Just a couple of years ago, everyone seemed to be talking about the great potential for clean hydrogen. As governments worldwide strive to decarbonise, several industry players were looking to hydrogen as the potential miracle fuel that could clean up operations. While there is still hope for a hydrogen revolution in some parts of the world, this is looking increasingly unlikely in the United States.
Under the Biden administration, investors across the U.S. were planning to spend billions on hydrogen projects, encouraged by the financial incentives introduced in the 2022 Inflation Reduction Act (IRA) and other policies. The main focus was on green hydrogen, which many hard-to-abate industries were looking to use to help decarbonise operations. Green hydrogen is produced through the electrolysis of water using renewable energy sources to power the process. This varies from other forms of hydrogen, such as blue and grey, which use natural gas to power operations.
Investors aimed to develop wind and solar farms in key locations, such as the Gulf and the desert Southwest, and use the clean energy to power electrolysers to produce green hydrogen. The idea was to transform disused gas pipelines to transport green hydrogen across the U.S. to support decarbonisation efforts across a range of industries, from transport to manufacturing, as well as export it to Europe and other regions.
Some industries are notoriously hard to decarbonise, and they still rely on fossil fuels to power operations. While clean electricity has helped drive down emissions in recent years, producing a clean fuel that can be used for a wide variety of applications has been much harder. There was significant optimism around green hydrogen’s use to fill this gap, particularly under former President Biden. The IRA provided a tax credit for the production of clean hydrogen of up to $3 per kilo, while the 2021 Bipartisan Infrastructure Law (BIL) designated $7 billion for a series of ?hydrogen hubs.
However, the big ambitions for green hydrogen that followed the introduction of the IRA and BIL have begun to fade due to a range of barriers to project development. Firstly, the price of producing green hydrogen has not fallen to anywhere near the level investors had previously hoped, as production has remained limited. While many thought that there would be abundant clean electricity from new solar and wind energy projects, progress slowed during the COVID-19 pandemic, and most of the clean electricity now available in the U.S. is used directly rather than to produce fuel. In addition, since President Trump has come into power, there is greater uncertainty around the energy transition sector in general, following major funding cuts and pauses on IRA incentives.
In September 2024, Hy Stor Energy backed out of a contract to purchase over 1 GW of alkaline electrolysers from the Norwegian cleantech company Nel. Meanwhile, in June this year, BP announced it was suspending a blue hydrogen project at its Whiting Refinery in Indiana. The blue hydrogen facility was one of eight projects in the Midwest Alliance for Clean Hydrogen (MACH2), a federally funded Regional Clean Hydrogen Hub.
A spokesperson for the company said, “BP is committed to remaining a critical driver of the economic engine that powers northwest Indiana and the Midwest… While we are indefinitely pausing our low-carbon project in the region, our focus is on building a strong, economically competitive future for our Whiting Refinery.”
It is now uncertain whether the expansion of the U.S. hydrogen industry has just stalled or if it will fail to happen. The Information Technology and Innovation Foundation (ITIF) published a 2024 green hydrogen analysis that reviewed the $8 billion to be spent on “hydrogen hubs,” and the even larger sums for production and investment tax credits in pursuit of a new hydrogen-driven clean energy economy. It concluded that “hydrogen was essentially a mirage”. The study suggested that green hydrogen production was impractical, at least when using the existing technology.
An updated ITIF assessment suggests that its original prediction appears accurate. It shows that after years of pilot projects, we are still nowhere near the commercial phase of green hydrogen deployment; there is little interest in hydrogen fuel cell vehicles or hydrogen fuelling stations; there have been severe delays in the use of green hydrogen in aviation, and other hydrogen sectors have also faced delays. The study ultimately suggests that while green hydrogen may be useful in the U.S. one day, we are still a long way off.
Following several years of enthusiasm around the development of a strong green hydrogen industry in the U.S., this now seems increasingly unlikely. Several barriers to clean hydrogen production, as well as greater political and economic uncertainty around transition industries, have led to project delays and cancellations. As other countries continue to invest in green hydrogen, which could help drive down prices and improve production processes, there is still potential for the development of a U.S. hydrogen industry, but likely not for many years.
By Felicity Bradstock for Oilprice.com
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