Political uncertainty over the past few months has hindered U.S. leadership in the global hydrogen sector. The Biden administration struggled to formalize a long-term clean hydrogen policy, posing risks to the country’s energy security. Following the recent election results and upcoming change of administration, there is now an opportunity to accelerate the adoption of clean hydrogen sources as part of a strategic shift toward stronger security policies – trends seen across the world.
It is crucial that the U.S. acts on these developments, as many U.S. hydrogen projects are awaiting large-scale deployment and they are essential to securing the nation’s future role in the global trade of low-carbon fuels and enhancing energy resource mobilization. Industrial and financial stakeholders require a streamlined and rapid implementation of regulations and incentives for all forms of hydrogen production to help safeguard the nation’s energy dominance, international competitiveness, and global influence.
The U.S. has accustomed us to its leadership and boldness, and in this race among major powers for sovereignty, it should not miss the opportunity to strengthen its energy and food sovereignty. Whether one promotes it or criticizes it, hydrogen is at the heart of the global energy and geopolitical play and is a tool for enhanced sovereignty, not only as the source of alternative fuels, but also as the core of the fertilizer industry.
Several large-scale low carbon hydrogen projects have reached Final Investment Decision (FID) in the U.S. in the past year based on the existing 45Q carbon capture tax credits. This is a net win for the U.S. as it allows for the continued use of existing natural gas resources, and the development of domestic low-carbon hydrogen-derivatives, such as refined petro-products, or ammonia to produce the fertilizers preserving the country’s food sovereignty, and e-fuels which can then be sold to international markets that are transitioning faster than the U.S. This development is the license to both continue making use of its existing fossil assets, and trading freely internationally without being left out of international energy markets if the world further accelerates its energy transition ambitions.
Renewable hydrogen products also offer the U.S. an opportunity to complement its fossil fuel-based exports. The U.S. are today the second-largest consumer of hydrogen in the world (10 mtpa), most of which is derived from natural gas (55 Bnm³ per year). This amount is roughly equivalent to the current U.S. LNG exports to Europe. Replacing this existing fossil-based feedstock with renewable hydrogen would allow the U.S. to preserve its cheap natural gas deposits and further strengthen its energy independence. The U.S. should leverage its vast renewable energy resources, much of which is constrained due to capacity limits on the electrical grid, to produce renewable-based molecules that can help alleviate electric grid congestion and decarbonise heavy industry and mobility applications.
Until recently, the politics of uncertainty in the U.S., with lack of clarity around the 45V clean hydrogen production tax credit, have significantly slowed project development and pushed investors to look elsewhere. China has taken the lead everywhere in this market, on the technology and use segments, from trucks, buses, stations, electrolyser manufacturing lines, green H2 production, and cost competitiveness. China is now full speed into the deployment of its champions in the rest of the world. The U.S. Treasury needs to now move ahead at pace to finalize existing hydrogen rules under the Inflation Reduction Act – otherwise it risks losing out on a pivotal industry that will shape our future energy world and help any world power in its global security agenda.
