The US has a notable green hydrogen advantage over EuropeApril 15, 2023
The EU struggles with high energy prices that can’t compete with subsidies in the United States.
Green hydrogen has a great deal of appeal, and while the European Union had been leading the way in the race for a while, it appears that the subsidies in the United States are sending it ahead.
Energy investors are keeping a close eye on both markets to see where the next advances will occur.
The EU recently announced new plans to set up a European Hydrogen Bank as a component of its response to the US Inflation Reduction Act’s $369 billion in clean energy funding. The European Hydrogen Bank is expected to launch before the close of 2023. It is intended to raise the green hydrogen supply through the use of an auction process connecting sellers to buyers. It will also provide subsidies for the cost of producing the H2 when compared to the cost of equivalent fossil fuels.
Still, with the subsidies in the United States through the climate bill, EU leaders are concerned that investors will find the US more attractive. The race is most certainly on. Governments in both the US and the EU are hoping that low-carbon and zero-carbon H2 will play an important role in decarbonizing industries such as shipping and steel manufacturing. Domestic production means improved energy security and less reliance on imported fossil fuels, particularly for Europe.
Companies are struggling to determine what support is available for green hydrogen production in Europe.
“The real charm of the IRA is its simplicity. To sum up the overall amount of available funding in Europe is very difficult,” said Tyssenkrupp Nucera business development manager Leif Christian Kröger.
The truth is that there are EU subsidies. That said, they aren’t as easy to find as they are in the US, because they’re spread across many different places. Funding as high as €5.2 billion (about $5.6 billion) was approved last September for H2 projects. Moreover, there remain nearly €270 billion in unused EU COVID-19 recovery funds that can change purposes as funding for clean energy projects. There are also grants worth €1.5 billion for companies focused on clean energy infrastructure, such as H2 fueling stations. Beyond that, each of the EU national governments has their own support available within their borders.
In the US, the process has been streamlined mainly to a single place, making the path for green hydrogen fuel project funding more obvious and straightforward. This may also make it more appealing for investors uninterested in wading through complex funding processes.
The Inflation Reduction Act offers a production tax credit of as much as $3 per kilogram of green hydrogen. The amount is based on the carbon intensity of the H2, meaning that it could help to make renewable H2 competitive with grey H2, which is produced using processes powered by natural gas with unabated emissions.
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