Companies up and down the hydrogen value chain are rooting for eight long-term provisions within the US Build Back Better Act that they say would accelerate the US hydrogen economy to maturity.
President Joe Biden’s $2 trillion spending plan, which passed the House Nov. 19, now faces uncertain odds in the Senate without support from Democratic holdouts Senator Joe Manchin of West Virginia and Senator Kyrsten Sinema of Arizona. Both would have to support the bill for it to pass the evenly divided senate, all but ensuring that the bill will undergo changes in order to win their support.
A central feature of the bill would spend more than $500 billion on measures aimed at transitioning the economy away from fossil fuel reliance, and investments in the hydrogen economy make up a sizable portion of that total.
The eight spending items, which direct money towards hydrogen production and the development of fuel cell electric vehicles, account for about $40 billion in spending over the next decade, according to cost estimates published by the Congressional Budget Office.
The spending would “spur further investment and deployment of low and zero-carbon hydrogen across the US economy if enacted,” a coalition of hydrogen companies called Hydrogen Forward said in a Nov. 19 statement. “This long-term commitment provides industry additional certainty to plan projects and ensure financial viability as cost reductions are achieved through scaling-up hydrogen production and deployment. We are hopeful the Senate will maintain this commitment to hydrogen and enact additional support for the US hydrogen industry.”
Hydrogen spending provisions
A significant hydrogen-dedicated measure would create a new clean hydrogen production tax credit, defined in the bill under section 45X. The amount of each credit is tied to the carbon intensity of the hydrogen over its entire life cycle.
For example, the credit would offer $3/kg of hydrogen produced with 95% fewer emissions than produced using natural gas, and between 60 cents/kg and $1.02/kg for hydrogen produced with between 40% and 95% fewer emissions than hydrogen produced using natural gas.
The CBO estimates that the 45X tax credit will cost the government $5.4 billion by 2031.
The largest hydrogen-related provision extends a program that provides credits for residential energy efficiency equipment, including fuel cells, geothermal heat pumps, solar panels, small wind turbines and battery storage technology. The provision provides 30% of capital costs for eligible expenditures through 2031, which is expected to cost nearly $25 billion, according to the CBO. After 2031, the program ratchets down to 26% in 2032 and 22% in 2033.
Three of the spending provisions are related to fuel cell electric vehicles. One provides $1 billion for the deployment of battery and fuel cell recharging stations, another provides nearly $5 billion to create a 30% credit for commercial electric vehicles and a 15% credit for hybrid commercial vehicles. The third provides credits for qualified fuel-cell electric vehicles through 2031 and is estimated to cost the government $44 million.
The bill would also spend $3.5 billion to expand an existing program, originally created in 2005 to encourage the sales of hybrid and diesel vehicles, to include electric vehicles and hydrogen fuel cell vehicles.
Source: S&P Global.