US hydrogen strategy unclear as Trump seeks spending cuts

US hydrogen strategy unclear as Trump seeks spending cuts

• The future of U.S. clean hydrogen under Donald Trump is uncertain but unravelling support from the Inflation Reduction Act could be politically tricky.

 

November 19 – President-elect Donald Trump has, for a long time, supported the oil and gas industry in the United States (“Drill, baby, drill”) and rejected Democratic-backed environmentally friendly policies (“the Green New Scam”).

 

The nascent hydrogen industry, however, has mostly flown under Trump’s radar, beyond hydrogen’s flammability.

 

“The one thing I can’t get used to is hydrogen. You know, the story with hydrogen, it’s great until it blows up,” Trump said during a rally in October 2024, repeating a claim he has made that hydrogen vehicles run a risk of exploding.

 

Trump’s unconventional style makes it difficult to predict his actions on many issues, but the Inflation Reduction Act – which aims to direct nearly $400 billion at boosting low-emission energy technologies, including hydrogen – is certainly on his radar.

 

No Republican voted for the inflation act when it passed in August 2022 and there have been multiple attempts by some in the party to repeal it in its entirety or parts.

 

Meanwhile, Trump has granted Elon Musk, who has repeatedly bashed hydrogen fuel cells, potentially sweeping power within his administration.

 

Carina Krastel, Managing Director the European Green Hydrogen Acceleration Center (EGHAC), InnoEnergy, says :

 

The only certainty right now is uncertainty,

 

“The much-anticipated hydrogen production tax credit (45V) in the U.S. under the [inflation act] will now be in question, as well as efforts to define a standard for green hydrogen.”

 

The production tax credits (PTC) for hydrogen will be allocated on a sliding scale based on intensity of carbon emissions for each kilo of hydrogen produced. Before then, the federal government must make a final decision on what constitutes clean hydrogen.

 

The decision, is expected by the end of 2024 and many in the hydrogen sector hope the PTC will be in place before Trump returns to the White House.

 

Difficult roll-back

 

Any sector subsidy that has already been allocated may be difficult to roll back.

 

The inflation act, and other bills passed including the Bipartisan Infrastructure Law (BIL) and CHIPs and Science Act, have generated more than 334,000 jobs and $372 billion in new private investment since 2022, according to the environmental policy firm Energy Innovation.

 

Much of that activity has centered in states that voted Republican in the election.

 

Co-chair of the Bracewell law firm’s Policy Resolution Group (PRG) Dee Martin, says :

 

There are seven Department of Energy hydrogen hubs that cover 20 states in the United States. Of those 20 states, a majority of them are in states that Trump won in the election,

 

“Those hubs are centered around major industrial basins and rely really on a robust local workforce. In other words, hydrogen hubs result in more energy jobs, which President Trump has historically not only supported but championed.”

 

Inflation act, supporters are concerned that the wide-ranging legislation could have parts repealed and rolled back, especially those parts that have still to be fully implemented such as the PTCs for hydrogen production.

 

The potential loss of jobs in red states caused by the reversal of the Biden administration’s hydrogen policies make dismantling of the inflation act and other environmental programs especially tricky for the incoming government.

 

Jonathan Traub, Leader of the Tax Policy Group at Deloitte said during a webinar on Trump’s taxation plans.

 

I think we’ll see a lot of internal Republican discussion about where they feel most comfortable in attacking the [inflation act], which pieces they feel have shown, despite Republicans’ opposition of the bill, are actually working and helping produce either clean energy and/or good jobs,

 

Hydrogen states

 

The oil and gas, industry has been a mostly enthusiastic player in the development of clean hydrogen as it is already an important producer of hydrogen from fossil fuels.

 

Oil states along the Gulf Coast, all of which are traditionally Republican, produce around a third of U.S.’ hydrogen, or around 3.5 million tons (Mt) a year. The same states boast the country’s largest hydrogen pipeline of over a thousand miles, and three of the world’s largest salt storage caverns.

 

Hydrogen is unlikely to be high on Trump’s list for rolling back inflation act incentives as many hydrogen hub projects are concentrated in Republican-held states, says Kyle Hayes, a Partner of Foley & Lardner and Co-Chair of the firm’s hydrogen practice.

 

So much hydrogen production is focused on the Gulf Coast, and hydrogen as a product is something that can truly scale as another business line for oil and gas majors, for which hydrogen production is right in their wheelhouse.

 

Support for hydrogen from natural gas and carbon capture (‘blue), favored by the oil and gas companies, will help build the proposed hubs and stimulate demand from steel makers, transportation hubs, and for ammonia production.

 

Greater demand for hydrogen, clean or not, helps lay the groundwork for electrolytic hydrogen from renewables (‘green’).

 

Mike Mohamed, Investment Banking Vice President at Solomon Partners, says :

 

It is expected that support for ‘blue’ hydrogen will also be good for ‘green’ hydrogen because it’s supporting the general build-out of the hydrogen economy,

 

Hydrogen will be important as it could serve as a long-duration storage vehicle for electricity generation and can be deployed during periods of peak demand, especially as data centers have an acute need for always-on electricity, Mohamed says.

 

He says,

 

That is another avenue that we believe is very positive for the hydrogen story. Hydrogen can be used to provide that resiliency and much needed backup power for the data center industry space … and falling behind in the AI race is not something I think we can afford as a nation,

 

Source: Hydrogencentral