Unlocking Subsidies for Hydrogen Producers: Guidelines Expected After COP28

By Valerie Volcovici

Published on December 6, 2022

Introduction

The United States is on the verge of releasing crucial guidance for hydrogen producers to access substantial subsidies. These incentives were embedded in the Inflation Reduction Act (IRA) passed last year. The guidelines are anticipated to be made available sometime after the COP28 climate conference in Dubai, according to U.S. energy advisor John Podesta.

Anxious Wait for Guidance

The industry has been eagerly awaiting the U.S. Treasury Department’s guidance for several months. The administration is currently deliberating whether to limit the subsidies to producers utilizing new clean energy sources rather than existing ones. This cautious approach aims to prevent any potential increase in emissions.

Expected Release Date

John Podesta expects the guidance to be released before the end of the year. However, he clarified that it will not be unveiled during the COP28 summit, which spans from November 30 to December 12.

The Significance of Hydrogen

Hydrogen is a crucial clean-burning fuel that the Biden administration believes can play a major role in decarbonizing challenging industries such as aluminum and cement. By electrolyzing water, hydrogen can be produced and considered green if it relies on zero-emission energy sources like solar, wind, nuclear, or hydro power.

Jumpstarting the Industry

Although the production of green hydrogen is currently limited due to cost and other constraints, the Biden administration plans to kickstart the industry through substantial subsidies. These subsidies amount to $3 per kilogram and are embedded in the IRA.

Debate Over Limiting Subsidies

A proposal supported by environmental groups and some green hydrogen companies suggests that the Treasury’s forthcoming guidance should restrict the new incentives to hydrogen producers who power their facilities using new clean energy sources. This limitation is crucial to avoid unintended consequences, such as increased emissions resulting from higher overall power demand fueled by fossil power, as indicated by a study led by researchers from Princeton University.

Concerns from Industry Stakeholders

Various industry groups, including nuclear advocates, argue that an overly strict subsidy program would jeopardize the administration’s green hydrogen goals. They warn that such a program would render some projects economically unfeasible.

Disagreements Among Federal Agencies

David Turk, U.S. Department of Energy Deputy Secretary, revealed that even federal agencies are divided over the design of the tax credit due to its significant impact. The Department of Energy and the Treasury still hold differing opinions on how to structure the subsidy program.

Preliminary Draft of the Guidance

A source familiar with the preliminary draft of the guidance shared that it includes an “additionality provision” that highlights the exclusion of existing power sources. However, the administration is considering special treatment for nuclear and hydro power. The source also mentioned that the draft mandates hydrogen electrolyzers to operate simultaneously with renewable energy sources to ensure that hydrogen production does not rely on fossil fuel electricity.

Additional Funding for Hydrogen Hubs

Besides the IRA subsidies, the U.S. Department of Energy has allocated $7 billion to support seven proposed regional “hydrogen hubs.” These hubs aim to demonstrate and scale up clean hydrogen production. It remains unclear whether these hubs would be economically viable if existing nuclear plants are excluded from the IRA subsidy.

Long-Term Benefits

Marty Durbin, president of the U.S. Chamber of Commerce’s Global Energy Institute, expressed the importance of enabling faster production with more relaxed rules. He noted that although there might be a slight increase in greenhouse gas emissions in the power sector initially, the long-term decarbonization of energy-intensive sectors will offset these effects.

Ensuring Decarbonization

Claire Behar, chief commercial officer for HyStor Energy, a green hydrogen company developing a hub in Mississippi, emphasized the need for stricter rules. She stated, “We have one shot to get this right for decarbonization.”

Conclusion

The guidance for hydrogen producers to access subsidies is eagerly awaited. The forthcoming guidelines will shape the future of the hydrogen industry in the United States, allowing for cleaner and more sustainable energy solutions.

Read More of this Story at finance.yahoo.com – 2023-12-06 17:20:15

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