The timing of this year’s World Economic Forum meeting in Davos, Switzerland was both good and bad for the clean hydrogen sector.

It was bad in that a whole new layer of uncertainty had just descended on the industry in the form of US President Donald Trump’s executive orders to pause federal funding under the Inflation Reduction Act and the Infrastructure Investment and Jobs Act for a 90-day review period.

This will further unsettle potential investors in green and blue hydrogen projects, with confirmation that the US will exit the Paris Agreement also potentially weakening the global resolve to advance the wider transition.

Much has been made of the fact that many IRA-supported projects are in Republican states, and that blue hydrogen in particular has attracted investment by big oil

However, the timing of Davos was good in that it gave the industry the opportunity to double down on its core message to policymakers and investors: despite events in the US, the industry is on track globally to play a key role in decarbonising hard-to-abate industries, if not quite at the pace and scale envisaged two or three years ago.

Danish power-to-x hydrogen technology supplier Topsoe sent a delegation to Davos for the first time, reflecting the need for firms across the global hydrogen supply chain to engage with policymakers and investors at this crucial stage in the industry’s development.

Topsoe is one of several electrolyser manufacturers planning to invest in production capacity in the US as it looks to tap this potentially large market. The US accounts for about 16% of the projects tracked by Gulf Energy Information’s GEI database. Trump’s move against Joe Biden’s Green New Deal could have a material impact on Topsoe’s strategy.

"We are closely following the developments. We look forward to ongoing engagement with the new administration and Congress on how federal tax and energy policies can best support energy security, resilience and economic growth in the US,” a spokesman for Topsoe told Hydrogen Economist. Note the emphasis on energy security and growth, rather than net-zero.

Executive orders

Initial interpretations of Trump’s executive orders suggest some funds previously aimed at regional hydrogen hubs and other capital projects, but as yet unallocated, could be partly or entirely redirected for use elsewhere. Some funds have already been allocated. Just before Trump’s inauguration, US firm Plug Power secured a $1.66b loan guarantee from the Department of Energy’s Loan Programs Office. The guarantee will help finance the construction of up to six projects to produce and liquefy clean hydrogen. The first plant to benefit from the financing will be Plug’s green hydrogen project at Graham, Texas.

Early readings of the new administration’s plans also suggest that tax credits offered under the Inflation Reduction Act (IRA) are likely to emerge from the review period largely unscathed. Changes to, or the abolition of, the credits would need approval by Congress, where there is bipartisan support for the subsidies. A group of House Republicans recently warned against tinkering with the IRA because of the impact it could have on investment in hydrogen and other sectors, and specifically projects in their own regions.

The final rules for the implementation of the main 45V hydrogen tax credit were published by the US Treasury in early January, potentially making it more difficult for the new administration to reverse the policy, although there are ways to reverse final guidance, such as the Congressional Review Act.

Much has been made of the fact that many IRA-supported projects are in Republican states, and that blue hydrogen in particular has attracted investment by big oil, which has recognised its twin potential to decarbonise refining and to produce exportable products such as low-carbon ammonia.

One project to watch is ExxonMobil’s Baytown, Texas low-carbon hydrogen and ammonia facility, the largest project of its type in the world, The company has recently stressed that the project is “contingent on supportive government policy and necessary regulatory permits”.  It has yet to comment on the final 45V rules, or on Trump’s initial executive orders.

Baytown is an example of the serious projects under development in the US. Such projects generate jobs, support US technology and produce new products for export. These are benefits that will catch the new president’s eye and likely hand the clean hydrogen sector more of a future in the US than some have suggested in the first few days under the new administration.

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Author: Stuart Penson