The US has taken top priority for hydrogen investments, according to speakers at the recent World Hydrogen Summit in Rotterdam.

David Crane, director of the US Department of Energy’s Office of Clean Energy Demonstrations, expects the Inflation Reduction Act’s (IRA) clean hydrogen production tax credit and federal funding commitment toward 6–10 regional hydrogen hubs to spur not only production, but also demand.

“There is a lot of excitement because of the IRA about hydrogen in north America, but coming from the corporate world as I do, one of the most important things we can do in the government in the US is create this air of inevitability that hydrogen is coming… Whether you are an energy producer or energy consumers, you have to work hydrogen into your medium-to-long-term plans,” he says.

But Crane acknowledges the industry may suffer from its own hype. “I personally worry that we are talking in 2023 about projects that will break ground in 2025 [and] be online in 2028–29… how do we separate ‘happy talk’ as we say from real commitment?”

“One of the most important things we can do in the government in the US is create this air of inevitability that hydrogen is coming” Crane, US Department of Energy

A recent report from global CEO-led initiative the Hydrogen Council anticipates that North America could account for 20pc of global hydrogen production, much of which will be consumed domestically with some potential for ammonia or methanol exports.

The industry has announced 170 projects in the US and Canada as of January 2023, 70 of which were announced in an eight-month span up to the beginning of the year, according to the report. 135 projects aim to be fully or partially commissioned by 2030, with 40pc already reaching FID. However, more than half of the projects are still in the early stages of planning, and the Hydrogen Council estimates that, of the $46bn of announced investment into North America, only $20bn represents ‘mature’ projects that have at least started feasibility studies.

However, ‘committed’ investments—where projects have taken FID or beyond—at $10bn represent 20pc of investments in North America, compared with 7pc in the rest of the world, indicating that the IRA still grants greater certainty for developers than elsewhere. While Europe has seen $117bn of investments announced, committed investments trail at $7bn.

However, the IRA’s end-date after 2032 means offtakers are cautious to commit to long-term agreements due to uncertainty around price falls once the subsidy is lifted, according to the report.

A lack of midstream infrastructure is also expected to hinder US hydrogen development, the report says. With only 1,600 miles of dedicated hydrogen pipelines operational, “the US hydrogen industry would rely on truck-based delivery despite higher unit costs for new uses outside of industrial clusters where hydrogen pipelines exist”, the report says, adding that trucking hydrogen adds $1/kg to the final cost. Only $3bn of investment into hydrogen infrastructure up to 2030 has been announced to date. The Hydrogen Council estimates a network of pipelines connecting hydrogen clusters—ten north-south and five east-west—may require $100bn of investment.

Gamechanger

Nonetheless, major developers are already shifting priorities for investment toward the US.

“There is no question the IRA has created a significant opportunity for hydrogen in the US, especially blue and green hydrogen… I expect a significant part of our investments in the future will be in the US,” Seifi Ghasemi, CEO of industrial gases firm Air Products told an investor call this week.

While the EU does not offer subsidies for low-carbon hydrogen outside its definition of renewable hydrogen, the US will also support blue hydrogen production, which is eligible for either the hydrogen production tax credit or the expanded 45Q carbon capture and storage tax credit.

Ghasemi notes that customers are already “asking for blue hydrogen” to create renewable diesel in line with California’s low-carbon fuel standard, “and we are considering converting some of our existing steam methane reformers” to add CCS technologies.

Companies with a focus on renewable hydrogen production are also moving their focus to the US.

“We are certainly expecting to have installed by the end of this decade half of our pipeline in the US” Breese, Orsted

“You would be silly not to consider [investment in the US],” Mattijs Slee, CEO of electrolyser startup Battolyser tells Hydrogen Economist on the sidelines of the event. In addition to a large pipeline of demand from projects seeking to benefit from the production tax credit, the country is also attractive to manufacturers as “permitting is easier” and “energy costs are lower”, he says. And while the US is still in the process of choosing its 6–10 regional hydrogen hubs, electrolyser manufacturers are unlikely to wait before investing in new factories. “From Rotterdam, we can already serve the port of Amsterdam,” Slee notes, arguing that “it is more about the right location that serves our needs” and hinting that the firm eyes Houston as one such location.

“The IRA has been obviously a gamechanger… and we are certainly expecting to have installed by the end of this decade half of our pipeline in the US. And I am very certain that I would not have sat on this stage two years ago and said the same thing,” Olivia Breese, senior vice-president for power-to-X at Danish energy company Orsted, told the conference. Orsted’s pipeline varies by 2–4GW by 2030 due to uncertainty around scale of demand.

Breese adds that, in addition to relative simplicity, the production tax credit is non-competitive and therefore able to foster a greater number of projects for an industry in a short timeframe.

“In terms of Europe, it is putting the same amount of money on the table as the US, but instead of having it in a one-stop shop, there are various different pockets of money and you patchwork together your funding support,” she says.

European Commission executive vice-president Frans Timmermans defends the EU’s focus on setting up a regulatory framework. “We honestly believe that doing regulation—creating a stable, long-term regulatory environment—will make it easier for the private sector to invest,” he says, noting that “everything we do, we do in close cooperation with the sector” as well as negotiating between member states. He adds that the upcoming ‘Hydrogen Bank’, due to begin its first pilot auction this year, provides producers with “the guarantee that if you win the auction, you will be supported on a good price for ten years, which is something investors like”.

Timmermans confirms the EU was “incentivised by the massive amounts of money that were put into the American development of hydrogen” and other renewables to ramp up its policy support. While Europe faces “a number of bottlenecks”, such as regulation, permitting, high interest rates and a shortage of materials and available workforce, “if we can remove some of the barriers or some of the difficulties, I think we can move very, very fast” similar to the rapid development of solar and wind, he says.

“We do not have our own fossil fuels, so for us, it is much, much more of an existential issue in terms of the future of our society and our economy, than for the US, who can have a parallel fossil fuel economy, or for other parts of the world,” Timmermans adds.

International trade

Crane hints that the US could in the long-term play a role in internationally traded hydrogen markets.

“While it is not a perfect match, I think that the best guidepost for hydrogen—particularly international trade of hydrogen—is how LNG was developed,” he says, noting that the industry was initially based on bilateral, long-term contracts with a “limited number of producers” and a “limited number of buyers” from Japan and South Korea.

“It basically took 35 years before we had a liquid market, an LNG traded market,” Crane adds. However, with more and more countries launching flagship megaprojects geared toward exports in the long term, “with all of us getting the production out and importantly creating large pockets of reliable demand, then the traded market creates a virtuous circle of more and more hydrogen production”, he says.

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Author: Polly Martin