In Part One of this 2-part article, we looked at the differences between green, blue, grey, and black hydrogen, examined some current disadvantages of hydrogen (high cost, lack of electrolyzer and fueling infrastructure), as well as some of the advantages of hydrogen (energy density and rapid refueling time vs. longer battery charging time). Here in part two, we look at the massive infrastructure investments that will be required and the massive incentives being provided by the U.S. Federal government, the EU, and other governments.
Massive Investments Driven by Massive Incentives
The Price of Green Hydrogen (With Subsidies) Will Plummet in Some Markets
For the transportation sector, unsubsidized green hydrogen is currently far too expensive to be competitive with the fossil fuels that are currently widely used across transport sectors—i.e., bunker oil in ocean shipping, diesel fuel in rail and road transport, and jet fuel in aviation. Currently only about 1.2Mt of green hydrogen are produced each year, equivalent to less than one thousandth of current global oil production. At least a trillion dollars of investment are needed to build out the hydrogen production infrastructure required to produce green hydrogen for ocean shipping alone and ultimately to bring unsubsidized hydrogen down to cost parity with fossil fuels. Thankfully, the massive tax credits and grants in the U.S., followed by similar large incentives from the EU and other governments around the world, should bring the price of green hydrogen down rapidly and dramatically.
U.S. Hydrogen Subsidies and Grants
The Inflation Reduction Act of 2022 includes section 45V which grants a generous tax credit of up to $3 per kg for hydrogen produced with lifecycle greenhouse gas emissions intensity below 0.45 kg CO2e/kg H2 (kilograms of carbon dioxide per kilogram of hydrogen). Only ‘green’ hydrogen (typically created using electrolysis powered by renewable electricity) has those ultralow levels of emissions.
Lazar’s LCOH analysis projects that, with the benefit of these tax credits, the subsidized cost of PEM-generated green hydrogen in the U.S. will be between $0.48 to $1.81/kg. This is at or below current market prices of grey hydrogen, which are typically between $1 to $2/kg. In other words, with the 45V tax credits, green hydrogen will already be at price parity or better than conventional hydrogen in many cases, and its cost advantage will only improve over time. This provides a very compelling incentive for producers to enter this market immediately. We can expect massive investments to follow.
The U.S. Department of Energy’s (DOE) Office of Clean Energy Demonstrations (OCED) will provide up to $7B of grants to create 10 regional clean hydrogen hubs (H2Hubs). These hubs will include production, processing, delivery, storage, and end-use of clean hydrogen, such as in steel, cement, and fertilizer production. There have been a number of hubs proposed. For example, one promising candidate is the Mississippi Clean Hydrogen Hub (MCHH).
EU’s Green Deal, REPowerEU, and Clean Joint Hydrogen Partnership
The EU’s European Green Deal Investment Plan promises to “mobilize at least €1 trillion in sustainable investments over the next decade [2020-2030]”. The plan aims to catalyze investments of €320B to €460B towards increasing green hydrogen production. The goals are to increase Europe’s electrolyzer capacity by almost 70X, from 60MW in 2020 to 40GW by 2030; add 80-120GW of new solar and wind power generation to power the electrolysis; greatly expand hydrogen transportation, distribution, storage, and refueling capacity; and retrofit carbon capture and storage onto existing fossil-fuel-based hydrogen production plants.
In addition, prodded by Russia’s invasion of Ukraine and its impact on energy supply, the European Union issued their REPowerEU Plan last year. It includes a section titled “Accelerating Hydrogen”, which sets a target of 10M metric tons of domestic (EU) green hydrogen production and an additional 10M metric tons of imports by 2030. It adds €200M to EU’s Clean Hydrogen Partnership which provides hundreds of millions of euros to fund green hydrogen R&D projects.
Canada, Australia, and Many Other Countries and States Are Providing Further Funding and Incentives
Canada’s 2023 budget includes $18B (CAD) to fund a new Clean Hydrogen Investment Tax Credit (ITC) of up to 40% for qualifying projects. The ITC will be available from 2023 to 2035. EverWind is moving forward with a $6B facility in Nova Scotia with the capacity to produce 1Mt of green hydrogen and ammonia per year. It includes a 2GW wind farm to power the electrolysis. World Energy GH2 will be building a 250 kt green hydrogen plant in Canada’s Bay St. George region.
The Australian government’s Hydrogen Headstart program is investing $2B in supporting large-scale renewable hydrogen projects through competitive hydrogen production contracts, aiming for 1GW of green electrolyzer capacity by 2030. Chris Bowen, Australia’s Minister for Climate Change and Energy, makes an eye-opening statement in their State of Hydrogen 2022 report: “Australia’s announced pipeline of over 100 hydrogen projects is worth around $230-$300 billion of potential investment. This represents close to 40% of all global clean hydrogen project announcements, and underlines Australia’s potential to be among the global leaders.”
India’s National Green Hydrogen Mission sets an ambitious goal of 5Mt of green hydrogen production by 2030. Numerous other state and regional/national policies and programs to support green hydrogen projects are being enacted as well, such as the California Hydrogen Fuel Cell Partnership (HFCP), German–Australian Hydrogen Innovation and Technology Incubator (HyGATE) initiative ($90M), and many others. Spain recently raised their target for renewable hydrogen production capacity to 11GW by 2030. The World Bank’s Hydrogen for Development Partnership (H4D) provides knowledge, technical assistance, and financing for the development of green hydrogen in low- and middle-income countries.
