Clean hydrogen’s Promethean moment: U.S. recent climate policy wins and their impacts on climate change
Recent landmark U.S. legislation positively affects climate change by igniting the affordable, domestic clean hydrogen (H2) economy and accelerating its pace for global impact. H2 economy is an industrial system based on H2 and electricity as the dominant energy carriers to move, deliver, and store energy from other sources (Conte & Ranchetti, 2013). Although H2 is the most abundant element available in the universe, on Earth, H2 occurs naturally only in the compound form with other elements in the solid, liquid, or gaseous phases (EIA, 2022). H2 production is energy-intensive and costly due to its separation from the H2-containing feedstock with an energy source (DOE, 2020). Based on different technological resources and production methods, H2 can be described as:
- black/brown (black/brown coal through gasification);
- gray (natural gas via steam-methane reforming [SMR]);
- blue (coal/gas through SMR with carbon capture);
- green (renewables via electrolysis, water-splitting technology);
- pink (nuclear energy via electrolysis);
- turquoise (natural gas through pyrolysis, methane thermal splitting) (Economist, 2021; H2 Green Steel).
Clean H2 comprises blue, green, or pink H2 (Lazard, 2023). It presents an important opportunity for modern energy systems amid the decarbonization transition, which requires replacing high-carbon energy sources and carriers with low-carbon ones (Corbeau et al., 2022). Clean H2 can assist in decarbonizing up to 25% of global energy-related CO2 emissions (DOE, 2023). Although clean H2 is not a panacea for this transition, it may assist other pathways, namely electrification, biomass-based fuels, and energy efficiency measures, to achieve favorable decarbonization outcomes (Hydrogen Council, 2021).
Since the United States has the world’s largest economy, its decarbonization is essential for attaining global greenhouse gas (GHG) emissions reduction of the magnitude required to fight climate change. Based on various climate models, frequent U.S. tornadoes and other severe weather (especially in boreal springs) indicate they are the product of human-caused climate change (Gensini & Brooks, 2018). For example, in 2021, the U.S. witnessed historic wildfires and droughts in the West, record heatwaves across the country, and unprecedented storms and flooding in the Southeast (DOS, 2021). Hurricanes and tornadoes have recently ravaged the South and the Midwest (Elamroussi et al., 2023). In sum, the U.S. already experiences the impacts of the changing climate, which will even worsen. Therefore, the country needs clean H2 as a part of its holistic, multi-faceted decarbonization approach.
Nowadays, clean H2 is having a Promethean moment due to recent historic climate policy wins, fundamentally shaping how the U.S. government supports H2 development. The Promethean moment is “one of those moments in history when certain new tools, ways of thinking or energy sources are introduced that are such a departure and advance on what existed before that you can't just change one thing, you have to change everything” (Friedman, 2023). Prometheus was a daring ancient Greek demigod (part god and part human) who stole fire from Mount Olympus. This research study focuses on two Promethean U.S. climate policies, the Infrastructure Investment and Jobs Act or the Bipartisan Infrastructure Law (BIL), and the Inflation Reduction Act (IRA), and analyzes their impacts on climate change.
Historic climate laws
2021’s BIL and 2022’s IRA are two significant Promethean U.S. policies that contribute to advancing the domestic clean H2 economy and developing the global H2 economy. The BIL and IRA present bold policy tools and ways of thinking, transforming everything related to this new industrial system. The enthusiasm surrounding H2 as a low-carbon energy carrier is not new, with waves of excitement in the 1970s, 1980s, and the early 2000s. None of these waves resulted in sustainable investment in the technology. The failure in the previous H2 scale-up stemmed from the dependency on high/rising oil and gas prices with the sole focus on the transportation sector (IEA, 2019). Currently, it is "an unprecedented time in history for H2 with interest being amplified worldwide due to its potential to address the climate crisis as well as energy security and resiliency” (DOE, 2022a, p. 1). In other words, although H2 has not lived up to the hype for decades, there is hope now that H2 time as a decarbonization solution has finally come.
