In the quest for sustainable and clean energy solutions, President Biden’s hydrogen plan has emerged as a focal point, sparking debate and anticipation. As the Treasury Department releases guidance on hydrogen tax credits under the Inflation Reduction Act, known as 45V, industry stakeholders grapple with questions that will ultimately shape the trajectory of U.S. hydrogen production and its impact on the environment. This analysis delves into three critical questions that remain at the forefront of discussions, exploring the nuances, potential implications, and ongoing debates that will define the evolving landscape of hydrogen as a “clean” fuel.
- Defining New Clean Energy: A Matter of Additionality
A cornerstone of Biden’s hydrogen plan is the requirement for companies to immediately use new clean electricity added to the grid, aligning with hydrogen production facilities in the same region. The definition of “new clean energy” becomes a pivotal factor, as stakeholders navigate the timeframe and documentation required for eligibility. While the Treasury guidance outlines that clean electricity is considered new if it comes online within three years before a hydrogen facility utilizes it, proposed exemptions and the allowance of existing clean electricity raise concerns.
One notable proposal suggests permitting 5 to 10 percent of hourly clean energy generation from existing facilities before 2023 to count as a new clean energy source. While this proposal could significantly contribute to hydrogen production, environmentalists express concerns about its potential impact on the concept of “additionality,” emphasizing the need for hydrogen to be produced with added clean electricity. Striking the right balance between flexibility and maintaining environmental integrity will be a crucial aspect of the final rules.
- Nuclear Power’s Role: A Boost or Burden?
The Treasury’s guidance provides indirect support for hydrogen producers using nuclear power, introducing potential incentives for the nuclear industry. However, questions linger about the extent to which these incentives might boost nuclear-powered hydrogen projects. With a proposed 5 to 10 percent threshold for existing nuclear power plants to count as new clean energy, the nuclear industry grapples with the financial feasibility of hydrogen production under these conditions.
Another proposal allowing clean energy facilities slated for retirement to count as new energy if they continue operations due to added revenue from hydrogen production adds a layer of complexity. While this could benefit the nuclear industry, the process of proving that a power plant would have shut down without partnering with a hydrogen producer raises challenges. Striking a balance between supporting the nuclear sector and preventing potential abuses of the system becomes a critical consideration in shaping the final rules.
- Fossil Fuel Projects: Navigating the Blue Hydrogen Conundrum
For “blue” hydrogen producers relying on fossil fuels and carbon capture, a pivotal question emerges: should they apply for the 45V tax credit or opt for the 45Q tax credit for carbon capture technology? The answer carries significant implications for project support and industry emissions. The Treasury’s adoption of the 45VH2-GREET model outlines how emissions for various production methods, including fossil fuels with carbon capture, will be counted. However, extensive questions surrounding verification of carbon capture rates leave “blue” hydrogen producers in a state of uncertainty.
The exclusion of certain hydrogen production methods, such as methane pyrolysis, from the GREET model adds complexity to the situation. Companies seeking clarity on emissions associated with the transportation of renewable natural gas face challenges, requiring a delicate balance in addressing industry concerns while maintaining the integrity of clean energy goals.
Navigating Complexity for a Sustainable Future
As the Treasury’s guidance for hydrogen tax credits undergoes public scrutiny and debate, the three questions outlined above stand as crucial determinants in shaping the future of U.S. hydrogen production. The delicate balance between flexibility and environmental integrity, the role of nuclear power, and the conundrum of fossil fuel projects pose challenges and opportunities. The decisions made in 2024 will not only influence the trajectory of the hydrogen industry but will also play a pivotal role in advancing clean and sustainable energy solutions, marking a defining moment in the pursuit of a greener and more sustainable future.
What is Biden’s Hydrogen Plan? The U.S. National Clean Hydrogen Strategy and Roadmap
The Biden-Harris Administration unveiled its U.S. National Clean Hydrogen Strategy and Roadmap in June 2023. Representing a comprehensive framework, this strategic initiative outlines a roadmap for accelerating the entire lifecycle of clean hydrogen—from production and processing to delivery, storage, and utilization. Recognizing hydrogen as a versatile and flexible energy carrier with the potential for low or zero carbon emissions, the strategy aligns with President Biden’s ambitious Investing in America agenda. With estimates suggesting the creation of 100,000 net new direct and indirect jobs by 2030, the strategy not only envisions economic growth but also aims to play a pivotal role in achieving long-term decarbonization objectives.
