Danish firm Topsoe has unveiled plans to invest up to $400m in a gigawatt-scale electrolyser production facility at Chesterfield in the US state of Virginia. FID on the plant, which would produce solid-oxide electrolyser cell (SOEC) electrolysers, is subject to an assessment of “market conditions and developments”, Topsoe said.

Construction of the plant would position Topsoe as the world’s largest supplier of SOEC technology.

If it goes ahead with the US project, Topsoe will join a growing band of European electrolyser manufacturers establishing production bases in the US on the back of incentives offered under the Inflation Reduction Act (IRA) and potential demand from the country’s emerging green hydrogen sector.

Topsoe has already received an allocation of nearly $136m in federal Section 48C tax credits.

“Our factory will ensure the economic and environmental aspects of the hydrogen economy are felt in the decades to come” Hedegaard, Topsoe

“With this new facility, we will help drive down the cost of clean hydrogen by employing our innovative SOEC technology, which is up to 30% more efficient than competing technologies,” said Kim Hedegaard, CEO of Power-to-X at Topsoe. “Our factory will ensure the economic and environmental aspects of the hydrogen economy are felt in the decades to come.”

The IRA has proved a strong draw for European manufacturers. The US Department of Energy (DOE) recently announced $750m of government funding to support the scaling up of electrolyser production and to “dramatically” reduce the cost of clean hydrogen and “supercharge” progress. Under this programme, which is designed to deliver production of 10GW/yr of electrolysers, Norwegian firm Nel and Germany company Thyssenkrupp Nucera were both invited to enter talks with the government over potential funding for projects.

Nel, a producer of proton-exchange-membrane electrolysers, is developing a major production site in Detroit, which it selected after evaluating various locations around the world, including sites in Europe and China. It already has a production site at Wallingford, Connecticut, which is undergoing a major expansion designed to raise its production capacity to nearly 500MW in 2025.

Devil in the detail

The US government has thrown its weight firmly behind the low-carbon hydrogen sector, with an emphasis on domestically produced green technology, including electrolysers. However, the pace of growth has not matched initial expectations, with hydrogen production projects slow to achieve FID. The industry’s initial optimism around incentives has been tempered as the complexities of IRA’s implementation become clearer.

The IRA has been praised for its relative simplicity, but recent guidance on tax credits from the US Internal Revenue Service (IRS) has shown the IRA is as complex as the subsidy regime in the EU, according to some in the industry.

For example, the IRS in April released new guidance on 45V tax credits relating to the use of on-site power generation for electrolysis. Project developers opting for on-site generation will need to request a ruling or a provisional emissions rate from the DOE during the design phase of construction.

“The IRS is shifting towards a pre-authorisation and pre-file registration process instead of relying solely on voluntary compliance with the threat of a field exam,” said Scott Stogsdill, tax director, energy incentives, at Dallas-based tax services and software provider Ryan. “Therefore, it is crucial to take action now if planning to build a hydrogen plant. Choosing the wrong path may lead to both regulatory penalties and missed tax incentives,” he told Hydrogen Economist.

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Author: Stuart Penson