by Kevin Killough
Air Products lobbied for more restrictive rules on green hydrogen tax credits, which would make it harder for competitors to enter the market, but it plans to produce the gas in Saudi Arabia to ship to Europe and California.
For the past few years, net-zero emissions proponents have hyped "green hydrogen" as the fossil fuel-free alternative to energy from natural gas, and the Biden-Harris administration eagerly hopped on board.
When the administration released its proposed rules for clean hydrogen production tax credits in December, the Treasury Department’s initial guidance was in line with the preferences of climate activists, emphasizing the “three pillars” guidelines, which had stricter emissions accounting requirements to define clean hydrogen production.
In June, the Natural Resources Defense Council touted a study arguing that the “three pillars” approach would increase hydrogen production while helping to advance “U.S. climate progress.”
"Outliers"
The restrictive guidelines, however, were controversial among many companies planning to enter the nascent green-hydrogen business. Frank Wolak, president and CEO of the hydrogen industry’s largest trade association, the Fuel Cell and Hydrogen Energy Association (FCHEA), told Bloomberg Law that of the organization’s 100 members, companies supporting the restrictive credits were “outliers.”
Just before the guidance on the tax credits was released, seven companies signed a letter to the Biden-Harris administration backing the three-pillars restrictions. Air Products, an industrial gas supplier, was among them.
“We applaud the administration’s strong three pillar hydrogen tax credit proposed rule, which will be essential to delivering real emissions reductions, creating the stimulus for broader investments across the hydrogen value chain, and cementing the U.S.’s global climate leadership,” Air Products President and CEO Seifi Ghasemi said in a statement released by the Treasury Department.
Ghasemi said Air Products was making a $15 billion commitment to clean hydrogen to decarbonize the heavy-duty transportation and industrial sectors of the economy.
However, the company’s primary green-hydrogen investment is in Saudi Arabia’s NEOM project. During a panel discussion at CERAWeek in Houston in March, according to S&P Global Ghasemi said Air Products sees potential to ship green hydrogen from Saudi Arabia to California and Europe.
During the company’s first quarter earnings call this year, Ghasemi said the company’s $5 to $5.5 billion planning capex was going mainly to the project. The company has another project in Louisiana, but according to Hydrogen Insight, it won’t be tapping the 45V green hydrogen tax credit. Instead, it will utilize natural gas as the feedstock for its hydrogen, and will utilize carbon capture tax credits instead.
It’s unclear why Air Products supported the restrictive tax credits when most of Air Products’ green-hydrogen investments are in Saudi Arabia, and the company didn’t respond to requests for comments.
The company spent $4.6 million since 2022 on lobbying efforts, according to the Washington Beacon, since the passage of the Inflation Reduction Act, and lobbying disclosures show almost all of the focus was hydrogen production tax credits. Likewise, the Beacon reports, Ghasemi gave $350,000 to the Biden Victory Fund, which later became the Harris Victory Fund, and he sent another $47,900 to President Joe Biden’s presidential campaign.
California dreaming
California, however, had hoped to create its own green-hydrogen industry in support of jobs and the state’s economy. California Sen. Josh Newman, chairman of the Select Committee on Transitioning to a Zero-Emission Energy Future, told S&P Global that he was “none too pleased” with the idea of importing green hydrogen into California, which runs counter to the state’s initiatives.
A company spokesperson told the Beacon that it has not yet formalized a deal to export hydrogen from Saudi Arabia to California.
The company had planned a green hydrogen project in Texas, but during its fourth quarter earnings call Thursday, the company announced it isn’t moving forward with the project.
The company’s investors are also expressing dissatisfaction with the company’s Saudi Arabia plans. In a letter to Air Products’ board of directors obtained by Just the News, the investors called attention to the company’s underperformance.
“We initially reached out to you privately over a month ago in the hopes of having a constructive dialogue aimed at addressing the Company’s longstanding total shareholder return underperformance as well as deficiencies in the Company’s governance and capital allocation policies,” the letter states.
Among the concerns is that the company is investing billions of dollars in green hydrogen production, but it has no agreements from buyers to take the product. The plan, the investors point out, departs from the company’s traditionally conservative industrial gas model.
Economic realities: "Prohibitive"
The entire green-hydrogen industry is cratering under economic realities that producing the gas is too expensive to the point of not just being uncompetitive with natural gas. It’s cost prohibitive, according to a Harvard study published in Joule last month.
"Even if production costs decrease in line with predictions, storage and distribution costs will prevent hydrogen being cost-competitive in many sectors," the study’s lead author, Roxana Shafiee, a postdoctoral fellow at the Harvard University Center for the Environment, said in a statement. Co-author Daniel Schrag, Sturgis Hooper Professor of Geology and Professor of Public Policy at Harvard, said in the release that hydrogen could play a role in reducing emissions, but it would be unwise to expect green hydrogen to be a total solution.
In the face of these economics, it’s not surprising that multiple projects in the U.S. and across the world are being canceled.
As Bulgarian energy writer Irina Slav reports on her “Irina Slav on Energy” Substack, Saudi Arabia is planning to invest $10 billion in green hydrogen production, while a similar effort by Abu Dhabi’s Masdar is being delayed by several years. The company didn’t explain the decision, but BNN Bloomberg notes that green hydrogen is enormously expensive to produce, and development of infrastructure in importing companies takes a long time. That’s on top of safety issues.
As was seen with many climate initiatives executed under the now-defeated Biden-Harris administration, from electric vehicles to green manufacturing, federal money from the Inflation Reduction Act was poured out without little forethought, leading to cronyism and boondoggles. Green hydrogen appears to be heading to a fate, metaphorically, as the Hindenburg.
Kevin Killough
Source: https://justthenews.com/politics-policy/energy/company-lobbied-restrictive-subsidy-rules-green-hydrogen-production-saudi
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