US plans $1bn of subsidies for clean hydrogen users as production tax credit fails to attract sufficient offtakers
Department of Energy launches consultation on what the support should look like
Stay ahead on hydrogen with our free newsletter
According to government statistics, around 12 million tonnes per annum of production capacity was announced as of late 2022, but only 10% has reached final investment decision (FID).
“Ensuring America is the global leader in the next generation of clean energy technologies requires all of us — government and industry — coming together to confront shared challenges, particularly lack of market certainty for clean hydrogen that too often delays progress,” said US energy secretary Jennifer Granholm.
“That’s why DOE [Department of Energy] is setting up a new initiative to help our private sector partners address bottlenecks and other project impediments — helping industry unlock the full potential of this incredibly versatile energy resource and supporting the long-term success of the H2hubs.”
Some of the support options the DOE is considering include:
- Contracts for Difference, which fill in the difference between the cost of producing low-carbon H2 and what customers are willing to pay
- Fixed payments to demand-side projects
- Funding to support feasibility analysis from potential offtakers near H2Hubs
- Creation of a “market-maker” entity to provide a ready purchaser/seller for clean hydrogen
And it is also weighing up the following methods of awarding these subsidies:
- A reverse auction in which the demand side competes to bid the lowest level of support they need to make the use of clean H2 in a project viable
- A request for proposal-like process in which offtake projects apply and are selected based on a variety of factors
- An eligibility-based process in which all projects that meet certain threshold requirements receive some form of support
But while this support will be linked to the H2Hubs initiative, which aims to spend up to $7bn on six to ten regional hubs, the DOE is also considering partnership with “an independent implementing entity or entities” and consulting on whether it should seek out “a single entity with national scope or several entities with regional scopes”.
The briefing also notes that the UK and Germany are already implementing offtake support, with the former basing its hydrogen subsidies on Contracts for Difference against a reference sales price, and the latter currently engaged in the double-sided H2Global auction, in which a government-owned entity buys green hydrogen from outside the EU and then sells it to the highest bidder.