The sector could see further setbacks as key H2 laws and project investments remain in doubt, writes Pamela Machado
Donald Trump's election for a second term as US president leaves the country's clean hydrogen sector looking to an uncertain future. Trump has pledged to roll back climate and environmental policies, but the fate of key hydrogen legislation, including the 45V production tax credits, is up in the air.
Initial industry reaction highlights the fact that Trump's return primarily means one thing for the sector — little to no predictability on the government's course.
"The only predictable thing about Trump is his unpredictability," Norwegian electrolyser manufacturer Nel's head of government affairs, Constantine Levoyannis, said on professional networking platform LinkedIn, adding that "there's a plethora of different scenarios" for US hydrogen's future.
Added uncertainty spells more difficulties for a nascent sector that has been held back by, among other factors, a lack of firm political guidance and clear regulatory frameworks. This could further delay investment in hydrogen projects that have been put on hold for more than a year as developers have been waiting for final rules for the 45V hydrogen production tax credits.
The industry could face even more severe setbacks if Trump follows through on his pledges to end all climate protection policies enacted during the administration of President Joe Biden.
In the run-up to the election, Trump repeatedly criticised the Inflation Reduction Act (IRA), saying he would terminate the "Green New Scam" and rescind all unspent funds earmarked for climate policy by the Biden government. This could include the 45V tax credits that would effectively provide subsidies of up to $3/kg for the cleanest hydrogen projects.
While some industry participants and observers say this is a real possibility, others deem it unlikely that the 45V tax credits will actually be scrapped, even if a majority in the Senate and potentially the House of Representatives would make this possible. The tax credits could benefit oil and gas companies and other big industrial players in key Republican states and could help create jobs and economic growth. Oil and gas industry body the American Petroleum Institute's chief executive, Mike Sommers, said in September that the industry would defend parts of the IRA that were "great provisions", including 45V and the 45Q tax credit for carbon sequestration.
Taking the credit
Instead of scrapping 45V entirely, key provisions planned to ensure that the tax credits reach projects that minimise emissions as much as possible could be loosened or removed entirely. The Biden administration has been planning for additionality requirements as well as regional and temporal correlation rules, which it said it wants to finalise before the end of this year and which are broadly similar to the EU's regulations. Levoyannis said such rules could be watered down, as could regulations around methane emissions for gas-based projects. "One thing's for sure in my eyes. Trump will not follow EU laws and guidelines," he said.
This could in fact mean a boost to hydrogen plans in the US, especially in comparison with other regions, such as the EU, where developers could face tighter regulations — but it would be a blow to those wanting to make sure that hydrogen delivers on its emissions-abatement promises.
With his focus on boosting the oil and gas industry, Trump's election could be a boon for hydrogen production from natural gas with carbon capture and utilisation or storage (CCUS). Trump repeatedly campaigned on a promise to slash regulations and ease permitting procedures for the oil and gas industry.
Many companies that are planning to produce hydrogen from gas with CCUS intend to avail themselves of the 45Q tax credits — which grant $85/t of CO2 stored — and industry participants largely agree that these are likely to stand unchanged. Meanwhile, changes to the 45V provisions and its underlying rules — such as more lenient accounting of upstream methane emissions — could make it possible for producers of gas-based hydrogen with CCUS to take advantage of even larger tax credits.
Several of the seven hydrogen hubs that were selected by the Biden administration for a combined $7bn in funding support centre on CCS-based hydrogen production, suggesting that these funds are unlikely to be rescinded. Other hubs are focused on renewable hydrogen, but they still involve firms that are rooted in the oil and gas industry.
Programmes for funding hydrogen use in transport are arguably at greater risk. Trump has repeatedly dismissed this as a viable option and has frequently claimed that hydrogen-fuelled vehicles are dangerous.
In any event, market sentiment in the aftermath of the election suggested a rather gloomy outlook for the renewable hydrogen sector. US electrolyser manufacturer and renewable hydrogen project developer Plug Power's share price fell by more than 20pc on the day after the election and has only recovered slightly since. The share prices of other companies, including Nel and fuel cell manufacturer Ballard, are also down substantially.
Brussels touts
European industry associations used the election results as an opportune moment to reiterate calls on governments to move faster on hydrogen and climate protection measures — and to provide more funding for this. In light of Trump's re-election, "Europe must hold the climate banner high", industry association Hydrogen Denmark's director, Tejs Laustsen Jensen, said on LinkedIn.
Brussels must "do more — quickly" and accelerate development of renewables and hydrogen infrastructure within the bloc, he said. In anticipation of a "more protectionist" US, the EU should also bolster its domestic energy sector to "be able to provide for ourselves", a move that "requires more money — a lot more money", Jensen said.
European Commission president Ursula von der Leyen touted Europe's leadership role on hydrogen during a speech at the Renewable Hydrogen Summit in Brussels, shortly after the election. She noted that 11 "large-scale" renewable hydrogen projects have "moved from concept to construction" in the past 12 months, while only two plants in the US took this step. "Renewable hydrogen is here, it is growing, and this is only the beginning," von der Leyen said. She pointed to "clear targets" and a "comprehensive legislative framework" and indicated that the commission is planning "clean lead markets" for hydrogen.
The US had been widely hailed as the most attractive place for hydrogen investments after the 45V tax credits were announced in 2022, and European industry participants and policymakers had warned of an exodus across the Atlantic. But the drawn out process of defining access to the tax credits sapped the US' momentum on hydrogen, somewhat alleviating concerns in the EU, even as the bloc has itself been held back by lengthy debates around regulatory frameworks and subsidy mechanisms.
