Is great getting in the way of good when it comes to advancing low-carbon hydrogen in the U.S.?

An attendee at the World Hydrogen North America conference in Houston wanted to know what panelists representing hydrogen end-users thought on the topic.

The crowd had just heard Paul Browning, founding partner of Energy Transition Finance, call the Inflation Reduction Act’s 45V clean hydrogen production tax credit “complete bull----.”

“If you do a battery energy storage project, nobody asks you is your power deliverable, time bound, additional. If you buy an electric vehicle, nobody asks you where your power is coming from. You still get a subsidy,” Browning said. “If you do a wind project, nobody asks you what your carbon intensity of your wind turbines is. If you do a PV solar project, nobody wants to know the carbon intensity. But if you do green hydrogen, it’s got to be additional. It’s got to be deliverable. It’s got to be time bound, blah, blah, blah. I don’t get it.”

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The proposed regulation, intended to incentivize low-carbon hydrogen production, offers a credit ranging from $0.60 per kilogram (kg) of hydrogen produced to $3/kg, depending on the lifecycle greenhouse gas (GHG) emissions from hydrogen production, including its power source.

It is based on three pillars: additionality, regionality and time matching.

To qualify, hydrogen producers must have used electricity from a clean power facility built within three years of a hydrogen plant entering service; produce clean power from the same region as the hydrogen producer; and provide proof of purchase of clean power, which comes in the form of an energy attribute certificate (EAC) that must be matched to production on an hourly basis. That means “the claimed generation must occur within the same hour that the electrolyzer claiming the credit is operating,” the Treasury Department said. The proposed rules include a transition to allow annual matching until 2028.

‘Difficult to navigate’

Since the proposed guidance was unveiled in December 2023, industry reaction has been mixed. The Treasury Department issued a supplemental notice of proposed rulemaking in April 2024 with more information on the provisional emission rate process. Many are calling for changes to the proposed rules. Some believe the rules are too stringent and may hamper the pace of development.

The hydrogen market has been plagued with the notion that “it needs to be the absolute best in order for it to happen,” said Kimberly Okafor, general manager of zero emission solutions for Love’s Travel Stop.

“No one asks how green is the electricity that goes into that vehicle. We just say it’s electric, so it must be green,” Okafor said. “For hydrogen, on the other hand, everyone has all these questions ….” That, she said, is where great is getting in the way of good. “That’s what honestly [has] become a barrier for the hydrogen industry to move in my opinion.”

Lauren Skiver, COO for Transdev North America, encouraged the industry to get on the same page—something she said it has done a better job at lately. This includes moving past the hydrogen color wheel and debates on what’s the better way to make hydrogen.

“If you look at vehicles, both light and heavy duty, the all battery electric didn’t do that. They went forward where all boats will rise if we all just say the same thing, whether it’s true or not,” Skiver said. “We’re so focused on the science and hydrogen and … that’s a good thing. I’m not saying that is a bad thing. I’m merely saying when I look at all battery electric technology and how fast it’s gone with so much less engineering and testing than there is in a hydrogen propulsion system … I’m amazed.”

Speaking on a panel with Browning, HIF Global COO Brooke Vandygriff said “they made it very difficult to navigate and really squashed a very nascent industry from taking off. I just need them to solidify the policy so that we can move forward with our project. … Until the regulations are solidified and in law, we cannot get to FID [final investment decision] because we don’t know how to calculate the hydrogen tax credit. And then we don’t know how to value our offtake product because of that. And then we can’t get somebody to sign a long-term contract for a cost of a product that they don’t know.”

‘May not be as bad’

HIF Global plans to use wind energy along the U.S. Gulf Coast to produce hydrogen, which will be used to make eFuels in Matagorda, Texas. The $6 billion project expects to produce about 1.4 million tons per year of eMethanol by 2027 and capture about 2 million tons per year of CO2.

Browning, who co-founded an advisory firm that guides clients though the U.S. Department of Energy’s Loan Programs Office application process, pointed out that China is not worried about additionality.

“They just finished a 260-megawatt electrolysis project, which is plugged into the grid and running at a very high capacity factor on power that’s probably mostly coal fired,” Browning said. He added the U.S. has made tons of progress in decarbonizing the power grid. “In the next decade, we’re going to be largely decarbonized. And a decade after that, we’re going to be fully decarbonized. Why do we care right now about all these additionality and other things? It’s all going to be resolved over the next two decades. Let’s just go.”

The 45V credit surfaced in several sessions during the conference, including one focused on hydrogen hubs selected by the DOE for award negotiations. The hubs use a variety of feedstock—including renewables, natural gas and nuclear energy—to produce hydrogen.

Hydrogen hubs’ views on the 45V guidance differ, said Kristine Wiley, vice president of GTI Energy’s Hydrogen Technology Center.

“I think generally what we’re looking for is more flexibility, being able to use some of the… existing data around methane emissions, if we’re looking at the natural gas pathway,” she said, “and being able to customize so that we can have more specific, carbon intensity characterization associated with our projects.”

Recalling experiences with the oil industry, Steve Schlasner, senior engineer for the Energy & Environment Research Center (EERC), said whenever there is more regulation there is complaining. EERC is the prime contractor for the Heartland Hydrogen Hub in Minnesota, North Dakota and South Dakota. Partners include Xcel Energy, Marathon Petroleum Corp. and TC Energy.

“We say how much more expensive it’s going to be. And then when it’s done, it’s marginally more expensive, and we figured out how to do it,” he said. “45V might have some aspects of that. And if we can work with Congress or whomever to get it optimized, it may not be as bad as it first struck our partners.”