US hydrogen strategy uncertain under Trump
The future of the U.S. clean hydrogen sector under President Donald Trump is uncertain, but a wholesale reversal of government support for existing projects is unlikely.
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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 the radar for the incoming U.S. President, 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 (IRA) – which aims to direct nearly $400 billion at boosting low-emission energy technologies, including hydrogen – is certainly on his radar.
Republicans have voted 54 times to repeal the IRA, alongside other provisions of the Act, since Democrats and President Joe Biden passed it in August 2022.
Meanwhile, Trump has granted Elon Musk, who has repeatedly bashed hydrogen fuel cells, potentially sweeping power within his administration.
“The only certainty right now is uncertainty,” says Carina Krastel, Managing Director the European Green Hydrogen Acceleration Center (EGHAC), InnoEnergy.
“The much-anticipated hydrogen production tax credit (45V) in the U.S. under the IRA will now be in question, as well as efforts to define a standard for green hydrogen.”
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Still to be allocated, Production Tax Credits (PTC) for hydrogen – a sliding scale based on intensity of carbon emissions for each kilo of hydrogen produced – will pay out once the final definition of what constitutes clean hydrogen is decided upon.
The decision is expected by the end of 2024, which many in the hydrogen sector hope will mean the PTC will 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 IRA, 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.
“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,” says co-chair of the Bracewell law firm’s Policy Resolution Group (PRG) Dee Martin.
“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.”
Policy uncertainty and the low-carbon hydrogen market
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Source: Wood Mackenzie's 'Hitting the brakes: How the energy transition could decelerate in the US'
The potential loss of jobs in red states caused by the reversal of Democratic hydrogen policies make dismantling of the IRA and other environmental programs especially tricky for the incoming government.
“I think we'll see a lot of internal Republican discussion about where they feel most comfortable in attacking the IRA, 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,” Jonathan Traub, Leader of the Tax Policy Group at Deloitte said during a webinar on Trump’s taxation plans.
Within the IRA, clean hydrogen, nuclear, and carbon capture are relatively safe from being defunded, Traub said. The PTC’s focus on carbon emission intensity, rather than the technology behind it, makes it harder to go after specific CO2 reduction methods, he added.
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Hydrogen states
The oil and gas industry has been a mostly enthusiastic player in the development of clean hydrogen, granting it a potential shield against those that see global net zero efforts as mistaken.
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.
“I don’t know that, on the menu of things that Trump is talking about rolling back as part of the IRA, hydrogen is particularly high on that list, because it stands to benefit a lot of red states in light of certain hydrogen hubs and the concentration of projects,” 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’).
“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,” says Investment Banking Vice President at Solomon Partners Mike Mohamed.
Hydrogen will be important as it can serve as a long-duration storage vehicle and can be deployed during periods of peak demand, especially as data centers have an acute need for always-on electricity, Mohamed 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,” he says.
By Paul Day