I recently had the chance to attend the 2024 Hydrogen Americas Summit & Exhibition in Washington, D.C., for some lively discussions with key industry players, policymakers, and more. Some key takeaways from the event:
- I heard a lot about the challenges with finding off-take for hydrogen projects (as my colleague Chris Robinson also did at the World Hydrogen North America Congress). Here, though, the emphasis was — perhaps not surprisingly, given the Washington location. — even more on the regulatory uncertainty, particularly around 45V tax credits. Established by the Inflation Reduction Act, the 45V credits can provide up to USD 3/kg in tax credits for hydrogen — provided the right conditions are met. Some participants had strong views on what the rules needed to be to enable the market; others, like many of the electrolyzer makers, would prefer more favorable rules but mostly wanted a decision made one way or the other. All parties agreed that nearly all projects in the U.S. will be on hold until the 45V rules are set.
- Unfortunately, the consensus seemed to be that the final decision on 45V is not likely to be made until next year, given the huge volume of comments that the U.S. Department of the Treasury needs to sort through. The decision is not likely to change that much from the original guidance, with perhaps some flexibility around 45V’s requirements for time matching and additionally for a limited period to get the industry off the ground.
- The broader discussion around policy was overall a bit gloomy, despite the strong climate policy push from the Biden administration, with attendees lamenting the lack of demand-driving price signals that mandates or carbon pricing mechanisms create in geographies like the EU. Notably, in Europe, we’ve heard almost the opposite, where hydrogen developers look enviously at the IRA’s generous supply-side subsidies. Maybe the grass is just always greener on the other side (of the Atlantic) — or maybe each side here has only half the package really needed to drive growth or make the industry really happy anyway.
- Perhaps Japan will have a more satisfying mix. Shinichi Kihara, Director General for Energy and Environmental Policy from Japan’s Ministry of Economy, Trade, and Industry, discussed what he called the country’s “big carrot, big stick” policy for hydrogen adoption. The carrot is a planned “contract for difference” subsidy that will make up the gap between the cost of hydrogen and conventional fuels for selected “front-runner” projects for 15 years — provided they commit to running unsubsidized for 10 more years after that — along with loan guarantees. The looming stick is an emissions trading scheme to launch in 2026 and a carbon tax kicking off in 2028. Overall, there was lot of interest in exporting U.S. hydrogen to Japan.
- A newer issue discussed at the event was hydrogen leaks, which the Environmental Defense Fund (EDF) is strongly advocating to get on the industry’s agenda, under the banner of “getting hydrogen right.” Unlike methane, hydrogen isn’t a greenhouse gas (GHG), but as EDF’s Executive Director Amanda Leland noted in her keynote, it is an indirect GHG, as its reactivity in the atmosphere increases concentrations of methane, ozone, and water vapor, which can boost warming. Some in the industry privately pushed back on how significant the issue of hydrogen leaks is, but given that the science isn’t really yet clear, it’d be wise for developers to be proactive about addressing it rather than risk playing catch-up, as oil and gas companies are with methane.
Lux Take
Given the regulatory and demand uncertainty and resulting lack of projects moving forward, the mood at the summit was certainly subdued — but there was also quiet optimism and a sense that with the hype dissipating, it was an opportune time for “seeing who the real players are,” as Michael Ducker, CEO of Mitsubishi Heavy Industries Hydrogen Infrastructure, put it. Clearly a lot of pieces are in place to hit the ground running whenever the 45V rules fall into place — though, as experience with more advanced projects in Europe has shown, many projects will face cost overruns and even outright failure.
More concerning is the lack of clarity around the demand side, as some of the touted uses in mobility are unlikely to materialize, and the infrastructure for hydrogen exports and imports will take time to fall into place — even if customers abroad do emerge in force. Substitution for current gray hydrogen uses in fertilizer production and refineries will likely need to account for a lot of green hydrogen off-take in the near term. In the long term, hydrogen has an essential role to play in the energy transition, and there’s ample room for the economics to improve with economies of scale and learning by doing, just as we’ve seen with solar panels and batteries — but expect some rocky years ahead while new sources of demand mature.