d (3.29 million tons/yr). Chevron’s future share of that capacity is not yet clear.
Chevron also has another feather in its blue hydrogen cap in the form of renewable natural gas (RNG), which plays a smaller role in its low-carbon strategy. RNG’s higher development costs mean the major’s initial volumes will target the replacement of legacy transport fuels in California. However, this growing business gives Chevron a longer-term feedstock option that could augment conventional natural gas and further reduce the carbon intensity of its blue hydrogen stream.
| Other Chevron Hydrogen Happenings |
| Agreement with Iwatani to codevelop and construct up to 30 hydrogen fueling sites in California by 2026 |
| Collaboration with Caterpillar-owned Solar Turbines to test 20%-50% hydrogen blends in gas turbines |
| Joint study agreement with Pertamina and Keppel to explore green hydrogen and ammonia projects in Indonesia |
| Joint study agreement with Air Liquide, LyondellBasell and Uniper to explore hydrogen and ammonia projects in US Gulf Coast (now roped into HyVelocity hydrogen hub plans) |
| Led Series A funding round for ZEI, a fuel-cell developer for marine transport applications |
| Led funding round for OneH2, a provider of small-scale distribution and mobile hydrogen fueling stations |
| Participant in Series A funding round for Auroa Hydrogen, a technology developer that uses microwave energy to produce CO2 emissions-free hydrogen without water use |
| Participant in Series C funding round for Syzygy Plasmonics, a hydrogen technology developer that uses light instead of thermal energy to produce lower-carbon hydrogen |
| Investor in Hydrogeniou, a developer of liquid hydrogen carrier technologies that could lower transport, storage and distribution costs |
| Source: Energy Intelligence, Chevron, press releases |
Don’t Let Me Down
Chevron’s hydrogen project list tells a clear tale about the necessity of public funds and strong market incentives to bring these plans to fruition. Even Aces, with all its advantages, needed a half-billion dollar loan from the federal government to proceed. Meanwhile, the US Energy Department is developing an offtake mechanism to provide additional support to its selected hubs, given potential time lags in building complementary infrastructure and developing a customer base.
Chevron and its hydrogen hub partners have made clear that the “45V” federal hydrogen production tax credits are essential to get the largest projects across the finish line. Blue hydrogen projects could tap the “45Q” federal carbon capture tax credits instead, but Energy Intelligence understands that Chevron sees the current gap between the prices that buyers will pay and the prices that sellers need to meet targeted returns on these pioneering projects as too wide for these credits to bridge. Arches plans to use renewable power from California’s grid to produce its hydrogen, while HyVelocity, as stated, will start out as a producer of mainly blue hydrogen. As proposed, neither project would be eligible for 45V credits. The US Treasury is currently reviewing 30,000 comments on the 45V parameters and will issue finalized rules soon.
