The new tax credits for hydrogen production in the US will make green hydrogen competitive with grey in every industrial sector where the fuel is used, according to Andy Marsh, CEO of Plug Power.

Speaking on the firm’s second-quarter results call, Marsh said the Inflation Reduction Act, passed in the Senate this week, was a “major inflection point” for the green hydrogen industry.

The bill provides a tax credit of up to $3/kg for a ten-year period to any green hydrogen generation facility that begins construction before 2033.

20,000t/d – Hydrogen consumed by refining and ammonia industries

“For everyone who wants green hydrogen now there is a path that makes it competitive,” says Marsh. “Momentum will grow rapidly.”

Firms substituting grey hydrogen for green in industrial applications will represent the first markets for Plug Power as a result of the legislation, Marsh adds.

The refining and ammonia industries consume almost 20,000t/d of grey hydrogen. Even if only 20pc of firms in those sectors make the switch to green hydrogen, that would represent a demand for 10GW of electrolysers in the US—and Plug Power believes its first-mover advantage will enable it to capture much of that market.

“Our electrolyser business has already benefitted from the push for energy independence in Europe with orders exceeded by 50pc [compared with our] projection for [the] year, with most of that coming from Europe,” says Marsh. “Now momentum will grow similarly rapidly in the US.”

Changing finance models

Modelling by Plug Power shows the credit should reduce capex payback times on green hydrogen plants by 4-5 years and cut costs by $500mn/yr for a plant producing 500t/d green hydrogen in 2025.

One key aspect of the tax credit will be in changing finance models. Rather than taking equity stakes in green hydrogen developers, banks will now be more likely to finance debt for individual projects.

“We believe this dynamic provides access to a larger pool of capital to help accelerate the growth of the green hydrogen industry while reducing the levelised cost of green hydrogen,” the firm says in its results statement.

Plug Power has an electrolyser order backlog of 1.5GW, including a recent 1GW order from Switzerland-based H2 Energy and a 120MW order from US infrastructure firm New Fortress Energy. It is on track to commission 70t/d of global production in 2022 and is targeting total capacity of 500t/d by 2025 and 1,000t/d by 2028.

In addition, the legislation also extends a 30pc investment tax credit for fuel-cell applications until 2024 and provides a technology-neutral credit beyond 2025, which will help incentivise the production of products that use hydrogen fuel cells.

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Author: Tom Young