Hydrogen power: Why US fossil fuel industry wants to get in on hydrogen act

The US rules are more flexible, using a scale to determine the level of tax credit for hydrogen projects based on the amount of carbon equivalent emissions for each kilogramme produced, starting at a basic rate of 60c per kilo.

This scale means that clean hydrogen producers can receive tax credits of up to $3 per kilogramme. Experts say the measures will kick-start the US nascent green hydrogen industry by making it one of the lowest cost producers in the world. The cost of producing hydrogen on the US Gulf coast was $6.55 per kilogramme earlier this month, according to S&P Global Commodity Insights.

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It will also make green hydrogen more competitive with so-called grey hydrogen, the most common form of hydrogen production. This process involves natural gas via steam methane reformation, without capturing the emissions. S&P says the cost reduction makes the cheapest clean hydrogen production “immediately cost-competitive”.

Over the past year, Fortescue has agreed billions of dollars of green hydrogen supply deals but has yet to start commercial production of the fuel. “The US has changed the game,” said Hutchinson. “They have created an industry out of nowhere.”

The US presently produces around 11mn tonnes a year of hydrogen from natural gas for use in oil refining and the production of chemicals. “That’s all going to get replaced now,” said Hutchinson. Global hydrogen demand in 2021 was 90mn tonnes, according to the International Energy Agency.