Democratic Senator Joe Manchin signaled strong support for clean hydrogen tax credits during a Feb. 10 committee hearing, but stopped short of indicating how those credits might make their way through Congress to become a reality.
"I'm more excited about this hearing that I have been for many," he said during the Senate Energy and Natural Resources Committee hearing on clean hydrogen. "Because I truly believe that we're going down a path, and if we don't correct ourselves to be a clean climate society in America using all the resources available to us, shame on us."
Hydrogen tax credits have been a small but key feature within the Biden administration's $1.7 trillion Build Back Better Act, yet they have been hanging in the balance as Machin, of West Virginia, and his Democratic colleagues have spared over the bill's high price tag.
As proposed, the bill would offer clean hydrogen companies the option to cut their costs via a production tax credit, which would offer up to $3/kg of clean hydrogen depending on the production method's carbon footprint, or an investment tax credits, which would pay for up to 30% of the cost of electrolyzers or other clean hydrogen production equipment. The incentives would be a critical policy for the US hydrogen economy.
Manchin highlighted how credits similar to these have done wonders for the wind and solar industries. Costs for utility-scale solar fell by 85% between 2010 and 2020, while offshore and onshore wind costs have fallen by around 50%, according to the International Renewable Energy Agency.
"In the past 10 years, production tax credits for wind and solar have been $25 [billion] to $30 billion that we've invested; hydrogen has had zero production tax credits," he said. "We have to get off the dime and start doing something. Because if we don't, we're going to be left behind and totally subservient to China. I believe we're totally putting ourselves in one hell of a mess."
But there was no indication of how these tax credits might wind their way through Congress, be it through a revised version of the Build Back Better Act, an individual piece of legislation dedicated solely to hydrogen, or some other means. His office didn't answer questions about his preferred legislative blueprint, although the senator has expressed a willingness to explore climate pieces within the scope of the next reconciliation bill.
Industry pushes for incentives
Since their initial proposal in 2021, the tax credits have been widely lauded as something that could unleash the hydrogen industry in the US. And industry executives testifying before the senate committee were sure to underscore that point.
"I think the private sector is ready, but it can't be done alone," said CEO Michael Graff of Air Liquide, which operates an extensive hydrogen transportation and storage network on the Gulf Coast. "I think there's got to be a clear role and a public-private partnership with the government to have smart climate policy that incentivizes the need to build the infrastructure to make this occur."
"Hydrogen alone will not drive the energy transition, but the energy transition will not happen without hydrogen," Graff said.
Brian Hlavinka, vice president of Williams Energy's subsidiary New Energy Ventures, explained how his company is developing hydrogen projects within its existing natural gas infrastructure through blending methods. Williams Energy, which delivers 30% of the nation's natural gas daily, has been developing these kinds of hydrogen projects across the country, from Wyoming, to Oklahoma, Appalachia, the Pacific Northwest, the Southeast and the Gulf Coast.
Hlavinka said he was pleased to see provisions within the infrastructure bill invest nearly $10 billion for hydrogen research and development, and to support the creation of at least four hydrogen hubs, but he said that more needs to be done.
"We need help," Hlavinka said. "The R&D dollars are a great start. We believe other incentives are needed to really kick-start the development of a clean future, and hydrogen is a very important part of that."
Not all have been keen on the design of the incentive program as written. On Feb. 10, nearly 200 environmental groups from across the nation sent a letter to the House and Senate Committee on Appropriations criticizing any incentives that benefit fossil fuel companies, such as those that would be used to develop carbon capture and "blue" hydrogen projects.
While the tax credits would provide $3/kg of hydrogen produced using renewable energy, known as green hydrogen, credits valued between 60 cents/kg and $1.02/kg would also be available for production methods using steam methane reforming – a fossil fuel process – paired with carbon capture technology, known as blue hydrogen.
On Feb. 8, the Institute for Energy Economics and Financial Analysis released a study discouraging any public investment in carbon capture technologies and described blue hydrogen as a method that "stands on flimsy economic and environmental footing."
Meanwhile, companies up and down the hydrogen value chain felt encouraged by the Feb. 10 hearing, according to the trade group Hydrogen Forward.
"Today's hearing demonstrated that there is broad, bipartisan support for the development of hydrogen as a low- to no-carbon resource capable of powering the U.S. economy and achieving climate goals," a Hydrogen Forward spokesperson said. "While Congress's support for hydrogen hubs was a critical first step, we know that additional policy support will be necessary to ensure hydrogen can deliver on its full economic and climate promise."