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Exxon warns Baytown, other hydrogen projects unlikely under federal draft rules
Feb 22, 2024
https://www.houstonchronicle.com/business/energy/article/exxon-baytown-hydrogen-tax-credit-biden-18677668.php

Relevant excerpts:

New tax rules

Not all clean hydrogen developers are worried about the tax rules.

British industrial firm Linde announced early last year, months before the draft tax credit rules were released, that it was going to start construction on a $1.8 billion blue hydrogen facility in Beaumont. And Pennsylvania-based Air Products said in November it would go ahead on building a $4.5 billion blue hydrogen plant in Louisiana.

But the majority of clean hydrogen projects, of which there are dozens in the works around the country, are on hold waiting to see if the Treasury Department loosens up the rules around claiming the hydrogen tax credit, said Frank Wolak, president of the Fuel Cell & Hydrogen Energy Association.

“Companies with captive customers who want to get ahead of the curve are building” he said. “But most projects are waiting for the final guidance to see if they’re economic. Right now theres a lot of things proposed and planned but not a lot of (final investment decision).”

The Biden administration has come under increasing pressure from environmentalists around hydrogen fuel, with groups like the Sierra Club advocating for only hydrogen facilities that build their own renewable energy facilities — not using existing ones — to receive federal subsidies.

But companies like Exxon, which is slated to make a final investment decision on its Baytown project this year, are pushing them to allow some flexibility in the early stages, lest this hydrogen energy push suffer the same failures as past efforts.

“When we look at the market it’s blue hydrogen. It’s what is available today to deliver those clean energy goals,” Klewpatinond. the Exxon executive said. “Green hydrogen may play a part in the future, but it has challenges to scale up. Blue hydrogen is expensive but green hydrogen is even more expensive.”

So far, the Biden administration has indicated some willingness to negotiate, with Energy Secretary Jennifer Granholm saying at an event in Washington Wednesday the administration was, “asking sincerely for input.”

And they’re feeling pressure from more centrist Democrats, including Senators Sherrod Brown of Ohio, Joe Manchin of West Virginia and Bob Casey of Pennsylvania.

“When developing the Inflation Reduction Act, we intended for the clean hydrogen incentives to be flexible and technology-neutral. Treasury’s draft guidance does not fully reflect this intent,” Sen. Tom Carper, D-Del., said in a statement late last year.

The administration last year released a roadmap projecting 10 million tons of clean hydrogen production a year by 2030, enough to replace most existing carbon-polluting hydrogen plants. And it has committed to distributing $7 billion to seven hydrogen hubs around the country, including the one in Houston.

But energy analysts are projecting the clean hydrogen market will take longer to develop, likely a decade or more, beginning with existing hydrogen customers such as refineries and chemical plants and only later expanding into transportation.

“It’s only the last couple years we’ve been doing this. Its important to remember that,” John Larsen, a partner at the research firm Rhodium Group, said at an event in Washington earlier this month. “Hydrogen wasn’t a real option before (the tax credit) and now it is.”