Hydrogen policies and incentives discussed during RE+ panel

As the U.S. Department of Energy (DOE) continues to sort through hydrogen hub applications, panelists took a look at the Inflation Reduction Act’s (IRA) impact during “Hydrogen Policy: What to Expect from the Existing Incentives in Place and are They Enough to Kickstart the H2 Economy?”

The panel took place during the RE+ conference in Las Vegas on September 13. Panelists included Fanny Charrier, director and hydrogen Americas Coordinator for Credit Agricole, David Edwards, director and advocate for hydrogen energy at Air Liquide, Antonio Fayad, senior manager for hydrogen strategy and origination at EDPR, and Michael Hoben, general manager for hydrogen at Chevron New Energies. The moderator was Steve Capanna, director of technology with the DOE.

The biggest push to establish a green hydrogen commercial-scale sector was the passage of the IRA in 2022. Charrier recalled when it was passed, stating that her contacts in Europe were surprised.

“Contacts in Europe asked what happened,” she remembered. “The U.S. took a leapfrog above Europe.”

Edwards said that “a lot of excitement” was generated in the renewable energy industry and that the “transition is happening in front of us today.”

Hoban acknowledged this by pointing out that Chevron created its New Energies business recently, with his professional focus being on the West Coast in the wake of policy having “started to come together.” The company had announced on September 12th that it acquired Magnum Development, which owns a majority stake in the Advanced Clean Energy Storage (ACES) Delta green hydrogen storage project in Utah.

“We need to keep up the momentum of the last two years,” Fayad said. “We have strong incentive with this new sector of the economy. We are focused on developing projects to electrolysis powered by our own renewables. Today, certain sectors of the economy cannot be electrified so we see a relevant role for hydrogen.”

For Charrier, she said that Credit Agricole made a hydrogen workforce four years ago, joined a hydrogen council, and was involved in creating space for green hydrogen as a low carbon solution in Europe.

According to Capanna, the DOE is also viewing green hydrogen as playing a key role in decarbonizing industries and that the DOE has come out with a clean hydrogen roadmap. This roadmap shows a need for 10 million metric tonnes by 2030, 20 by 2040, and 50 by 2050 in the U.S.

“Europe is ahead of the U.S.,” he acknowledged, though Charrier pointed out that some of the largest at scale projects are currently planned to be in the U.S. due to the IRA.

The panel agreed that policy is the basis of initiative points, and the IRA is as “progressive as anywhere.” From a global perspective, “a lot of our investment” has shifted due to the new policy which “flipped the script.”

“In some cases, this is the most competitive hydrogen production in the world,” the panel said, but highlighted that an issue remains: Can the U.S. produce low carbon hydrogen, convert it to a transportable form and ship it to Europe? Since the passage of the IRA, that has been the main discussion globally.

The panel stated that two-thirds of the cost of hydrogen will be from transportation. Charrier said that there is already a hydrogen train up and running in Canada.

As for transporting the product itself, Capanna pointed out that storage of hydrogen may become a big part of the industry. The ACES project was used as an example, where massive amounts of green hydrogen will be kept in salt caverns.

“That scale of storage is a robust solution,” the panel stated, adding that the regional hubs will also provide a network access across the U.S.

Though the IRA helped drive development initiatives, mainly focused on national hydrogen hubs which will be selected this fall, Fayad stated that the approach to offer tax credits may be good but was uncertain if it is enough to start an economy.

With the support of the IRA, Capanna asked how much state policy will help drive regional development for state markets. He pointed to Colorado as an example, which recently passed an incentive for a kilogram of hydrogen that meets criteria in hard-to-abate sectors such as trains, airplanes, shipping, and long-haul trucking. It also includes production of steel and chemicals.

Having been passed earlier this year, House Bill (HB) 23-1281 provides income tax credits of USD 1.00 per kilogram of clean hydrogen “for a qualified use.” The qualifications are for hydrogen to be derived from a clean energy resource that uses water as the source of hydrogen, or produced through a process that results in lifecycle greenhouse gas emissions (GHG) rates less than 1.5 kilograms of carbon dioxide equivalent per kilogram of hydrogen.

It also requires the Colorado Public Utilities Commission (PUC) to initiate an investigatory proceeding to consider issues related to green hydrogen projects by investor-owned utilities and that no later than December 1, 2025, to adopt rules establishing clean hydrogen project requirements.

The panel stated that one of the oversights of new U.S. policies is the question surrounding how the green hydrogen will be transported to offtakers. Additionally, what the demand side market may look like.

“There will be a very different market,” the panel recognized, stating that the heavy-duty market will likely have 20 or 30 fuel offtakers off a single production facility. “It’s a different investment decision.”

Capanna stated that environmental groups have weighed in on the IRA, recognizing the valuable credit, but that “we are in danger of drowning in a flood of green hydrogen in 10 to 15 years if we don’t put in strict guidelines from the start.” He questioned if this could result in negative prices down the line, to which Fayad said no.

“I don’t think it is likely to drive a negative price,” he said. “We do have to be careful how much we incentivize in case we are unable to accommodate.”

Overall, Charrier said that for the economy to grow there must be synergy between companies and the ability to adapt.

*This story was originally published exclusively for NPM subscribers last month.


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