Katrina Fritz is executive director of the California Hydrogen Business Council.
Hydrogen is poised to play a massive role in the future of energy. The past two years have represented a quantum leap in hydrogen policy in the United States, buoyed by authorization of billions of dollars of Congressional funding. While commonly used in refining and fertilizer production today, new uses and new forms of cleaner hydrogen will play a significant role in reducing emissions and growing our economy, especially in California where lawmakers are advancing legislation and investments needed to realize hydrogen’s full potential.
Achieving this goal is not a foregone conclusion, however, as hydrogen producers await important guidance from the U.S. Department of the Treasury and Internal Revenue Service on the crucial 45V production tax credit that will determine which producers can qualify to claim the credits. The announcement of the $7B hydrogen hub awards represents tens of thousands of clean energy jobs across the U.S. — investments and jobs that could be at risk if the guidance limits the ability to scale hydrogen quickly.
Some advocates are calling for restrictions on PTC eligibility they call the "Three Pillars." These so-called pillars — real time delivery, only new renewable generation, direct connection — would restrict the use of renewable electricity in ways not applied to any other load. The “pillars” are, in reality, program design elements with a range of options that can be considered. Whatever the optimal provisions are in a given time-frame, they should be applied uniformly to all electric loads. If more stringent requirements are added than are currently in place (annual time matching, no prohibition on using existing resources, and regional market areas), then new requirements should be phased in and uniformly applied.
As the new, more stringent, requirements being demanded of hydrogen were not envisioned when the IRA was written and passed, these new requirements would effectively rewrite the Inflation Reduction Act to include serious restrictions on the types of clean energy that can be used, where it can be used, and even when it can be used. If the goal is to scale clean hydrogen, we should be exploring ways to encourage its production, not creating new hurdles before it can even get off the ground.
The future of the hydrogen economy in the United States and California rests on a PTC that is practical and workable for industry stakeholders. Without a workable PTC, the administration risks derailing their own agenda as laid out in the U.S. National Clean Hydrogen Strategy and Roadmap that calls for clean hydrogen to take a central role in a 50% to 52% reduction in U.S. GHG emissions from 2005 levels by 2030 and achieving net zero GHG emissions no later than 2050. In California, we’ve set even more ambitious targets, with the goal of becoming net zero by 2045.
Hydrogen enjoys strong support in the Golden State with industry leading advancements in power generation and zero-emission transportation. One of the state’s largest utilities, SoCalGas, announced its Angeles Link that would be the nation's largest green hydrogen energy infrastructure system. California is also home to a growing fleet of nearly 18,000 zero-emission hydrogen fuel-cell electric vehicles that are served by an expanding network of 57 refueling stations with that number expected to double in the years to come, and working towards coverage and fueling experience akin to that of gasoline and diesel. Additionally, the Port of Long Beach, a critical node in global maritime trade, has announced a goal of transitioning all terminal equipment to zero-emissions options, including hydrogen, by 2030 and port truck fleets to zero emissions by 2035.
In August 2023, Governor Gavin Newsom announced California’s Hydrogen Market Development Strategy, calling it an all-of-government approach to building up California’s hydrogen market. Newsom declared California as “all in on clean, renewable hydrogen,” and noted hydrogen will be “an essential aspect of how we'll power our future and cut pollution.” Importantly, and unlike many other energy sources and fuel types, hydrogen enjoys bipartisan support, both in California and across the country. Hydrogen hubs are in development in Texas, as well as Appalachia and the Midwest. In California, bipartisan legislators came together in May 2023 to sign a letter expressing support for the Alliance for Renewable Clean Hydrogen Energy Systems’ application to make California home to one of the nation’s first clean hydrogen hubs.
This alignment of policy and politics highlights hydrogen as an integral player in the emerging clean energy economy. That will be increasingly important as leaders recognize the role hydrogen can play to abate emissions from sectors like long-haul trucking, steel and heavy industry. Much of the hydrogen produced today is from legacy fossil fuels, and critics argue that further development of hydrogen, including clean hydrogen, will serve as a lifeline to traditional energy sources. This perception has led to calls for a highly restrictive PTC — one that makes claiming the credit nearly impossible.
But let’s be clear: we need hydrogen to achieve our climate goals, and any effort to limit or delay its growth will only hurt our environmental progress.
While Treasury and the IRS deliberate how best to structure the tax credit, we are losing precious time. Some projects are already at risk of being delayed or canceled, and we simply don’t have time to wait when it comes to combating climate change.
