Uncertainty over the implementation of the Inflation Reduction Act (IRA) is holding back investment in the US hydrogen sector, and the equivalent regulation in Europe is better understood by the industry, according to Andy Marsh, CEO of electrolyser manufacturer and green hydrogen supplier Plug Power.

Greater clarity is needed specifically around the 45V tax credit for low-carbon hydrogen production in the US, Marsh told Hydrogen Economist in an interview.

“There is no clarity at the moment, and that is the challenge. Without that clarity, it makes it challenging for people to invest in long-term projects,” he said. “That is really one of the key items for accelerating more rapidly.”

“Without that clarity, it makes it challenging for people to invest in long-term projects” Marsh, Plug Power

Marsh acknowledged the US government’s efforts to work through the complex challenges around regulation of the hydrogen sector, and he stressed the need for rules that are “easy for investors to understand but are not overbearing”.

“There are challenging issues that need to be addressed that [the US government]is working through thoughtfully,” Marsh said.

In July, Plug and the US Chamber of Commerce, together with 31 other organisations, wrote to the Biden administration warning that “poorly devised rules” could hamper the hydrogen industry.

Carrots and sticks

Equivalent regulations around policy designed to drive hydrogen investment in the EU are clearer than those in the US, Marsh said.

“The European system, at least the regulatory requirements, is probably better understood than in the US,” he added. “Europe has a regime where you depend on both sticks and carrots. And the carrots are more difficult to access than they are in the US, because the US carrots are tied to tax codes and ultimately to Wall Street.”

The sticks to drive decarbonisation are “more powerful in the EU than in the US”, especially the EU ETS, he added.

New-York-based Plug’s projects in Europe include a 100MW green hydrogen plant at the port of Antwerp-Bruges and the supply of a 100MW proton-exchange-membrane electrolyser to a project under development at the port of Rotterdam. 

In Finland, Plug has set out a $6b plan to deploy 2.2GW of electrolyser capacity across three sites with a consortium including commodities trader Trafigura, hydrogen project developer Hy2gen, French technology company Technip Energies and green steel specialist GravitHy.

Marsh said he is confident that demand for low-carbon hydrogen is materialising. “I am not worried about the demand side. I have people who are looking at electric fuels. I have people who want to move green ammonia,” he said.  “Demand is not the issue, it is having a clear understanding of how the IRA is going to be implemented,” he said. 

However, he urged the industry and its financers to accept that hydrogen, at least when viewed as a fuel, will not achieve the type of long-term offtake deals that have underpinned the expansion of wind and solar in recent years.

Some lenders have been reluctant to back hydrogen projects because they lack the security of long-term offtake deals, limiting the number of projects reaching FID globally and threatening 2030 capacity goals set by governments.

Equity play

Marsh said a lack of long-term offtake deals means equity finance is set for a bigger role than debt in funding the initial scale-up of hydrogen production.

 “Investors are probably going to have to price in additional risk when they are looking at hydrogen projects, and I think that is why you are going to see it is more of an equity play at first than a debt play.”

Plug remained loss making in the second quarter, but Marsh is confident the company will move into profit during the next 12–18 months. “One of the biggest drains is that, while we are building our own hydrogen plants, a lot of our losses are attributed to having to buy hydrogen from third parties. By our vertical integration strategy, we will be past that over the next year.”

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Author: Stuart Penson