The US Government is planning to inject $1 billion into clean hydrogen subsidies, a part of their ambitious $7 billion H2Hubs initiative.
Why? To address a significant roadblock in hydrogen adoption: a lack of offtakers. Simply not enough people are buying clean hydrogen.
Initially, the US offered a clean hydrogen production tax credit, hoping to spark investment from project developers. Unfortunately, that has resulted in less-than-expected interest. At the end of 2022, around 12 million tons per year of production capacity was announced, but only a small 10% has made it to the FID stage.
So, what will these new subsidies look like? The Department of Energy is exploring various routes, including Contracts for Difference, fixed payments to demand-side projects, funding for feasibility analysis, or creating a “market-maker” entity to facilitate clean hydrogen sales.
And how will these subsidies be awarded? The DOE is considering a reverse auction, a proposal-based process, or an eligibility-based process.
This move could potentially stimulate private investment in the clean hydrogen sector, following the example set by the upcoming European Hydrogen Bank, and similar initiatives in the UK and Germany.
But the big question remains – can these subsidies successfully address the demand-supply imbalance and accelerate the clean hydrogen revolution? Let’s see.