Texas has the potential to become a “hydrogen export powerhouse” with the ability to supply Europe at highly competitive prices, according to London-based consultants Baringa Partners.

Projects in Texas could benefit from an electrolyser load factor of 70pc, based on hybrid wind and solar projects, to produce green hydrogen with support from tax credits available under the Inflation Reduction Act (IRA), Molly Iliffe, global head of hydrogen at Baringa, told the FT Hydrogen Summit in London.

“If it is converted to ammonia and transported into the port of Rotterdam, it is less than half of the price of hydrogen produced from offshore wind in the UK, which is probably where the vast majority of all green hydrogen [in Europe] would come from,” Iliffe said.

“We have seen a massive refocusing of the interest and the strategic focus of our clients towards the US” Iliffe, Baringa

Baringa has worked with industry group the Hydrogen Council to identify c.$30bn of potential investment in hydrogen infrastructure in Texas alone, she adds.

The introduction of the Inflation IRA in the US, which offers highly attractive tax credits to low-carbon hydrogen projects meeting a range of criteria, has had a “massive distorting impact” on the sector, Iliffe says.

“We have seen a massive refocusing of the interest and the strategic focus of our clients towards the US since the introduction of the Inflation Reduction Act last year,” Iliffe says.

However, there is some uncertainty among potential investors and project developers over the long-term future of the policies contained in the IRA and how they could potentially be rolled back following a change of administration in the US, she adds. “To build a project on the basis a ten-year tax credit, there are some uncertainties associated with that,” she says.

Emerging economies

There are also concerns about the impact of the IRA on the development of renewable hydrogen production in emerging economies, says Diep Nguyen-Van Houtte, senior manager, climate innovation & business development at the International Finance Corporation, part of the World Bank. “There is a concern out there in emerging markets that the IRA is destroying the market and basically steering developers and financiers toward the US,” she says. “But the emerging markets do have advantages. Many of them today—India, Brazil [and] Chile—have a ready supply of very low=cost renewable energy as well as a good supply of water.”

Andrew Forrest, executive chairman and founder of Australia-based hydrogen project developer Fortescue Future Industries, also highlights the advantage the IRA has given the US in the global competition for investment. “Now there is nowhere in the world compared to North America. If you are a responsible executive of any public company, then you will be putting your green energy dollars into North America,” he says.

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Author: Stuart Penson