New US tax credits and other incentives for the hydrogen sector should be adopted to help the country meet the Biden administration’s new goal of slashing the cost of clean hydrogen by 80pc, to $1/kg, within a decade, according to a leading lobbyist. This price level would make hydrogen competitive with conventional fuels—a development seen as vital to hydrogen’s adoption.

Tax credits for green hydrogen would be key to reaching that goal, according to Morry Markowitz, president of the Fuel Cell and Hydrogen Energy Association (FCHEA), the national trade body. “It is a start that could provide certainty in the marketplace,” says Markowitz, noting that a production and an investment tax credit would spur both the supply and demand sides of the sector, bringing down the cost of electrolysers and storage.

Incentives for infrastructure for a fuel-cell transport network are also important to boost demand for the fuel, he adds.

Jobs plan 

FCHEA’s tax credit strategy appears to be in line with what has so far emerged of the Biden administration’s hydrogen policy. A few high-level elements of the administration’s hydrogen plans were outlined in Biden’s $2tn American Jobs Plan, announced in May.

“It is a start that could provide certainty in the marketplace” Markowitz, FCHEA

In the plan, the White House proposed a hydrogen production tax credit, as well as $15bn for emerging energy technologies such as investment in next-generation hydrogen electrolysers and the siting of 15 decarbonised hydrogen demonstration projects in distressed communities.

Since then, no further specifics about the proposed hydrogen production tax credit have been released. The future of Biden’s American Jobs Plan is also unclear. The latest version—hammered out recently with bipartisan Senators—is the subject of intense debate in Congress, with discussions expected to continue unto the autumn.

In early June, US Energy Secretary Jennifer Granholm launched a cost goal to unlock a fivefold increase in demand, known as the Hydrogen Shot initiative. It was the first of a series of Biden administration energy ‘earthshots’ designed to accelerate the breakthrough of clean technologies.

Details are so far scant on what the administration and the Department of Energy (DOE) plan to do to make the hydrogen goal a reality, although the department did simultaneously issue a request for information for “viable hydrogen demonstrations”.

According to the announcement, the earthshot establishes a “framework and foundation” for clean hydrogen deployment in the American Jobs Plan and will drive integrated programme development across the DOE’s science and applied energy offices, and the Advanced Research Projects Agency (Energy) agency (ARPA-E).

Cost barrier

There are still many hurdles to deploying clean hydrogen at scale, the DOE says, noting that green hydrogen currently costs about $5/kg to produce.

Granholm concedes that cutting that cost down to $1/kg is ambitious but added the benefits would be wide-ranging. “Clean hydrogen is a game-changer. It will help decarbonise high-polluting heavy-duty and industrial sectors while delivering good-paying clean energy jobs and realising a net-zero economy by 2050,” she says.

The DOE’s hydrogen goal is feasible, according to analysts from thinktank Resources for the Future.

Blue hydrogen could cost $1.25/kg by 2030, while green hydrogen could reach $1/kg by 2050, the analysts said on a webinar earlier this year.

A Resources for the Future briefing released in February pointed out the structure of tax credit is crucial to its ability to lower emissions.

$15bn – Proposed by US government to support clean technologies

But any such tax credit for green hydrogen has two potential deficiencies, said analysts Jay Bartlett and Alan Krupnick in the briefing.

Depending on the energy mix of the grid, a tax credit for electrolysis projects— regardless of the carbon intensity of the electricity used to power them—could result in substantial emissions, they warn.

And a tax credit for grey hydrogen projects with steam methane reformers powered by electricity could result in higher emissions than if that hydrogen were generated by gas-powered steam methane reformers equipped with carbon capture and storage, they add.

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Author: Ros Davidson