The US hydrogen industry has gone quiet as it waits for the Treasury's final rules for the 45V hydrogen production tax credit — and importers may be looking elsewhere.
Attendees this week at the CERAWeek by S&P Global conference in Houston, Texas, were vocal about the challenges facing the hydrogen industry, which is attempting to build to scale at an unprecedented pace. Pragmatic discussions and calls for more policy support circulated around the elephant in the room — a near total drop-off in project announcements this quarter.
The wait for Treasury's draft guidance for 45V caused companies to slow down and rethink how aggressively they wanted to enter the marketplace, putting more thought into their full system costs and recalibrating their price assumptions for electricity and equipment, trade group Fuel Cell and Hydrogen Energy Association chief executive Frank Wolak told Argus. Companies that had planned to take projects to the next level have stalled their plans because of uncertainty about the future — Wolak characterized it as market maturity rather than cold feet.
45V has caused a major slowdown in the US with projects being delayed or stopped entirely, BP senior vice president of hydrogen and carbon capture and storage Felipe Arbelaez said today. But the global effects of the US stall are debatable. Most clusters or hubs around the globe are prioritizing domestic uses, so it is unlikely the worldwide pause can be attributed to the wait for Treasury's decision. The market is challenging everywhere, Arbelaez said.
Wolak agreed the worldwide hush from the hydrogen sector is more likely owed to local factors rather than knock-on effects from the US. Still, if the US fails to present itself as an attractive investment market, developers will look to places like Europe, where decarbonization mandates give developers everywhere a sense of comfort that the energy transition is inevitable, he said.
But hydrogen pause has been felt around the world, including in Europe.
"We see a slight delay or recalibration of the timeline — especially on green hydrogen," Mitsubishi Heavy Industries energy business executive vice president Emmanouil Kakaras said on the European market. Mitsubishi is now hoping for the market to kick off in the mid-2030s, rather than the early part of the decade or even the late 2020s as industry participants once hoped, he said.
Kakaras said there is less optimism than last year in the market, but there has not been a change in direction. The funding gap has not decreased since last year's CERAWeek — "quite the opposite," he said.
US industry believes the market's future hinges on the stringency of the final 45V guidance — which, if too strict, some groups warn will drive away investment.
"If you don't create a market, people will avoid the US," Wolak said.
"We actually realize when talking we're talking to our clients in Japan, Korea — North America has a bit of a reputation of not getting a lot done when it comes to building pipelines," the Canadian government's Invest Alberta chief executive Rick Christiaanse told Argus. But Christiaanse said the US slowdown may be helping drive investment northward, where investors perceive there may be greater stability.
"The US is a little bit more obtuse are not quite clear what's going on," Christiaanse said. "Canada provides clarity; that's kind of working to our benefit."
But the purpose of 45V and other clean energy provisions was to reduce net emissions, and loosening certain restrictions on hydrogen could end up sending more carbon and methane into the atmosphere than natural gas, nonprofit Environmental Defense Fund's vice president of global energy transition Beth Trask said. Not only do Treasury's proposed rules need to be upheld, but the upstream methane emissions assumptions need to be updated — the current numbers are significantly lower than actual data collected by satellites, she said.