The BIL and IRA are related to the bipartisan Energy Act of 2020, which provided the first opportunity for H2 to become a part of the U.S. energy transition, where policymakers identified the technology as a target of the new research and development (R&D) efforts for developing integrated energy systems (U.S. Senate, 2020). Moreover, 2021’s DOE Hydrogen Shot initiative sought to reduce clean hydrogen's cost by 80% to $1/kg by 2031 (DOE, 2022b). Based on these R&D efforts, Congress passed the CHIPS + Science Act of 2022, authorizing $11.2 billion in R&D for the Department of Energy (DOE), especially for the Advanced Research Projects – Energy agency, working on advanced energy technologies, namely H2 (U.S. Senate, 2022).
Supplementing these R&D investments, the BIL, once-in-a-generation legislation, defines clean H2 as one manufactured "with a carbon intensity equal to or less than 2 kg of CO2e produced at the site of production per kg of H2 produced" and establishes a Clean H2 production standard (draft publicly available) (Latham and Watkins, 2022, p. 1). Also, the BIL authorizes and appropriates $62 billion for the DOE, including $9.5 billion in clean H2 funding (DOE, 2022b). For example, Section 40314 describes clean H2 programs with vital amendments to the Energy Policy Act of 2005, such as:
- $8 billion over four years (2022-2026) for Regional clean H2 hubs
- Requirement for development of National Energy H2 Strategy
- $500 million over four years (2022-2026) towards R&D and demonstration projects for novel clean H2 production/processing/delivery/storage/use of equipment manufacturing technologies
- $1 billion for the Clean Energy Electrolysis Program for funding R&D, demonstration, commercialization, and H2 deployment efforts (Goldman Sachs, 2022).
Lastly, the IRA is another historic legislation toward creating the solid groundwork for nationwide H2 solutions (H.R. 5376, 2021-2022). This legislation offers additional incentives to boost the clean H2 economy further, namely:
- Clean H2 production tax credits for the developers who produce clean H2 beginning in 2023 or start new construction before January 1, 2033. The 45V new tax credit, depending on life-cycle emissions and wage/apprenticeship requirements, provides up to $3/kg in credit to H2 producers. The 45Q existing tax credit for carbon sequestration also became more valuable (Krupnick and Bergman, 2022).
- Investment tax credits for energy storage, including clean H2.
- Clean vehicle credits extend to vehicles that use H2 fuel cells and electric batteries and provide significant credits for commercial vehicles, where clean H2 might be beneficial.
- Alternative fuel (AF) credits: property tax credits for expanding AF fueling stations, encouraging more H2 transportation infrastructure (Goldman Sachs, 2023).
In sum, as "supply-side incentives, [the BIL and IRA] can help make clean H2 cost-competitive with incumbent technologies in the next 3-5 years for numerous applications” (DOE, 2023, p. 1). In other words, these historical legislations will accelerate the domestic clean H2 economy and, as a result, assist in developing the global H2 economy. These recent Promethean climate policies can also positively impact climate change.
Impacts on climate change
Landmark investments through the BIL and IRA are spurring Promethean momentum toward achieving the climate benefits of clean H2 both domestically and worldwide. Despite significant challenges, the U.S. is currently set to position its clean H2 economy for rapid growth. For example, the country produces only about 10 MMT/year of hydrogen, compared to 90 MMT/year globally (DOE, 2022). U.S. hydrogen production primarily comes from fossil fuels (99%), natural gas through SMR (95%), and partial oxidation of natural gas through coal gasification (4%). Electrolysis is used only in 1% of U.S. hydrogen (DOE, 2020). DOE strives to increase affordable, clean H2 production from almost zero today to 10MMT/year by 2030, 20 MMT/year by 2040, and 50 MMT/year by 2050. These targets are based on demand scenarios in potential high-impact uses for clean H2, such as the industrial sector, long-duration energy storage, and heavy-duty transportation. DOE believes that by attaining a 5-times increase in clean H2 production and utilization by 2050, the U.S. can decrease its total GHG emissions by nearly 10 percent compared to 2005 (DOE, 2022).
According to the draft DOE National Clean Hydrogen Strategy and Roadmap, the BIL and IRA can contribute to advancing domestic and global clean H2 economies (DOE, 2022). For instance, in November 2022, in response to BIL’s igniting the clean H2 economy, 79 coalitions submitted concept papers for the H2Hubs program. DOE encouraged 33 applicants to submit complete applications by April 7, 2023. In a few months, DOE will select between 6-10 winners, awarding each winner $1.25 billion in funding. Likely, other applicants may still build their projects. If all proposed regional clean H2 hubs were to happen, they would attract more than $150 billion in private financing for such a construction (Bioret et al.; Wilson, 2023). Therefore, the BIL-inspired Promethean growth of the multiple regional clean H2 hubs can accelerate the development of the domestic clean H2 economy in the following decades. Since the U.S. produces more than 10 percent of the global H2 supply, the country can also play a significant role in developing the global clean H2 economy, positively impacting climate change.
