The US Department of Energy (DOE) considers "clean hydrogen" (as defined in the Legal framework overview below) an important part of the Biden administration's goal to achieve 100% clean electricity by 2035 and total carbon neutrality by 2050.
Specifically, the DOE believes that clean hydrogen can help decarbonise sectors such as transportation, manufacturing, and chemical industries that would otherwise find it difficult to rely on green energy.
Specifically, the DOE believes that clean hydrogen can help decarbonise sectors such as transportation, manufacturing, and chemical industries that would otherwise find it difficult to rely on green energy. The DOE has established a Hydrogen Program, led by the Office of Energy Efficiency and Renewable Energy (EERE) and the Hydrogen and Fuel Cell Technologies Office (HFTO), to regulate and assist the development of all aspects of the burgeoning hydrogen economy. If the Hydrogen Program is fully realised, the DOE estimates that the hydrogen industry would create 100,000 new jobs by 2030 and reduce CO2 emissions by 10% by 20501.
The US has provided substantial funding for hydrogen development in recent years. In 2021, the Bipartisan Infrastructure Law (BIL) allocated US$9.5 billion for "clean hydrogen" with US$8 billion going towards developing regional hydrogen hubs ("H2Hubs"), US$1 billion marked for investment in reducing costs of hydrogen produced by electrolysis, and US$500 million earmarked to support the manufacturing of clean hydrogen equipment.
In August 2022, the US passed the Inflation Reduction Act ("IRA") and created production tax credits ("PTC's") for "qualified clean hydrogen." The credits last until 2032 and are worth as much as US$3/kg (with inflation adjustments in future years) for hydrogen produced with less than 0.45kg of CO2 emissions per kg of hydrogen. Lower rates are also available for production emitting up to 4 kg of CO2e per 1 kg of hydrogen. Additionally, hydrogen production facilities using on-site renewable energy can claim the PTC's available for renewable energy production (up to 2.6 cents/kWh with inflation adjustments in future years). The IRA also includes several other funding mechanisms that can apply to clean hydrogen projects, including loans and grants for the manufacture of hydrogen fuel cell vehicles, tax credits for clean hydrogen aviation fuels, tax credits for energy storage projects, and grants for projects designed to reduce emissions at American ports.
Legal framework overview
Like most other countries, the legal framework for clean hydrogen in the US is developing in real time as the industry grows.
The BIL defined "clean hydrogen" as hydrogen produced with resulting carbon emissions at the site of production equal to or less than 2kg per kg of hydrogen. The IRA defines "qualified clean hydrogen" as hydrogen produced through a "process that results in a lifecycle greenhouse gas emissions rate of not greater than 4 kilograms of CO2e per kilogram of hydrogen." In June 2023, the DOE released guidance for a Clean Hydrogen Production Standard (CHPS)2 that proposes adopting the IRA definition, reasoning that it is achievable for facilities that meet the IRA target at the site of production but may have additional upstream or downstream emissions. The CHPS will be reviewed within 5 years.
In addition to the DOE and its subagencies (EERE and HFTO), several other agencies have actual or potential authority to regulate hydrogen. However, while recent activity has begun to flesh out regulations, the DOE has noted that these efforts have not been closely coordinated and thus gaps within the framework are unclear.
Environmental
The Environmental Protection Agency (EPA) has authority to regulate all substances having an impact on human health and the environment, which includes hydrogen under the EPA's Mandatory Greenhouse Gas Reporting Program. However, other sources of authority for the EPA primarily relate to hydrogen produced as a byproduct of fossil fuel regulation and therefore may need to be expanded to capture all clean hydrogen production.
Transportation
The transport of hydrogen via pipelines is regulated by the Pipeline and Hazardous Materials Safety Administration (PHMSA), a subagency of the Department of Transportation. PHMSA has promulgated safety standards for "pipeline facilities and the transportation of gas," among other regulations. However, the existing regulations were created for natural gas and may need to be updated to account for risks unique to transporting hydrogen.
Storage
The Occupational Health and Safety Administration (OSHA) has issued regulations concerning gas and liquid hydrogen storage touching on safety, location and design of facilities, electrical systems, maintenance, etc
State Regulations
In addition to the federal framework, developers and investors should be aware of any state-level regulations and funding opportunities that exist. With a nation as large and diverse as the United States, and with many important policies being governed at the state level, it should be expected that incentives and programmes for green hydrogen – together with the attendant opportunities for commercial participants –will vary widely across states. At the moment, California and Texas are among the states with the most well-developed hydrogen regulatory frameworks and offer their own incentives for green hydrogen projects3 . While most other states have very few laws regulating hydrogen specifically, they will likely develop these regulations as clean hydrogen projects become more common.
Like most other countries, the legal framework for clean hydrogen in the US is developing in real time as the industry grows.
