OPINION:
The global race to produce clean-burning hydrogen fuel is on, and according to a new International Energy Agency report, China is winning. That’s a surprising development, given the hundreds of billions devoted by the Biden administration to encourage U.S. production, including $7 billion just announced by the president for regional hydrogen hubs.
When first passed by Congress as part of the 2021 Infrastructure Investment and Jobs Act, this unprecedented level of federal spending seemed to secure America’s competitive advantage — especially when combined with the clean hydrogen production tax credit included in the 2022 Inflation Reduction Act.
Known as 45V, this tax credit covers about 60% of the total cost for any domestic hydrogen producer that meets certain low-emissions standards. That tax credit initiated a tidal wave of planned investment and created envy in other countries.
“We like the IRA,” affirmed Sanjiv Lamba, CEO of the multinational hydrogen producer Linde, shortly after the law’s passage. “It is simpler and easier to understand than the [European Union’s] lengthy policy statements.”
“We have a very robust framework in the EU, but we fail to attract our own companies because it’s all too complex,” echoed Jorgo Chatzimarkakis, CEO of Hydrogen Europe. “In their typical bureaucratic way, the Europeans will kill this business.”
Unfortunately, American bureaucrats may do the same. The Treasury Department, which is responsible for implementing the Inflation Reduction Act tax credit, missed the August deadline to issue 45V guidance.
Treasury is trying to decide whether to follow the EU’s initial impulse and impose an “additionality” requirement that would define clean hydrogen as only the hydrogen using electricity from newly built, or “additional,” clean power plants.
At the center of this debate is the electrolyzer machine, which produces clean hydrogen by running an electric current through water to split hydrogen from oxygen. Irrespective of whether this electricity comes from a solar, wind, nuclear, hydro, or other carbon-free power plant, the electrolyzer’s output is clean hydrogen.
The United States has an abundance of carbon-free power plants and, with flexible 45V guidance, could use them almost immediately to increase clean hydrogen production by some 10,000% in less than 10 years — an ambitious but necessary goal if the country has any hope of meeting net-zero targets, according to the Department of Energy.
If Treasury imposes an additionality requirement, all these facilities would be ineligible for the tax credit. Instead, producers would have to wait for new power plants to be built — a process that takes, on average, nine years. Given that Congress authorized 45V for just 10 years, it’s hard to believe they had such a delay in mind.
We can learn from Europe, which tried earlier this year to impose their own version of additionality. Fortunately, France and eight other member states blocked the proposal because it would have limited the speed of hydrogen development.
Ultimately, France was allowed to produce clean hydrogen using nuclear energy — a concession by EU policymakers tacitly acknowledging that additionality does not work.
In the United States, 10 Senate Democrats plan to submit a letter on additionality to White House adviser John Podesta, Treasury Secretary Janet Yellen and Energy Secretary Jennifer Granholm.
The senators will ask the administration not to impose a stringent additionality requirement that would hurt U.S. clean hydrogen production and global competitiveness and jeopardize “the nearly quarter-of-a-million jobs the Energy Department projects the … industry could create by 2030.”
Across the United States, 93 nuclear reactors provide roughly half of the carbon-free electricity generated in the country. Just 10 of these reactors could provide about 1.5 million tons of clean hydrogen annually — or 15% of the total clean hydrogen needed by 2030 to put America on track to reach net zero by 2050.
With the right 45V guidance, U.S. hydropower plants, which current use the natural flow of moving water to generate around 40% of the country’s renewable electricity, could also use their water for large-scale clean hydrogen production.
Taking these and other carbon-free resources off the table would cede U.S. energy transition leadership and jobs to China by forcing American producers to compete with their hands tied behind their backs.
Treasury has an opportunity to learn from Europe’s mistakes and implement 45V as Congress intended, without additionality, so that the United States can start producing clean hydrogen right now, not a decade from now.
• Benton Arnett is senior director of markets and policy at the Nuclear Energy Institute. Michael Purdie is director of regulatory affairs and market strategies at the National Hydropower Association.
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