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6 June
2023
By Leigh
Collins
US unveils national clean hydrogen
strategy and roadmap based around three key priorities
Document focuses on 'strategic,
high-impact uses', cost reduction and regional H2 networks —
all but ruling out its use in cars, heating and co-firing in power
stations
The US government has released the final version of its long-awaited
National Clean Hydrogen Strategy and Roadmap, eight months after
unveiling the draft document in September last year.
Following a public consultation, the three key priorities remain the
same in the updated paper: the targeting of “strategic, high-impact
uses for clean hydrogen”, reducing the cost of clean H2, and building
regional clean hydrogen hubs.
The goals for domestic clean H2 production also remain the same: 10
million tonnes by 2030, 20 million by 2040 and 50 million by 2050.
“The use of clean hydrogen [defined as producing less than 4kg
of CO2-equivalent per kg of H2] will be focused strategically to
provide maximum benefits, particularly in sectors that are hard-to-decarbonize,”
the 99-page document from the Department of Energy (DOE) explains.
“Rather than competing with alternative low-cost and efficient
decarbonization technologies, such as electrification, clean hydrogen
adoption will focus on end-uses that lack alternatives and are in
industries that can build momentum to enable scale, increase benefits,
and drive down cost.”
This all but rules out the use of H2 for cars, the heating of
buildings and co-firing in power stations — despite the government’s
own Environmental Protection Agency championing the latter only last
month.
“Specific markets include the industrial sector (eg, chemicals,
steel and [oil] refining), heavy-duty transportation, and
long-duration energy storage to enable a clean grid.”
And the strategy is still to reduce the cost of producing clean
hydrogen by electrolysis to $2/kg by 2026 and $1/kg by 2030 without
subsidy — the so-called “Hydrogen Shot” — even though a recent
government report stated that the US was on course to reach $1.50/kg
in 2035.
“The United States can dramatically lower the delivered cost of
clean hydrogen by developing sustainable and supply-resilient
pathways, including electrolysis, thermal conversion with CCS [carbon
capture and storage], and advanced or hybrid production pathways,” the
document continues.
“Harnessing the innovation and entrepreneurial spirit of
Americans and world-class National Laboratories, industry, and
academic facilities, in addition to ramping up deployments, can help
drive down costs rapidly and achieve scale within a decade.”
And it adds: “Scale can be achieved strategically by focusing
on regional networks, ramping up hydrogen production and end-use in
close proximity to drive down transport and infrastructure costs and
create holistic ecosystems that provide local benefits.
“For instance, by leveraging the [$8bn] Regional Clean Hydrogen Hubs
program as established in the BIL [2021 Bipartisan Infrastructure
Law], DOE will focus on catalyzing regional infrastructure networks,
bolstering the uptake of long-term hydrogen offtakers, and unlocking
private capital.”
Costs and usage
The clean hydrogen production tax credit of up to $3/kg,
introduced in last year’s Inflation Reduction Act but yet to be
enacted (see panel below), will be the key to enabling current users
of grey hydrogen (made from unabated fossil gas) to switch to the
cleaner option, the document suggests.
The full $3/kg tax credit — for clean hydrogen produced with
lifecycle greenhouse gas emissions of less than 0.45kg of
CO2-equivalent per kg of H2 — would enable green hydrogen to break
even with grey immediately in the refining and ammonia sectors.
But it would take longer for clean H2 to reach the threshold
for cost-competitiveness in the steel industry or with diesel in
heavy-duty trucks, until 2027 and 2030 respectively.
The strategy document talks about three phases — or “waves” — of
hydrogen usage.
“Applications of clean hydrogen in the first wave will be
jumpstarted by existing markets that have few alternatives to clean
hydrogen for decarbonization and where there is access to hydrogen and
compatible end uses.”
These include: ammonia production; oil refining; long-haul
heavy-duty trucks; long-distance buses; heavy machinery in mining,
construction and agriculture; and forklifts.
The second wave — “use cases where clean hydrogen offers a
growing economic value proposition, supported by commitments by
industry and policy momentum” — includes steel production; some
industrial chemical production; energy storage and power generation;
medium-duty trucks, regional ferries; and aviation (ie, using H2
directly and via sustainable fuels produced from clean hydrogen and
biomass/waste feedstocks).
And the third wave — which “will become competitive as clean hydrogen
production scales significantly and as costs decline and
infrastructure becomes available” — includes shipping (using clean H2
directly or via derivatives ammonia or methanol); cement; back-up and
stationary power for resilience in hospitals, data centres, etc); and
“blending with existing natural gas networks [to] support targeted
decarbonization of hightemperature heating systems, primarily in the
industrial sector where high temperatures are needed for certain
sectors, such as chemicals”.
