Administration tries to jump start industry
WASHINGTON – The Biden administration released its highly anticipated proposal for doling out billions of dollars in tax credits to hydrogen producers Friday, in a massive effort to build out an industry that some hope can be a cleaner alternative to fossil fueled power.
The U.S. credit is the most generous in the world for hydrogen production, Jesse Jenkins, a professor at Princeton University who has analyzed the U.S. climate law, said last week.
The proposal – which is part of Democrats’ Inflation Reduction Act passed last year – outlines a tiered system to determine which hydrogen producers get the most credits, with cleaner energy projects receiving more, and smaller, but still meaningful credits going to those that use fossil fuel to produce hydrogen.
Administration officials estimate the hydrogen production credits will deliver $140 billion in revenue and 700,000 jobs by 2030 – and will help the U.S. produce 50 million metric tons of hydrogen by 2050.
“That’s equivalent to the amount of energy currently used by every bus, every plane, every train and every ship in the US combined,” Energy Deputy Secretary David M. Turk said on a Thursday call with reporters to preview the proposal.
That may be a useful metric for comparison, but it’s a long way from reality. Buses, planes, trains and ships run on liquid fuels for which a delivery infrastructure exists, and no such system exists to deliver cleanly-made hydrogen to the places where it could most help address climate change. Those include steel, cement and plastics factories.
Hydrogen is being developed around the world as an energy source for sectors of the economy like that which emit massive greenhouse gases, yet are difficult to electrify, such as long-haul transportation and industrial manufacturing. It can be made by splitting water with solar, wind, nuclear or geothermal electricity yielding little if any planet-warming greenhouse gases.
Most hydrogen today is not made this way and does contribute to climate change because it is made from natural gas. About 10 million metric tons of hydrogen is currently produced in the United States each year, primarily for petroleum refining and ammonia production.
As part of the administration’s proposal, firms that produce cleaner hydrogen and meet prevailing wage and registered apprenticeship requirements stand to qualify for a large incentive at $3 per kilogram of hydrogen. Firms that produce hydrogen using fossil fuels get less.
The credit ranges from $.60 to $3 per kilo, depending on whole lifecycle emissions.
One contentious issue in the proposal was how to deal with the fact that clean, electrolyzer hydrogen draws tremendous amounts of electricity. Few want that to mean that more coal or natural gas-fired power plants run extra hours. The guidance addresses this by calling for producers to document their electricity usage through “energy attribute certificates” – which will help determine the credits they qualify for.
Rachel Fakhry, policy director for emerging technologies at the Natural Resources Defense Council called the proposal “a win for the climate, U.S. consumers, and the budding U.S. hydrogen industry.” The Clean Air Task Force likewise called the proposal “an excellent step toward developing a credible clean hydrogen market in the United States.”
But Marty Durbin, the U. S. Chamber of Commerce’s senior vice president for policy, said the guidance released today “will stunt the growth of a critical industry before it has even begun” and his organization plans to advocate during the public comment process “for the flexibility needed to kickstart investment, create jobs and economic growth, and meet our decarbonization goals.”
He accused the White House of failing to listen to its own experts at the Department of Energy.
The American Petroleum Institute said in a statement that “hydrogen of all types” is needed and urged the administration to foster more flexibility for hydrogen expansion, not less.
The Fuel Cell & Hydrogen Energy Association includes more than 100 members involved in hydrogen production, distribution and use, including vehicle manufacturers, industrial gas companies, renewable developers and nuclear plant operators. Frank Wolak, the association’s president, said it’s important the industry be given time to meet any provisions that are required for the top tier of the credit.
“What we can’t have is is an industry that is stalled because we have imposed requirements that the marketplace is not ready to fulfill,” Wolak said, particularly with the time it takes to bring new renewable resources online.
If the guidance is too restrictive, he said, “you’ll see a much smaller, if not negligible growth in this industry and a failed opportunity to capitalize on the IRA.”
Other industry representatives welcomed the proposal.
Chuck Schmitt, president of SSAB Americas – a supplier of steel plates– said the proposal “supports SSAB’s leadership and innovation in the decarbonization of the steel industry. This clarifying language will help drive new technology investment and create clean energy jobs in the United States.”
The federal government on Friday reopened two cross-border railroad crossings in Texas, five days after the shuttering of rail operations there disrupted trade and sparked outrage from U. S. and Mexican businesses.
Customs and Border Protection closed railroad operations in Eagle Pass and El Paso, Texas, on Monday to reallocate their customs officers to help Border Patrol take migrants into custody. Both regions have seen the number of illegal border crossings soar this month.
Operations resumed at both cities as of Friday afternoon.
Troy Miller, U.S. Customs and Border Protection’s acting commissioner, said the closures at Eagle Pass and El Paso were a response to more migrants traveling on freight trains recently. Miller said authorities are seeing “unprecedented” arrivals at the border, topping 10,000 crossings on some days this month.
The closures affected two of the six available rail border crossings between the U. S. and Mexico. Union Pacific and BNSF, the affected carriers, said automotive, agricultural, chemicals, and other consumer goods were halted. Union Pacific estimated that the closures cost $200 million in daily losses across affected industries.
News of the reopening was received with relief, but both BNSF and Union Pacific said they would be working diligently to make up for lost time.
“We will restore normal operations as quickly as possible as we work through the five-day backlog of shipments holding to cross the border,” a Union Pacific spokesperson said in a statement.
CBP said they made the changes after observing a shift in the trends of smuggling operations in Mexico that used freight trains. Although migrants board trains traveling through Mexico, the railroad carriers said they have safety measures in place to deter and detect migrants attempting to cross into the U.S. aboard their cars.
Union Pacific said it has found only five migrants trying to enter the U.S. illegally on its trains in the last five weeks.
“Through our efforts, we have experienced very few people attempting to cross the border on trains at both ports of entry,” BNSF said via a statement.
Other similar decisions to close down ports of entry and redirect officers to help with an uptick in migrant crossings are still in place. CBP said vehicular traffic is still suspended at one of the two international bridges in Eagle Pass. A pedestrian entry in San Diego, a port of entry in Lukeville, Arizona, and a border crossing in Nogales, Arizona, remained closed as of Friday.
Even after the railroad operations resumed, stakeholders expressed disapproval over the federal government’s decision.
“In the face of the unprecedented humanitarian crisis, CBP has been working under exceptionally difficult circumstances, but these ill-advised closures were a blunt force tool that did nothing to bolster law enforcement capacity,” said Ian Jefferies, the CEO and president of the Association of American Railroads.
The stalled shipments of agricultural products affected farmers and ranchers. The Nebraska Farm Bureau, an organization representing 55,000 families who have farms or ranches, called for longterm solutions but stressed more immediate changes, too.
“In the future, we call upon the Biden administration to allocate the resources necessary to secure our nation’s southern border before costing our nation’s agricultural and overall economy millions of dollars,” Mark McHargue, president of the Nebraska Farm Bureau, said in a statement.