Fortescue criticizes Biden’s green Hydrogen Tax Credit Act rules
TL/DR –
The “hourly matching” rule, which requires hydrogen producers to either stop production when renewables are not available or subscribe to excess renewable power from various sources, can increase the cost of an 80-megawatt green hydrogen facility by 140 to 200%. This rule could force hydrogen producers to sign up for seven times more renewable power than they could utilize at any time, leading to wastage and increased cost. Fortescue has suggested the government to consider “annual matching” instead, which would allow hydrogen producers to rely on non-renewable power at times, so long as they sourced extra renewable power at other times and consumed as much power as they generated in a year.
Hydrogen Producers Navigating Regulatory Guidelines
The “hourly matching” rules could push hydrogen producers to either halt production when renewable sources are unavailable or subscribe to excess renewable power from various sources, ensuring constant availability of clean energy.
Fortescue, a key player in the hydrogen industry, has proposed the government to consider “annual matching”. This system would enable a hydrogen producer to depend on non-renewable energy at certain times, as long as it sourced extra renewable power at other instances, and consumed equivalent energy it generated annually.
Impact on Power Surplus and Costs
In its submissions to Treasury, Fortescue cautioned that “hourly matching” could inflate the cost of an 80-megawatt green hydrogen facility by “between 140 and 200 per cent”. Andy Vesey, Fortescue’s North American chief, expressed that “hourly matching” would compel a hydrogen developer to subscribe to seven times more renewable power than they could consume at one time.
The 45V draft rules stipulate eligible hydrogen producers to consume “additional” or new clean power, rather than purchasing from existing clean power generators. This “additionality” clause aims to stimulate the green hydrogen industry to invest in new renewable projects but also presents challenges for early-stage projects.Learn more about Fortescue’s Project.
Fortescue warned that the wait times for new clean power projects and difficulties in developing transmission lines imply the “additionality” clause could hinder the growth of the hydrogen industry.
Implications and Future Prospects
Fortescue suggested exemptions from the rules for early adopters, with these exceptions “grandfathered”. Mr Vesey stated that the regulations were doing “everything against the original intent” to foster a clean hydrogen industry.
Other projects like Woodside Energy’s hydrogen venture in the US could also face uncertainties. Their H2OK project in Oklahoma plans to use electricity from the state’s power grid.
The hydrogen eligibility discussions illustrate the ongoing fine-tuning of the IRA, even after two years since the legislation passed Congress. Battery makers, electric vehicle manufacturers, and critical minerals producers are also waiting for clarity on “foreign entity of concern” rules within the IRA.
Audit results from the Massachusetts Institute of Technology and Rhodium Group discovered that government money accounted for just $US33.7 billion of the $US239 billion invested in clean energy, transportation, and manufacturing in the year to September. Most of this investment was private money anticipating future support, rather than government spending.
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