The Road to a Hydrogen-Driven Future: Unveiling the Need for Transparency and Standards in the U.S.
Amidst the burgeoning landscape of clean hydrogen as a cornerstone of the U.S. energy mix, a new report by the esteemed law firm Troutman Pepper casts a discerning light on the path ahead. The report, titled “Fueling Up: How to Make U.S. Clean Hydrogen Projects Happen,” is a clarion call for greater transparency and the establishment of robust standards to propel the nation’s hydrogen economy to its anticipated heights.
A Clarion Call for Regulatory Clarity
The report underscores the necessity for explicit clarity surrounding tax credits and a steadfast commitment to certification rules and standards. These are deemed essential for clean hydrogen to be seamlessly integrated into the U.S. energy tapestry. As the nation steers towards a sustainable future, the Inflation Reduction Act and Bipartisan Infrastructure Law have sparked commercial interest in clean hydrogen projects. However, the legislative frameworks and their implementation are laced with complexities that necessitate astute navigation.
Tax Credits: The Incentive Conundrum
Tax credits, designed as catalysts for clean hydrogen production, have encountered a roadblock with proposed IRS regulations deemed too restrictive by industry voices. The stringent criteria for hydrogen to qualify as ‘clean’—additionality, time matching, and deliverability—pose significant challenges, causing developers and utilities to pause and reassess, fearing escalated costs and hindered project funding and construction.
The Quest for Certification Standards
The industry’s plea for transparent certification standards is echoed by off-takers who seek assurance of the purity of the hydrogen they procure. The Biden Administration’s allocation of $7 billion to foster seven regional clean hydrogen hubs is a testament to the government’s intent to stimulate demand. Yet, the ambiguity in hydrogen classifications leaves stakeholders in sectors like chemical production, oil refining, and transportation grappling with uncertainty.
State Initiatives: The Vanguard of Progress
The report points to a potential blueprint for success, drawing parallels to state-led initiatives that previously championed renewable portfolio targets. With only a handful of states like California, Oregon, and Washington adopting low-carbon fuel standards, there’s a call for broader state commitments to instill confidence and support the burgeoning domestic clean hydrogen market.
Global Aspirations: The U.S. as a Hydrogen Exporter
Looking beyond domestic horizons, the report identifies an opportunity for the U.S. to position itself as a global exporter of clean hydrogen, particularly to energy-transitioning regions like Europe and Asia. With the global regulatory landscape pressuring industries to decarbonize, U.S.-produced hydrogen emerges as an alluring prospect, potentially attracting international capital and establishing a spot market for clean hydrogen and its derivatives.
Manufacturing and Infrastructure: Pillars of the Hydrogen Economy
The call to action extends to the expansion of U.S. manufacturing facilities for hydrogen technologies and the prioritization of national ‘backbone’ infrastructure. Such strategic moves aim to mitigate project risks and foster a self-reliant hydrogen economy, reducing dependency on global manufacturing hubs like China.
The DOE’s Strategic Vision
The Department of Energy’s National Clean Hydrogen Strategy & Roadmap, released in June 2023, acknowledges the infrastructural investments required to realize the goal of producing 10 million metric tons of clean hydrogen annually by 2030. This ambitious target underscores the need for a concerted effort to streamline regulatory frameworks and unlock investments for infrastructure development.
Conclusion: A United Front for Clean Hydrogen Advancement
Mindy McGrath, a regulatory and finance Partner at Troutman Pepper, emphasizes the consensus on clean hydrogen’s potential as an integral non-fossil element of America’s energy portfolio. The report shepherds a vision of government and industry aligning to demystify regulations and forge a cohesive strategy, fostering an environment where clean hydrogen can thrive.