In short, until just a couple of years ago, few would have predicted the magnitude of incentives and expected torrid pace of investment and green hydrogen capacity development that we are currently witnessing. The world will need every bit of it, and probably more, to meet the goals for decarbonizing hard-to-abate sectors, including specific transportation sectors where battery electric propulsion is not feasible (e.g., ocean shipping, long-haul aviation, and possibly long-haul trucking and rail) and non-transportation sectors (e.g., steel, cement, petrochemical, and industrial heat production).
In Part Three of this series, we look at the IMO’s aggressive net zero goals and the legal framework driving ocean shipping to adopt low- and no-emissions power, why green ammonia (derived from green-hydrogen) is likely to be the fuel of choice, the potential use of hydrogen in rail, trucking, and aviation, and some initial projects already underway.
 Source: IRENA (International Renewable Energy Association). Their Hydrogen Overview states that total global production of hydrogen (as of 2022) was about 120Mt, with only about 1% of that amount being green hydrogen. — Return to article text above
 45V is generous for green hydrogen producers because: 1) if they produce their own renewable power, they can also qualify for a renewable power production tax credit of 2.6 cents per kWh, in addition to the $3/kg green hydrogen tax credit, 2) the hydrogen tax credit is “direct pay” for the first five years (producers can claim a refund equal in value to their tax credits for five years), and 3) both the renewable electricity and clean hydrogen production credits are transferable; i.e., can be sold to others who owe taxes, if the producer does not owe that full amount in taxes. (Source: ICCT—Can the Inflation Reduction Act unlock a green hydrogen economy?) — Return to article text above
 There has been a high-stakes fierce debate about the exact rules defining how emissions are calculated to qualify for this tax credit, in the production of hydrogen through electrolysis. It is important because it will determine which kinds of green hydrogen production projects qualify and thereby which projects do or do not make economic sense. Many climate activists are advocating that the rules should be strict and include the ‘three pillars’ of additionality, deliverability, and hourly time-matching. They say without those requirements, the program will reward production of hydrogen via electrolysis that in fact has a much higher carbon footprint, as explained in Letting US green hydrogen use existing renewables ‘could increase emissions by factor of five’ and in IRA Clean Hydrogen Tax Credit: Debunking Five Myths. On the other side of the debate, many traditional energy producers argue that too stringent rules will limit hydrogen’s growth, as described in US Treasury under pressure for no hydrogen tax credit additionality requirement. Yet others are advocating a hybrid approach, with additionality and deliverability requirements in effect immediately and the hourly time-matching phased in over time. As of the publication of this article, the Treasury Department has yet to issue their rules for what qualifies for this production tax credit, missing the August 16, 2023 date mandated by Congress in section 45V of the Inflation Reduction Act. — Return to article text above
 Figure 1 in part one of this series illustrates typical carbon emissions (kg CO2e/kg H2) from black, grey, blue, and green hydrogen—see Not All Hydrogen is Created Equal—The Hydrogen Rainbow. — Return to article text above
 Source: Cleantech Group, Electric Hydrogen: A New Benchmark for Green Hydrogen Scale and Cost?, July 19, 2023, which states “delivered cost of grey hydrogen in the U.S. typically averages between $1 to $2 per kg.”. Other sources put the cost of grey hydrogen at $0.98-$2.93 per kg (BloombergNEF, Green Hydrogen to Undercut Gray Sibling by End of Decade, August 9, 2023) and $0.50 to $1.70 per kg (Energy Tracker Asia, Hydrogen Cost: Can We Afford It?, June 22, 2023). — Return to article text above
 The location of the proposed MCHH provides many advantages, anchored by the vast a network of underground salt domes in the area, which can be used for enormous capacity hydrogen storage. Hy Stor is already constructing multiple salt caverns initially providing a storage capacity of 30,000 mt (Source: Mississippi hub pitches itself as a ‘Strategic National Hydrogen Reserve’). The region also boasts the three largest dry bulk ports in the U.S. as well as 52% of US refining, 44% of US shipping, and 19% of US steelmaking (Source: Case Study – Storing Green Hydrogen to Safeguard Energy Security). The Mississippi river provides access to another 74% of U.S. steelmaking. — Return to article text above
 Source: BloombergNEF, Liebreich: Separating Hype from Hydrogen – Part One: The Supply Side, October 8, 2020. The largest expense is the 80-120GW of new solar and wind power generation, at a cost of €220B to €340B. €65B is for hydrogen transportation, distribution, storage, and refueling stations. The new electrolyzers are expected to cost €24B to €42B. €11B will be to retrofit carbon capture and storage onto existing fossil-fuel-based hydrogen production plants. — Return to article text above
 In 2023, the EU’s Clean Hydrogen Partnership (aka Clean Hydrogen Joint Undertaking) is providing €68M for research on renewable hydrogen production, €39M to support EU-wide hydrogen infrastructure/distribution, €91M to support electrodes, fuel cells, and storage systems for heavy-duty vehicles and aviation, €18M for solid oxide fuel cell manufacturing, €8M for cross-cutting issues, €10M on sustainability and criticality of electrolyzer and fuel cell materials, and TBD amount (up to €105M) on ‘ydrogen Valleys’ (regional integrated hydrogen ecosystems). — Return to article text above