The administration plans to invest more than US$7 billion to develop hydrogen production hubs with a goal of meeting 10 million tonnes of demand for the gas by 2030, becoming “a pillar of the hydrogen economy for decades to come,” David Crane, US president Joe Biden’s nominee for undersecretary of energy, told Nikkei.
Some of the gas produced at these hubs, to be scattered across the country, could be exported, he said.
“We would like to cooperate with Japan, which is committed to hydrogen and ammonia in energy,” Crane said, adding, “If I had a personal wish, I would love to see Japanese companies in this bidding.”
Crane was nominated in August and is in the process of congressional approval. A well-known executive who served as president of major US power supplier NRG Energy for more than a decade, he also served as a board member of Japanese power company JERA, a 50-50 joint venture between Tokyo Electric Power Co Holdings and Chubu Electric Power.
The Biden administration has made decarbonisation a major policy initiative, setting aside massive amounts of funding in both the Infrastructure Investment and Jobs Act, passed in November 2021, as well as the Inflation Reduction Act that passed in August. The goal is to have a carbon-free power grid by 2035 and net-zero emissions by 2050.
Crane said public investments related to decarbonisation will reach US$26 billion while the private sector will match that, bringing the total investment to about US$50 billion.
Hydrogen, which emits no greenhouse gases when burned, is central to that policy. The government will first spend US$7 billion to establish six to 10 hydrogen hubs, supporting up to 50% of expenses, up to US$1.25 billion per location. Business proposals from companies will be accepted until April 2023.
Sources told Nikkei that Japanese companies such as Mitsubishi Heavy Industries are also considering to submit proposals.
The energy department’s draft hydrogen strategy, released in September, says clean hydrogen -hydrogen produced without emitting greenhouse gas – will reach 10 million tonnes by 2030. This is equivalent to about 10% of global hydrogen demand in 2021.
The International Energy Agency (IEA) projects global clean hydrogen production in 2030 to be between 16 million and 24 million tonnes per year. Clean hydrogen in the US is expected to be used in power generation, factories, plants and transportation.
Crane said “time matters” and it would be better if the hubs start production sooner. The locations will be spread across the western, eastern, and Gulf Coast regions of the country. The production capacity could reach several hundred thousand tonnes per location.
Clean hydrogen can be produced several ways. It can be extracted from natural gas combined with carbon capture storage. Water electrolysis methods can also be achieved through the use of renewable energy. Chemical processing using nuclear power is also an option.
Japanese power companies aim to reduce emissions by generating electricity using ammonia as fuel. To aid their efforts, Japanese trading companies are exploring ways to convert US hydrogen into ammonia, which is easier to transport by ship, and supply it to Japan.
The Biden administration will also introduce tax credits for hydrogen producers. Up to US$3 will be deducted from the tax for each kilogramme of hydrogen produced from renewable energy sources or nuclear power.
The US Congressional Budget Office estimates total assistance for clean hydrogen will be US$5.3 billion from 2022 to 2031. Research company Rystad Energy said in some cases the cost of producing green hydrogen can be recovered through the tax credits alone.
The European Union also plans to produce 10 million tonnes of hydrogen per year by 2030 while importing another 10 million tonnes per year.