In a move poised to shape the future of the U.S. hydrogen industry, energy advisor John Podesta announced that the country would release crucial guidance on securing hydrogen subsidies embedded in last year’s Inflation Reduction Act (IRA).
This guidance, expected post the COP28 climate conference in Dubai, is anticipated to unlock billions of dollars in subsidies, igniting the potential of green hydrogen production.
The Biden administration views hydrogen as a linchpin in the decarbonization efforts, particularly in hard-to-decarbonize sectors like aluminum and cement. Hydrogen, a clean-burning fuel, becomes green when produced through electrolyzing water powered by zero-emissions sources such as solar, wind, nuclear, or hydro. The subsidies, embedded in the IRA, aim to kickstart the green hydrogen industry with an enticing $3 per kilogram incentive.
Central to the debate surrounding the guidance is whether the subsidies should be exclusive to hydrogen producers using new, clean energy sources. While green hydrogen production is currently limited due to high costs, these subsidies could pave the way for a significant increase. The Biden administration’s push for environmentally friendly hydrogen faces a delicate balancing act between supporting new clean energy and avoiding unintended consequences such as an uptick in emissions.
Deputy Secretary David Turk acknowledged the significant impact of the tax credit, revealing policy divergence between the Treasury and the Department of Energy. The robust debate continues on the design, with considerations for the so-called “additionality provision” that redlines existing power sources. The preliminary draft suggests special treatment for nuclear and hydro while requiring hydrogen electrolyzers to run concurrently with renewable energy to ensure fossil fuel-free production.
Aside from IRA subsidies, the Department of Energy has earmarked $7 billion for seven proposed regional “hydrogen hubs” aimed at demonstrating and scaling up clean hydrogen. Three of these hubs include existing nuclear plants, raising questions about economic feasibility if these reactors are excluded from IRA subsidies. The diverse opinions within the industry reflect the complex balance between immediate production needs and long-term decarbonization goals.
Stakeholders in the hydrogen industry exhibit differing views on the subsidy rules. Marty Durbin, president of the U.S. Chamber of Commerce’s Global Energy Institute, advocates for a more lenient approach, emphasizing the long-term benefits of enabling faster production. In contrast, Claire Behar, Chief Commercial Officer for HyStor Energy, a green hydrogen company, supports stricter rules, emphasizing the urgency of getting the decarbonization strategy right in a single shot.