US climate bill could be pivotal for green hydrogen

The passing of the Inflation Reduction Act (IRA) by the US Senate on Sunday may prove to be the single most important event in the history of green hydrogen to date, according to observers.

Green hydrogen is defined as hydrogen produced by splitting water into hydrogen and oxygen using renewable electricity.

“For the first time, there is a tax credit for low-carbon hydrogen,” Edward Lees and Ulrik Fugmann said in a note following the narrow passing of the act by the US Senate. “We view this as game-changing legislation for market-leading green hydrogen producers in the US.”

In essence, the act provides tax credits of up to $3/kg for green hydrogen, which would effectively ensure that the hydrogen produced in the US is the cheapest form of this hydrogen in the world.

According to S&P Global Platts, a $3/kg tax credit on green hydrogen would effectively make it cheaper to produce in most parts of the US than existing sources of so-called ‘grey’ hydrogen — ten million tonnes of which is used every year in America.

Grey (or gray) hydrogen is derived from natural gas and produced from fossil fuels, making it the least renewable form of hydrogen. Most of the hydrogen produced today is grey hydrogen. It is relatively inexpensive and commonly used in the chemical industry to make fertilizer and for refining oil.

Aside from the US, the UK has also unveiled a national subsidy for clean hydrogen — based on contracts for difference that would make it cost competitive with grey.

The European Commission has announced plans for a similar scheme, which will require the sign-off of 27 nations and the European Parliament. Germany has also revealed a €900m ($920m) auction scheme for green hydrogen imports from outside the EU.

Meanwhile in Ireland, a new report has suggested that the development of green hydrogen as a power source at scale here could attract significant overseas investment, lead to the creation of thousands of jobs and solidify the country’s status as a hub for renewable energy.

The report, by Hydrogen Mobility Ireland, forms the basis of a new White Paper on the development of the sector.

It follows the decision by the Irish Government to open a public consultation on the development of a national strategy for green hydrogen.

The report concludes that hydrogen has the capacity to fully eliminate carbon dioxide emissions from heavy goods vehicles on roads.

The deployment of the fuel across the wider transport network would in turn contribute to a reduction in Ireland’s carbon emissions by 2.6% by 2030, it claims.

The report goes on to state that the production of green hydrogen would diversify the energy supply Ireland, providing enhanced energy security.

“Given that Ireland will be legally mandated to advance a network of hydrogen refuelling stations along its major motorways as per forthcoming EU legislation, the time for action and implementation is now,” it concludes.

The European Commission has announced plans for a similar scheme, which will require the sign-off of 27 nations and the European Parliament. Germany has also revealed a €900m ($920m) auction scheme for green hydrogen imports from outside the EU.

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