Highlights of our recent work on hydrogen fuel.
What’s New with Hydrogen?
The video series In Focus gives researchers at Resources for the Future (RFF) a platform to share insights related to current events in energy and the environment. The series launched this past year; since September 2022, In Focus videos have tackled topics that range from climate optimism to carbon dioxide removal.
In February this year, the US Department of Energy took a step forward in its much-anticipated Regional Clean Hydrogen Hubs program by encouraging 33 of 79 funding applicants to submit full project proposals. That deadline has passed; an announcement is forthcoming from the agency about which proposals will be selected for award negotiations, during which DOE and the potential awardee will negotiate a contract for the award. In addition, the US Department of the Treasury has not yet released its detailed rule for implementing the Clean Hydrogen Production Tax Credit (known as “45V” in the tax code). Thus, the time was ripe for a related video in our In Focus series: Aaron Bergman, an RFF fellow, discussed the current and potential uses of hydrogen and how the federal government is supporting the development of hydrogen technologies. Transcribed here is Bergman’s video, in which he gives the lowdown on recent developments in the hydrogen industry.
This In Focus video was originally released on February 10, 2023. The transcript has been edited for length and clarity.
Hydrogen is a unique element that allows you to store and transport energy and burn that energy—but when you burn hydrogen, you create water instead of creating carbon dioxide. Hydrogen already is used a lot in the chemicals industry, fertilizer, and refining. But a lot of new potential uses exist, as well.
You could use hydrogen to make green steel, which is steel that’s produced without carbon dioxide emissions. You could use clean hydrogen to replace the existing applications in refineries, fertilizer production, and elsewhere; replace diesel in commercial transportation; or for long-term energy storage in the electric system. Sometimes the wind doesn’t blow, and the sun doesn’t shine, and you need a way to provide electricity. If you have stored hydrogen, you can put that hydrogen through generators to produce more electricity.
Hydrogen is a unique element that allows you to store and transport energy and burn that energy—but when you burn hydrogen, you create water instead of creating carbon dioxide.
Congress recently passed two important laws that include provisions for hydrogen: the Infrastructure Investment and Jobs Act, which sometimes is called the Bipartisan Infrastructure Law, and the Inflation Reduction Act. Both of these laws will have a large impact on hydrogen.
The Bipartisan Infrastructure Law allocates almost $9.5 billion for various hydrogen demonstration projects. One of the big provisions makes $8 billion available to the US Department of Energy to create “hydrogen hubs,” which will demonstrate technologies that produce and use hydrogen. In the Inflation Reduction Act, Congress passed two different tax credits that will impact the costs of hydrogen.
The first is the 45V tax credit, which grants a certain number of dollars per kilogram of hydrogen produced. This number depends on the amount of emissions that are produced while creating the hydrogen.
The law also changes the 45Q tax credit. Some methods of generating hydrogen produce a lot of carbon dioxide; for example, the production of hydrogen from natural gas. The 45Q tax credit provides subsidies if that carbon dioxide gets stored. This credit has been around for a while. Congress, through the Inflation Reduction Act, increased the value of the credit to about $85 per ton, which is quite significant.
—Aaron Bergman, RFF Fellow
Bergman and Senior Fellow Alan Krupnick joined an episode of the Resources Radio podcast in February to discuss hydrogen technologies and the policy landscape for hydrogen fuel. They also provided an update on the Regional Clean Hydrogen Hubs program, which the US Department of Energy has launched to support a domestic industry for clean hydrogen, by funding regional networks of hydrogen producers and consumers.
“The program is supposed to help demonstrate the production, processing, delivery, storage, and end use of clean hydrogen and serve as a basis of development for a clean hydrogen market.”
—Alan Krupnick, RFF Senior Fellow
45V Tax Credit
How can hydrogen producers prove that they are using clean electricity? This question has become a thorny issue for the US Department of the Treasury, the agency that the Inflation Reduction Act has charged with implementing the 45V tax credit for clean hydrogen fuel. Verifying that producers use clean electricity is a requirement to be eligible for the credit.
Bergman compared proposals for the implementation of 45V that would answer the question of verification, in a series of issue briefs that were released in the summer and fall this year. These proposals for implementation have different implications for US greenhouse gas emissions, deployment of new renewable energy generation, and federal spending. Bergman’s issue briefs were shared with the US Department of Energy, Department of the Treasury, and Environmental Protection Agency as the federal government considers how to implement the credit.
“The 45V tax credit is a big deal, with potentially billions of dollars at stake to jump-start a domestic clean hydrogen industry.”
—Aaron Bergman, RFF Fellow