Photo: Nuraghies on Freepik
The administration of outgoing United States President Joe Biden expanded the scope of hydrogen production tax credits to electrolyzers powered by uncompetitive nuclear power plants. The government now also encourages making hydrogen from fossil gas if CO2 is captured in the process, labeling it blue hydrogen, and from methane from waste and coal mines.
After a complex public consultation process, the US Treasury Department released the rules on tax credits for hydrogen production. The aim is to incentivize carbon-free energy in the emerging sector as well as to include the sources of methane that would otherwise be released into the atmosphere.
The new legislation, one of the last updates from the outgoing President Joe Biden’s administration, derives from the 2022 Inflation Reduction Act (IRA). The name itself offers no clue, but it is a massive support package for the decarbonization of industrial production.
Nearly all hydrogen in the world is still produced directly from natural gas, which is essentially methane. It is classified as gray hydrogen. The technology is by far the most competitive.
If carbon dioxide emissions are captured, utilized and stored in the process, the resulting gas is labeled blue hydrogen. Green hydrogen is made in electrolyzers powered by renewable energy plants. It is called pink hydrogen if nuclear power plants provide the electricity.
President-elect Donald Trump, due to be sworn in on January 20, can still amend or, less likely, scrap the new rules.
Pink hydrogen to keep ailing nuclear plants on grid
Expanding the draft hydrogen plan, the Treasury approved tax credits for nuclear power plants. The operator needs to prove its facility wouldn’t survive in the market without such support. Analysts estimated that a tenth of US nuclear capacity would be eligible.
The scope now also involves blue hydrogen and the direct production from methane from wastewater processing, biowaste, landfills and coal mines.
Gray methane usually sells for under USD 1 per kilogram in long-term deals in the US, compared to no less than USD 1.3 per kilogram for any kind of clean hydrogen. Moreover, BloombergNEF estimates current production costs for clean hydrogen at USD 3 to USD 11. Tax credits, set to reach up to USD 3 per kilogram, would make at least some investments feasible.
Numerous production projects and investments in pipelines were canceled last year, especially in Europe, where the price spread is much wider.
The point is that there is no market without matching supply and demand and enabling the supply chain. The European Union is giving out massive subsidies and, at the same time, supporting the most viable green hydrogen production projects through the European Hydrogen Bank mechanism.
The US earmarked USD 7 billion so far in aid for big projects. The blue hydrogen concept, including carbon capture, utilization and storage (CCS or CCUS), is prompting criticism. Some environmentalists claim it is a way in for the world’s biggest fossil fuel companies.
Hourly tracking of clean electricity supply starts in 2030
The mechanism in the US involves tracking renewables supply for hydrogen production hour by hour. The idea is to limit taking away power from the electricity system and drawing in oil and gas power plants. The rule comes into force in 2030.
Hydrogen has potential applications in steel and fertilizer production. It can be used for alternative-synthetic fuels or as an energy source for vehicles and vessels.
Be the first one to comment on this article.