US green hydrogen industry faces policy uncertainty, but executives upbeat on long term

The US green hydrogen industry has been slower to take off than many analysts had predicted, and the country is unlikely to meet its goal of reducing the cost of hydrogen to $1/kg by 2031, but the industry is expected to grow over the longer term, executives said April 30.

Based on current data, it is unlikely that the US will reach its $1/kg cost goal in the next six years, known as the "Hydrogen Shot" that was developed by the Department of Energy under the Biden administration, Payal Kaur, a hydrogen analyst with BloombergNEF, said during the BNEF Summit New York.

Although the Trump administration's tariffs add an extra layer of uncertainty to the nascent US hydrogen industry, increasing costs for green hydrogen by 14%, the biggest issue facing the industry is the status of incentives and funding, Kaur said.

Rolling back clean energy policy

Legislation enacted during the Biden administration that created tax credits for hydrogen, known as 45Q and 45V, has been called into question as the current administration looks to roll back much of the clean energy policy set forth under Biden.

"The previous administration and Congress did what for our industry was a great thing with 45V and the Inflation Reduction Act legislation," but the final rules for the tax credits came out later than planned, Alejandro Perellon, head of Americas at Hy24, a low-carbon hydrogen investment company, said.

The buzzword in the industry is consistently "uncertainty," but at the end of the day "we think the US in the medium to long term, no matter the administration, will stand to be a leader," he said.

Ana Quelhas, chair of the Renewable Hydrogen Coalition and head of hydrogen at EDP, agreed that there is a positive long-term outlook for hydrogen in the US.

It is a marathon and there will be bumps along the way, especially in the beginning, and this is what is happening, she said. The industry "clearly overestimated the short-term ability to deliver on hydrogen production and consumption," and while there is still long-term uncertainty, "I firmly believe that this is the right direction because the fundamentals are there," Quelhas said.

Headwinds will make hydrogen development take longer than initially expected to take off in the US. Europe is currently further ahead, she added.

Project development

Despite the headwinds and policy uncertainty, projects are moving forward. Hidrogenii, a joint venture between Plug Power and Olin Corporation, commissioned a 15 mt/day hydrogen liquefaction plant in St. Gabriel, Louisiana, April 17.

"When you look at the deployment of a good deal of the renewable energy development that is going on, it's actually in red states," Andy Marsh, CEO of Plug Power, said.

Verdagy, a clean hydrogen electrolysis company, is building a 60-MW clean hydrogen project near the Gulf Coast in Texas.

Broadly for US hydrogen, there are some near-term questions, "but we generally feel good" about the tax credits, Rahul Bammi, president of Verdagy, said.

Asked specifically if the tax credits were likely to survive the current policy reset in Washington, Bammi said he thought the core value would be maintained and could be tweaked in ways that improve it for the industry.

The biggest ingredient in the cost of producing hydrogen is power, Marsh said. If the cost of electricity is high, "it becomes very challenging," he said.

But all the panelists agreed that the main challenge for green hydrogen in US is policy uncertainty.