Building a Strong Foundation:
Developed by the U.S. Department of Energy (DOE) in collaboration with other federal agencies, the U.S. National Clean Hydrogen Strategy and Roadmap is a testament to the whole-of-government approach adopted by the Biden administration to address the climate crisis. It aligns seamlessly with the President’s vision of achieving a carbon-free grid by 2035 and a net-zero emissions economy by 2050. At its core, the strategy aims to accelerate the deployment of hydrogen, placing it at the forefront of President Biden’s vision for an affordable, secure clean energy future.
Key Voices in Support:
U.S. Secretary of Energy Jennifer M. Granholm emphasizes the significance of hydrogen deployment, stating that it is crucial to realizing President Biden’s vision. Assistant to the President and National Climate Advisor Ali Zaidi reinforces the idea, noting that growing America’s clean hydrogen capability can lead to job creation, economic development, and the decarbonization of traditionally challenging industries. The roadmap, therefore, serves as a collaborative effort to align private and public sectors in the pursuit of a cleaner and more secure energy future.
Economic Benefits and Job Creation:
One of the pivotal aspects highlighted in the strategy is the substantial economic benefits associated with clean hydrogen. Projections from DOE’s Pathways to Commercial Liftoff report indicate the potential addition of 100,000 net new direct and indirect jobs by 2030. These jobs are expected to span across the country, particularly benefitting underserved communities. By fostering diverse, domestic clean energy pathways, clean hydrogen is envisioned to strengthen American energy independence and contribute to the ongoing manufacturing boom, which has already generated over 800,000 jobs since President Biden assumed office.
Decarbonization Across Sectors:
Clean hydrogen is positioned as a key player in reducing emissions from some of the most energy-intensive sectors, including industrial and chemical processes, as well as heavy-duty transportation. Beyond emissions reduction, it offers support for the expansion of variable renewable power, providing a solution for long-duration energy storage. Additionally, clean hydrogen opens avenues for flexibility and multiple revenue streams across various clean power generation methods, including renewables, advanced nuclear, and other innovative technologies.
Strategic Objectives:
The Strategy and Roadmap lay out a comprehensive vision for hydrogen production, transport, storage, and utilization in the United States. It examines future demand scenarios, outlining strategic opportunities for domestic production targets of 10 million metric tonnes annually by 2030, 20 MMT by 2040, and an ambitious 50 MMT by 2050. The strategy aligns with the President’s Bipartisan Infrastructure Law, which allocates a historic $9.5 billion investment for clean hydrogen. This investment, coupled with ongoing research, development efforts, and policy incentives, including a new production tax credit, forms a robust foundation for the strategy’s success.
Key Strategies:
The U.S. National Clean Hydrogen Strategy and Roadmap outline three key strategies to ensure the effective development and adoption of clean hydrogen as a decarbonization tool:
- Targeting Strategic, High-Impact Uses: Emphasizing the importance of clean hydrogen in applications where limited alternatives exist, such as the industrial sector, heavy-duty transportation, and long-duration energy storage. This ensures that clean hydrogen is utilized in areas where it can deliver the highest benefits.
- Reducing Cost through Innovation: Catalyzing innovation and scale to drive down the cost of clean hydrogen. The strategy envisions stimulating private sector investments and developing a robust clean hydrogen supply chain to make it economically viable.
- Focusing on Regional Networks: Prioritizing large-scale clean hydrogen production and end-use in close proximity, thereby maximizing the benefits of infrastructure investment. This approach facilitates market liftoff, drives scale, and aligns with place-based opportunities for equity, inclusion, and environmental justice.
Public Engagement and a Living Document:
To ensure inclusivity and gather input from a broad spectrum of hydrogen stakeholders, the strategy was released in draft form for public comment in September 2022. The final version incorporates feedback from various sources, including the Biden-Harris Administration, industry stakeholders, academia, non-profit sectors, and state, local, and Tribal governments. Designed as a “living document,” the strategy is adaptable to the rapidly evolving market, technology, and policy landscape. It will be updated at least every three years, reflecting the dynamic nature of the clean hydrogen sector.
A Sustainable Energy Future
The U.S. National Clean Hydrogen Strategy and Roadmap emerges as a beacon guiding the nation towards a cleaner and more sustainable energy future. With a focus on collaboration, innovation, and economic growth, the strategy positions clean hydrogen as a cornerstone of President Biden’s broader vision for America’s clean energy transition. As the nation strives to meet ambitious decarbonization goals and address the pressing climate crisis, this strategy sets the stage for a transformative journey, bringing together government, industry, and communities in a shared commitment to a cleaner, more secure energy landscape.
Michelle Miller