Electrolyser maker Nel stacks up nearly $170m in subsidies for proposed Michigan gigafactory
Latest $41m tax credit award ‘increases attractiveness’ of taking FID, says CEO
Norwegian electrolyser firm Nel has now racked up nearly $170m in US federal and state government subsidies for a proposed 4GW factory in Michigan, after being awarded $41m in tax credits.
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The company has been awarded the tax credits for the proposed gigafactory, which will make both alkaline and proton exchange membrane (PEM) electrolysers, through the Department of Energy’s Qualifying Advanced Energy Project Tax Credit (48C).
This tax credit covers 30% of eligible investments subject to conditions such as wage and apprenticeship requirements.
The US Department of Energy had also allocated a $50m grant towards the Michigan gigafactory in March, with the Michigan state government promising an additional $75m.
“We continue to see strong support for our efforts to scale our US operations, both within advanced research and efficient manufacturing,” said Nel’s CEO, Håkon Volldal. “The support now received increases the attractiveness of investing in expanding our capacity and capability in the US.”
However, a final investment decision (FID) is still pending on the Michigan factory, which on initial announcement in May was estimated to cost up to $400m in total.
Nel is already expanding manufacturing capacity for PEM electrolysers at its site in Wallingford, Connecticut, to 500MW — and in a February results call, Volldal suggested that the Michigan factory would be on hold until the company had enough demand to justify the investment.
Environmental groups and some companies such as Air Products have backed the draft guidelines, arguing that these are necessary to prevent induced emissions from extra demand on the grid.
Proposed US guidelines on green hydrogen production
The US Treasury's proposed guidelines on green hydrogen production, published in December, call for three requirements or "pillars" that will ensure H2 is truly green and will not lead to increased emissions: additionality, temporality, and deliverability.
“Additionality” means that the green hydrogen would have to produced from new renewables projects, so that they do not utilise existing clean electricity facilities that would otherwise help decarbonise the power grid.
For this pillar, the Treasury wants hydrogen producers to source their power from zero-carbon projects built within three years of the H2 project.
“Temporality” relates to how frequently producers would have to prove that their electrolysers have been powered by 100% renewable energy — usually hourly, weekly, monthly or annually — and therefore to what extent they can use grid electricity at times when the wind isn't blowing and the sun isn't shining, and then send the same anount of renewable energy back to the grid at a later date.
Here, the Treasury is calling for renewable power to matched on an annual basis up to 2028, and then hourly from then on.
"Deliverability" — or geographic correlation — relates to how physically close the hydrogen-producing electrolysers are to the source of renewable energy they use. Distances can be set to ensure that an electrolyser in, say, Texas, is not powered by solar panels in California through renewable energy credits, which in practice could mean that green power is sent to a grid that doesn't need it, with the electricity actually used by the electrolyser coming from fossil-fuel power plants.
The US Treasury wants green hydrogen projects to be within the same regional grid as the renewable energy projects powering them.