Another Promethean clean H2 game-changer, the IRA, contributes to the fight against climate change by directly accelerating the domestic clean H2 economy and indirectly building the global H2 economy. For example, domestically, boosted by the IRA incentives, electrolyzer manufacturers Ohmium, EH2, and Nel announced their rapid expansion plans by jointly producing 4-times current global installed electrolyzer capacity (~2GW in 2022) (CTVC, 2023). Cummins also plans to expand its H2 electrolyzer production in Minnesota (Adler, 2022). After the IRA passage, NextEra Energy wants to invest more than $20 billion in green H2 (Blunt, 2023).
The IRA also inspires other synergies that can affect the growth of green H2 production, which requires adding more clean energy to the electricity grid. For instance, First Solar announced its order book (90% of which is in North America), which has grown almost seven-fold since the start of 2020. The orders doubled from the second quarter of 2022 to the end of the first quarter of 2023. After the IRA passage in August 2022, the company’s booking indicates that the customers are bullish about the IRA’s impact on the energy sector (Bullard, 2023)
Furthermore, the IRA indirectly contributes to developing the global clean H2 economy. The 45V tax credit causes a positive market disruption since it attracts investments to the US from other countries and ensures US-made clean H2 can compete in the future global H2 economy. Namely, Caglayan claims that the European Union's shrinking share of H2 projects (from 63% at the end of 2022 to 56% in April 2023) “is a direct consequence of the bloc’s slow response to the [IRA] and [its] delay in developing concrete regulation for renewable hydrogen” (Horner, 2023, para. 8).
Consequently, other countries are being pressured to create more competitive climate policies and support their clean H2 production, contributing to the growth of the global clean H2 economy (Helmi, 2023). For example, the EU unveiled its plans for a similar IRA-style support package, the Green Deal Industrial Plan (Murray, 2023). Canada Budget 2023 also mirrors the IRA, including two new investment tax credits (ITC) targeting clean energy and technology manufacturing. As part of Canada’s 2022 proposal, the clean H2 ITC includes volumetric ITC credit based on the project’s carbon intensity and specific labor conditions (Schoek, 2023). Likewise, Australia has just announced establishing the $2 billion H2 Headstart initiative to finance the most significant green H2 projects (Arena, 2023). Therefore, like BIL, the IRA-inspired Promethean acceleration of the domestic and international clean H2 economies also helps curb the effects of climate change.
This research study describes the BIL and the IRA, the current Promethean U.S. climate policies, and evaluates their impacts on climate change. Former White House climate adviser Gina McCarthy believes that the U.S. “clean energy transition is soon going to be on steroids” due to these recent policy wins, which proved popular in both blue and red states (Powell, 2023). In the current policy environment, the commercial “lift-off” for clean H2 is projected to materialize in three phases: 1) near-term expansion (~2023-2026), industrial scaling (~2027-2034), and 3) long-term growth (~2035+) (DOE, 2023). In other words, the BIL and the IRA, with their emphasis on clean H2, have put the U.S. on track toward achieving significant GHG reductions. Like in the 21st century, climate change was a profound concern of the Founding Fathers of the United States (Frankopan, 2023). Their nation has come very far in this current Promethean moment, but significant challenges remain to ensure that clean H2 realizes its full potential as a decarbonization solution.
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About the author
Dr. Venera N. Anderson is a global strategy advisor on sustainability and climate issues. She creates and implements innovative solutions that address the world’s most pressing issues, such as climate change, economic development, and humanitarian challenges. She is a member of the Harvard Business Review Advisory Council. Venera is a co-author of the "Touching Hydrogen Future" book (2nd edition). She is also an International Expert at Women in Green Hydrogen, a global network which strives to increase the visibility and amplify the voices of women working in the green hydrogen sector, and a Speaker at Tech Up for Women and the Wall Street Green Summit about her vision for coastal U.S. green hydrogen hubs.