It is worth noting that railways (or railroads in the US) are
mentioned as a potential use of hydrogen in the document, but not in
the section about waves.
Actions and milestones
The strategy document also includes 110 “actions” that the US
government plans to take by 2025, 2029 and 2035, although most of
these might be better be described as “aims” or “goals”, and many are
already under way.
These are split into four sections: clean hydrogen production,
delivery and storage infrastructure, end uses and market adoption, and
“enablers”, which are neatly summarised by the roadmap in the
following “actions and milestones”:
1) Clean hydrogen production
Catalyze research, development and demonstration in
electrolysis, thermal conversion and new pathways to meet Hydrogen
Shot [by 2025]
Demonstrate replicable, scalable production from renewables,
nuclear, and fossil and waste with CCS [by 2025]
Deploy gigawatt-scale electrolyzers and develop domestic supply
chains [2026-29]
Scale up electrolyzer manufacturing and recycling/reuse
capacity [2026-29]
Achieve ten million tonnes of production capacity and $1/kg
target [2030-35]
2) Delivery and storage infrastructure
Identify and prioritize barriers to infrastructure roll out [by
2025]
Initiate supporting infrastructure for regional hubs [by 2025]
Demonstrate advanced and efficient infrastructure components
[2026-29]
Develop sustainable regional clean hydrogen networks [2026-29]
Deliver clean hydrogen at scale [2030-35]
3) End uses and market adoption
Engage regulators to lay groundwork for strategic adoption
across sectors [by 2025]
Initiate industrial projects and develop offtake agreements [by
2025]
Deploy regional clean hydrogen hubs [2026-29]
Deploy technologies that lower pollution and provide resiliency
[2026-29]
Scale up hydrogen hubs and prepare export opportunities
[2030-35]
4) Enablers
Engage stakeholders; address safety codes and standards;
develop critical supply chains [by 2025]
Develop and expand workforce, talent pools, and apprenticeship
programs [by 2025]
Ensure 40% of benefits flow to disadvantaged communities
impacted by DOE-funded clean H2 projects [2026-29]
Demonstrate business cases and activate private capital
[2026-29]
Achieve Justice 40 [a separate government initiative to address
decades of underinvestment in disadvantaged communities]; create
good-paying jobs, and ensure public health and safety [2030-35]
The report concludes that clean hydrogen is “an important
element of the nation’s path to decarbonization”.
“Federal agencies, through a whole of government approach, are
committed to working with partners in industry, academia, national
laboratories, local and Tribal communities, and more to advance this
transition and will leverage a broad array of tools including
policies, financial assistance, loans, apprenticeship programs, and
stakeholder engagement, to accelerate progress.
“Through effective collaboration and with the right strategies
and implementation plans, the United States can and must succeed in
the development of a sustainable, resilient, and equitable clean
hydrogen economy.”
Details of The US Hydrogen Tax Credit
The $433bn Inflation Reduction Act of 2022 creates a tax credit that
would pay clean hydrogen producers up to $3 per kilogram (adjusted for
inflation).
The size of the tax credits available to US clean hydrogen
producers depends on the lifecycle greenhouse gas (GHG) emissions of
each project — and more importantly, on how much staff are paid.
So the basic tax credit rate for “qualified clean hydrogen” is
set at $0.60/kg, with a sliding scale depending on lifecycle emissions
— measured in carbon dioxide-equivalent (CO2e) — of the H2 produced.
Hydrogen manufactured with less than 0.45kg of lifecycle CO2e
emissions per kg of H2 would receive 100% of the credit, followed by
33.4% for 0.45-1.5kgCO2e/kgH2, 25% for 1.5-2.5kg and 20% for 2.5-4kg.
The lifecycle emissions would have to be verified “by an
unrelated third party”, and only projects that start construction
before 2033 would qualify.
However, the wage requirement in the new bill seems to be the
most important part of the deal — multiplying the size of the tax
credit by a factor of five.
Producers would be eligible for this boost if they ensure “that
any laborers and mechanics employed by contractors and subcontractors
in the construction of such facility… shall be paid wages at rates not
less than the prevailing rates for construction, alteration, or repair
of a similar character in the locality in which such facility is
located as most recently determined by the Secretary of Labor”.
Importantly, these lifecycle emissions are calculated from
“well to gate” — in other words, they would include upstream methane
emissions in the production of blue hydrogen (which is made from
natural gas with incomplete carbon capture and storage).
Also, the IRA states that blue hydrogen projects would be
ineligible for H2 tax credits if they already receive federal tax
credits for carbon capture and storage — but green hydrogen projects
would also be allowed to receive renewable energy tax credits valued
at $30/MWh in addition to the hydrogen ones.
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