Australia's Fortescue turns soil at US renewable liquid hydrogen project

Australia's Fortescue group turned the soil at its US project, slated to produce up to 11,000 mt/year of liquid renewable hydrogen, strategically positioned to replace diesel for heavy-duty transportation, the company said late May 3.

The Arizona Hydrogen project in Buckeye, Arizona, comes at a time when the US is setting the guidelines for claiming production tax credits under its Inflation Reduction Act announced in 2022 to boost clean energy development.

"There are rules right now under consideration with the Biden Administration that would make already announced projects like this one dramatically more expensive and smaller, resulting in fewer economic opportunities and slower progress on decarbonization," Fortescue Executive Chair and Founder Andrew Forrest said. "I support the Biden Administration's goal to produce hydrogen in a way that prioritizes sustainability, however 45V, in its current form, is a straitjacket on the industry..."

In a Notice of Public Rulemaking (NPRM) December 2023, the US Treasury proposed guidance for claiming the 45V Clean Hydrogen Production Tax Credit established under the Inflation Reduction Act.

The 45V tax credit provides a tax credit of up to $3/kg of hydrogen to projects with low lifecycle greenhouse gas emissions.

The guidance proposes that Energy Attribute Certificates must represent electricity generation that is time-matched to the period during which the electrolyzer is operating -- beginning on an annual basis, and later transitioning to an hourly basis as tracking systems improve.

It also says the electricity supply to the electrolyzer must be located in the same grid region and be incremental to existing generation such as, from new clean power plants.

Rising cost

In April 2023, 45 companies including Air Liquide and Avangrid, BP, Entergy, National Grid, Sempra Energy and Woodside asked the Biden administration in the US to use annual matching to determine hydrogen producers' Production Tax Credit eligibility as against hourly matching that was proposed late in 2023 by the government, Woodside's CEO Meg O'Neill said in March.

The Arizona project is significant for Fortescue because the southwest market consumes approximately 5 billion gallons of diesel annually in heavy-duty transport.

However, Fortescue has highlighted rising costs being a hindrance to renewable hydrogen developers worldwide.

In April, Fortescue's Renewable Hydrogen Project CEO Mark Hutchinson said high price for electricity has been instrumental in delaying Fortescue's Queensland, Australia, renewable hydrogen project, appealing to the government to help lower the prices.

Platts, a part of S&P Global, assessed US Gulf Coast hydrogen produced via alkaline electrolysis at $2.43/kg May 2, nearly two and half times higher than a month ago.

It assessed Queensland hydrogen produced via alkaline electrolysis at $4.24/kg May 3, up 17% month on month.