Funding & Support schemes
As mentioned above, the IRA provides a PTC of up to US$3/kg of hydrogen produced. Because these credits are available until 2032, only projects that started in 2023 will benefit from the full ten years of credits. To qualify for the full amount of the credit (US$3/kg of hydrogen), projects must, in addition to meeting the emissions requirement above, satisfy prevailing wage and apprenticeship requirements set by the Secretary of the Treasury. These PTC's are transferrable starting in 2023 (subject to various requirements and limitations), opening the clean hydrogen market to new investors. Alternatively, hydrogen energy storage technology and hydrogen production facilities may qualify for the investment tax credit (ITC).
The DOE has the authority to distribute the US$9.5 billion allocated to clean hydrogen projects under the BIL, including the US$8 billion earmarked for H2Hubs. On 13 October 2023, DOE announced its selection of 7 regional H2Hubs to receive up to US$7 billion4. The hubs are expected to produce 3 million metric tonnes (MMT) of hydrogen per year. These funds will be distributed through cooperative agreements with DOE under which both DOE and the recipients share responsibility for the direction of the projects. The remaining funds will be available for use by the Hydrogen Demand Initiative (H2DI)5 consortium led by the Energy Futures Initiative to organise a market for clean hydrogen.
On 13 March20246, the DOE announced 52 projects across 24 states that would receive US$750 million in support of the "Hydrogen Shot." Launched 7 June 2021, the Hydrogen Shot aims to eliminate the gap between the cost of hydrogen produced by natural gas (US$1/kg) and hydrogen produced by renewable energy (over US$5/kg) by reducing the cost of green hydrogen to US$1/kg by 2031. And in December 2023, the DOE issued a Funding Opportunity Announcement (FOA)7 on behalf of HFTO to support the H2@Scale Initiative, which aims to advance affordable hydrogen production, transport, storage, and utilisation. A total of US$59 million is expected to be made available to applicants who applied by the 22 March 2024 deadline.
The DOE has the authority to distribute the US$9.5 billion allocated to clean hydrogen projects under the Bipartisan Infrastructure Law, including the US$8 billion earmarked for H2Hubs.
According to the FOA, the DOE is looking to fund the following to further this goal:
- Components for hydrogen fuelling of medium and heavy-duty vehicles.
- Standardised hydrogen refuelling stations.
- Hydrogen fuel cell powered port equipment.
- Proposals addressing permitting and safety for hydrogen.
- Reports addressing equitable hydrogen technology community engagement.
Up-coming evolution
DOE, in collaboration with other government agencies, released its National Clean Hydrogen Strategy and Roadmap in June 2023. The Roadmap calls for 10 MMT of clean hydrogen per year by 2030, 20 MMT per year by 2040, and 50 MMT per year by 2050. The three strategies described by the Roadmap to achieve these goals are:
- Strategy 1: Targeting initial deployment of clean hydrogen in sectors where limited alternatives for decarbonisation exist, such as industrial sectors, heavy-duty transportation, and long-term energy storage.
- Strategy 2: Reduce the cost of clean hydrogen through the Hydrogen Shot program discussed above. Through this program, DOE plans to spark private investment and resolve inefficiencies and vulnerabilities throughout the supply chain.
- Strategy 3: Investing in regional hydrogen hubs through the H2Hubs programme discussed above. Regional hubs will connect producers with end users in close proximity and allow rapid upscaling in important markets. Offshore wind facilities and ports are identified as examples of potential centres around which to base H2Hubs.
Some recent examples
In March 2022, Green Hydrogen International (GHI)8, joined by ABB Energy Industries in March 20249, announced plans for Hydrogen City, Texas, an integrated green hydrogen production, storage, and transport hub. The project is anticipated to be powered by 60 GW of solar and wind power and produce over 2.5 billion kilograms of hydrogen per year, which will be used for green ammonia, sustainable aviation fuel and other products.
In June 2022, the DOE issued a US$504.4 million loan guarantee to finance Advanced Clean Energy Storage10, a hydrogen and energy storage facility in Delta, Utah. The facility will capture excess renewable energy and store it as hydrogen by combining 220 MW of alkaline electrolysis with two 4.5 million barrel salt caverns to store clean hydrogen. The project is expected to start production in 202511 .
On 14 December 2022, Florida Power & Light Co, a subsidiary of NextEra Energy Inc., broke ground on the Cavendish NextGen Hydrogen Hub, a solar powered electrolysis project capable of producing approximately 11 tonnes of hydrogen per day. The first clean hydrogen plant of its kind in Florida, this project was completed in February 2024.
Footnotes
1 U.S. National Clean Hydrogen Strategy and Roadmap (energy.gov)
2 U.S. Department of Energy Clean Hydrogen Production Standard (CHPS) Guidance
5 The Future Of Hydrogen: DOE And Moniz Start Setting Up A Demand Market (forbes.com)
7 DE-FOA-0003213_MOD_2_Advance_National_ Clean_Hydrogen_Strategy.pdf
9 The Engineer – ABB joins team for 2.2GW Hydrogen City project in Texas
10 ADVANCED CLEAN ENERGY STORAGE | Department of Energy
11 Chevron Building Solar-to-Hydrogen Plant in California Oil Field | Rigzone
Originally published by Bird & Bird
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