Can Hydrogen Incentives Reshape the US Grid?
Hydrogen provides a versatile and promising solution for stabilising the U.S. grid and advancing the clean energy transition. BCM’s Roberto Chiarotti explores how updated U.S. federal hydrogen tax credits are designed to attract investment and reduce the cost of hydrogen production.
The US energy system is under pressure, with growing electricity demand, ambitious clean energy goals, and outdated infrastructure. Recently, updated federal rules on hydrogen tax credits have opened new possibilities for its role in transforming the grid.
These credits, offering up to $3 per kilogram for low-carbon hydrogen, aim to boost investment and make hydrogen production more affordable. This could allow companies to use extra renewable energy—like wind or solar—to create hydrogen. By storing this energy as hydrogen, we could cut waste and provide power when renewable sources aren’t producing enough.
The US government’s goal is ambitious: 10 million tonnes of green hydrogen annually by 2030, backed by over $265 billion in clean energy commitments. According to the recent Reuters report, “US Clean Power Accelerates as Tech Demand Soars”, this highlights the growing momentum behind hydrogen’s role in the clean energy transition.
However, challenges remain. Building the pipelines and storage facilities needed for hydrogen will take time and money. Plus, hydrogen must compete with other technologies, like batteries, that are already in use. Regions like Texas and Oklahoma, rich in wind and solar power, could lead the way, attracting investment under these new incentives.
The Cimarron Link project in Oklahoma will soon connect 1.9 GW of wind energy to new uses. This shows how hydrogen can work with renewables to ease grid bottlenecks and reduce dependence on long-distance transmission.
The new hydrogen tax credits are a step in the right direction. They encourage low-carbon solutions and give businesses a reason to invest in hydrogen. While it’s not the only answer to our energy challenges, hydrogen offers a flexible and promising way to stabilise the grid and support the clean energy transition.
How long they will stay in place beyond Jan 20th is another question.
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