‘Misguided US clean hydrogen guidelines will have a chilling effect on investment’, warns US H2 coalition

The newly released proposed US hydrogen guidelines, which stipulate the stringent rules that must be met for developers to qualify for clean H₂ tax credits, has been slammed as “misguided”, “overly restrictive” and “unworkable”, according to one of the US hydrogen industry’s most prominent trade bodies.

Within moments of the guidelines being issued by the US Treasury Department, Hydrogen Forward released a statement, saying: “Unfortunately, Treasury’s guidance includes overly restrictive and unworkable requirements that run counter to Congressional intent and the Biden administration’s climate goals.

“Hydrogen Forward is disappointed to see the early imposition of requirements for additionality, geographical- and time-matching in the guidance, as these new restrictions will have a chilling effect on hydrogen investment, delay technological deployment, and slow progress to reduce costs and address climate challenges.”

And in response to the fact that the issued guidelines are still proposals that will not be finalised until late March at the earliest, the group — which had campaigned for few limits on electricity usage — added: “Treasury’s final guidance should recognize the importance of accelerating the transition to clean energy by ensuring that a broad range of low- and zero-carbon technologies and production pathways remain eligible for this landmark energy incentive on a carbon intensity basis, as Congress intended.

“Hydrogen has an opportunity to play a key role to meaningfully contribute to economy-wide decarbonization goals but only if it’s given the opportunity to scale and that certainty is created in the market to drive the substantial, long-term investment required.”

Hydrogen Forward consists of eight members, including auto makers Toyota and Hyundai, miner AngloAmerican, electrolyser maker Cummins and industrial gases giant Linde.

American Clean Power Association (ACP) CEO Jason Grumet came to a similar but more conciliatory conclusion: “Unfortunately, the Administration proposal contains a fatal – but fixable – flaw that must be addressed to realize the economic, environmental, and climate benefits of commercially scaling a domestic green hydrogen industry.

“While ACP embraces the basic structure of the Administration’s three-pillar approach, the rushed imposition of the most burdensome restrictions fails to acknowledge the market realities of new technology deployment. Specifically, imposing an hourly matching provision too early for first-wave green hydrogen projects will discourage a significant majority of clean power companies from investing in green hydrogen manufacturing and facilities.

“An ACP analysis concludes that offering additional flexibility in time-matching requirements will enable investment in a first wave of 20 to 40 commercial-scale facilities by 2032. While adequate to jumpstart the green hydrogen industry, this deployment represents only 3-5% of the Administration’s 50-million-tonne annual green hydrogen production goal and presents little risk of a material increase in emissions.

“However, the proposed rule jeopardizes the economic feasibility of these early projects, and with them, the future viability of the green hydrogen industry.”

However, environmentally minded organisations issued statements praising the new proposed measures.

“The rules contain strong measures to ensure that electrolytic hydrogen production does not add overwhelming new demand on the power grid and bring extra fossil fuels online at the expense of the climate and U.S. electricity customers,” said the NRDC (Natural Resources Defense Council).

It also pointed to recent analysis that shows that the “three pillars” of additionality, time matching and geographical correlation contained in the regulations “will help avoid hundreds of millions of tones of carbon emissions over the next 15 years and protect against compromising the US clean energy transition.”

The three measures ensure that fossil-fuel-fired electricity cannot be used directly or indirectly to produce green hydrogen at times when the wind is not blowing and the sun is not shining.

The NRDC’s policy director for emerging technologies, Rachel Fakhry, added: “Today’s proposed rules are a win for the climate, US consumers, and the budding US hydrogen industry.

“Anything less than the climate and consumer protections proposed today would be a giveaway to legacy energy companies eager to hijack hydrogen at the direct expense of the climate and consumers.

“Broad loopholes would be disastrous for the climate, kneecap our efforts to clean up the power grid, and harm the global potential of the U.S. clean hydrogen industry. Treasury must hold firm and finalize this strong guidance.”

Julie McNamara, deputy policy director of the climate and energy programme at the Union of Concerned Scientists, also welcomed the proposals.

““The draft guidance sets a strong foundation for accurately capturing the true climate impact of hydrogen production projects. Rigorous guardrails are necessary to ensure the hydrogen tax credit incentivizes the scale-up of the right hydrogen, not just any hydrogen. No less than whether or not hydrogen actually serves as a tool for climate progress hangs in the balance.”

The Treasury Department also issued statements from supportive companies.

Seifi Ghasemi, CEO of US industrial gases giant Air Products, said: “We applaud the Administration’s strong three pillar hydrogen tax credit proposed rule, which will be essential to delivering real emissions reductions, creating the stimulus for broader investments across the hydrogen value chain, and cementing the U.S.’s global climate leadership.”

Alex Hewitt, chairman of the Green Hydrogen Catapult and co-CEO of developer CWP Global, added: “As a project developer with laser focus on the promise of renewables-based hydrogen production in the US and globally, stringent rules that channel maximum benefit to projects with the strongest environmental credentials will pave the way for a vibrant and successful new green hydrogen industry. Put simply, we can’t get to net zero without it.”

Green Hydrogen Catapult is a coalition of ten “green hydrogen market leaders” including steel giant ArcelorMittal, green hydrogen pioneer H2 Green Steel and green hydrogen developers CWP Global and Fortescue.

And Raffi Garabedian, CEO of the Bill Gates-backed electrolyser maker Electric Hydrogen, said: “The rules allow developers to get started right away, while later phasing in hourly matching, which is necessary to ensure that green hydrogen is truly green.

“No stakeholder got everything they wanted, but finalizing the rules will give industry the certainty it needs to begin scaling green hydrogen production with domestically manufactured technology that is capable of ramping with renewable resources.”

Meanwhile, Bryan Fisher, managing director for climate-aligned industries at the clean-energy-focused Rocky Mountain Institute (RMI), pointed out how key the regulations will be for the country’s decarbonisation.

“The industries that clean hydrogen can transform — steel, shipping, aviation, and fertilizer to name a few— touch nearly every aspect of our lives: where we live, how we move, what we eat.

“Clean hydrogen is critical in delivering the solutions that will reduce carbon pollution from these sectors… With these incentives, the United States is poised to be a leader in low-emissions hydrogen.”

This article was updated on 22 December to include comments from the ACP.