The outlook for clean hydrogen in the US is looking more blue by the day. Provisions put forward in mid-May by US House Republicans, ahead of the country’s budget reconciliation, called for the “termination” of the 45V tax credit by bringing forward its expiry to the end of 2025, from 2033.

By contrast, the tax credits for carbon sequestration would be left largely intact, except for a tightening of the rules around credit transferability and access for certain prohibited foreign entities.

$3/t – Maximum 45V credit

This stance on 45V, which has Republican opponents, is bewildering for developers with green projects that are relatively well advanced. Without the tax credits, most green projects will be out of the money and will struggle to secure finance.

The 45V credit offers projects up to $3/kg, a game-changer that set a new benchmark for green hydrogen support. Not too long ago, the Biden administration was being criticised by the EU and other regions for handing the US green hydrogen sector such a massive advantage that it would drain investment from the rest of the world and hamper the industry’s global growth.

Proposals to extinguish 45V altogether could form the final act of a painful drama that dragged on throughout 2024 as the IRS delayed publication of the finalised rules for 45V until the eve of the election.

“This is a defining moment for the hydrogen sector,” said trade association the US Hydrogen Alliance in response to the latest proposals. “The hydrogen industry must act now to protect this critical incentive.”

If green hydrogen in the US stalls under the Trump administration, America’s leadership on driving down costs will be missed. Remember the 2021 ‘Hydrogen Shot’ and the Department of Energy’s goal to reduce production costs to $1/kg within a decade?

Green hydrogen has developed a footprint in the US, at least in terms of the number of projects on the table. The US accounts for about 16% of the global project pipeline, according to Gulf Energy Information’s GEI database. Of the US projects, about a third are green, with blue trailing at about 14% and grey around 38%. That said, the share of green projects expected to reach FID and construction is questionable, mirroring the trend in many other regions where the percentage of the project pipeline hitting FID remains below 10%.

US projects of all colours could fall victim to a review of separate funding for the country’s planned regional hydrogen hubs.

Silver lining?

Would a US hiatus on green projects necessarily be damaging to the global industry? Proponents of blue point to its ability to start scaling up now by leveraging some existing infrastructure. CCS is gaining momentum, especially in the US where CO₂ pipelines already exist. ExxonMobil is rapidly building a carbon management business, at the centre of which sits its large Baytown blue hydrogen project in Texas, with others such as Chevron also making strides.

As the blue industry grows, the demand side will also develop. Green hydrogen could return to the US under future administrations to find a ready-made market for its product, and electrolyser technology capable of meeting the country’s 2031 target of $1/t.

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Author: Stuart Penson