The Biden administration proposed eligibility rules for hydrogen industry subsidies Friday, but some conditions may ultimately stymie innovation and production of the technology, Bloomberg News reported.
Hydrogen is one of the key green energy technologies that the administration is counting on to replace fossil fuels on the path to reaching its goal of a fully decarbonized power sector by 2035. The proposed rules for billions of dollars of hydrogen subsidies are governed by strict environmental constraints intended to ensure that hydrogen production does not generate more emissions than it effectively cancels out, but green energy trade groups say that those conditions may actually stifle the nascent industry, according to Bloomberg.
The Biden administration and environmentalists consider hydrogen fuel to be a crucial tool to decarbonize heavy-duty transportation, as well as the production of steel and cement, according to Bloomberg. However, the hydrogen fuel production is in its infancy and has yet be proven effective and economical at scale. (RELATED: Companies Pressure Biden Admin To Allow Tax Credits For ‘Green’ Hydrogen Produced With Natural Gas)
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The tax credits are meant to bridge that gap, but the proposed rules mandate that subsidy-eligible hydrogen can only be generated if new green power is being produced during the same hours, according to Bloomberg. Administration officials reportedly said that they chose to restrict the subsidies to hydrogen that is produced with green energy brought online within the last three years, on the same power grids and at the same times.
Several green energy trade associations and executives criticized the proposal. The guidelines “will fall woefully short in achieving the Administration’s decarbonization objectives” and “are counter Congress’ intent,” Andy Marsh, the CEO of Plug Power Inc., a hydrogen company, told Bloomberg.
“Unfortunately, the Administration proposal contains a fatal – but fixable – flaw that must be addressed to realize the economic, environmental, and climate benefits of commercially scaling a domestic green hydrogen industry … the rushed imposition of the most burdensome restrictions fails to acknowledge the market realities of new technology deployment,” American Clean Power Association CEO Jason Grumet said of the proposed rules. ” Specifically, imposing an hourly matching provision too early for first-wave green hydrogen projects will discourage a significant majority of clean power companies from investing in green hydrogen manufacturing and facilities.”
The green energy requirements attached to the eligibility rules could spawn a price premium of up to 150%, which would make hydrogen economically unfeasible for most potential applications, according to Bloomberg, which cited a previous analysis conducted by the American Clean Power Association.
The guidelines are still in draft form, and will now be subjected to a 60-day public comment period and potential revisions, according to Bloomberg.
The White House, the Treasury Department and the Energy Department all did not respond immediately to requests for comment.
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