The US hydrogen sector is hoping the new Trump administration could still be a boon to the industry despite potential threats to tax credit and loan programmes.
The sector receives support from the government through two main channels—45V tax credits for hydrogen production under the Inflation Reduction Act, and up to $7b of Department of Energy (DOE) loans for the development of hydrogen hubs.
Trump was critical of both the Inflation Reduction Act and DOE loan programmes on the campaign trail and paused disbursement of funds via both channels in an executive order on 20 January.
But there are still a number of potential outcomes for both programmes, with some still favourable to the hydrogen sector, according to experts.
45V tax credits
The hydrogen production tax credit is in the list of schemes the Office of Management and Budget (OMB—which is doing a full review of funding programmes—has requested information on.
“While Trump showed support for hydrogen during his first presidency, it is unclear where the current administration truly stands. Tax credits could either be eliminated, maintained as they are, or adjusted through congressional review,” Roxana Bekemohammadi, executive director of industry body the US Hydrogen Alliance, told Hydrogen Economist.
Guidelines for the 45V tax credit for hydrogen production released by the Biden administration at the end of its tenure imposed strictly temporal and geographic correlations with renewable power. The delay in implementing the scheme and the strictness of the criteria triggered some criticism from industry groups.
“The industry is currently experiencing significant uncertainty due to the slow rollout of policies under the Biden administration, followed by the shift in leadership. As a result, many investors have already opted to stay out of the market for the time being,” says Bekemohammadi.
Relaxing these rules could allow Trump—who was supportive of hydrogen in his first term—to take credit for boosting the industry.
“There have been several Republican Congresspeople who have mentioned wanting to make the 45V rules more ‘industry friendly’, which I imagine will look like either removing the temporal matching requirements of shifting the incrementality requirements,” Abbe Ramanan, project director at non-profit the Clean Energy Group, told Hydrogen Economist.
Should this occur, it would likely make hydrogen production cheaper for developers—and thus a more attractive proposition to investors. Any changes implemented to 45V tax credits will not take effect until the next tax year.
Speaking to CNBC earlier this month, Republican Senator Shelley Moore Capito indicated she did not think the 45V tax credit would be eliminated completely.
“Those incentives are built into our tax code now,” she said. “These are billions of dollars of investments and they are great employers.”
Hydrogen Hub loans scheme
All seven of the US hydrogen hubs have been awarded their phase-one funding, intended to help them in the initial planning, design and engagement activities required to set up a hydrogen hub. That funding is meant to be implemented over the next 12–18 months.
The fact that DOE funding programmes have been paused by the Trump administration does not necessarily mean all of them will be eliminated.
“This happens with a lot of administration changes, where they just pause all funding while they review everything,” said Ramanan. “What it looks like after that depends on where this the executive order funding freeze ends up. Depending on how the litigation works out, there may be a claw back [of funds] in some way or another.”
Following the executive order, a federal judge temporarily blocked the Trump administration freeze on federal grants and loans, and subsequently Democratic attorneys general from 22 states and the District of Columbia filed a lawsuit seeking to block and permanently prevent the administration from cutting off federal funding.
“What we understand is that there will be significant litigation that will occur if those contracts are broken,” said Bekemohammadi.
Technically, Congress has control over how money gets allocated, and the litigation will revolve around whether Congressional control of those funds remains under the legal framework that has operated to date.
“The legal authority of the Trump administration to permanently halt the disbursement of funds will depend on whether a programme or project is funded through a loan guarantee agreement, cooperative agreement, grant or other transaction agreement, and the terms of those agreements,” said a report released online by lawyers at law firm Akin, Gump, Strauss Hauer and Feld.
Some firms have released statements claiming that they believe that their contracts are secure and that their hydrogen project developments will remain on track.
“Though the disbursement timeline may change as with any transition to a new administration, we are looking forward to working with the new team, and we are confident our hydrogen development projects will stay on track,” said Andy Marsh, CEO of hydrogen fuel-cell company Plug Power.
Risks of clawback
If the contracts are broken and hub funding is paused, this jeopardises up to $30b of private sector investment in hydrogen hubs, according to Bekemohammadi.
“It is in the interest of the new administration to ensure money continues to flow into the US energy economy,” she said.
The Office of Clean Energy demonstrations, which houses the hydrogen hubs programme at the DOE, is deemed by some industry figures to be less at risk than other offices that are more explicitly focused on renewable energy.
Another potential outcome is that certain provisions of the funding—such as community benefit plan development and community engagement—are removed.
“This is definitely a concern for us, because that is the main mechanism through which communities can push back on those projects, and make sure there is no undue harm,” said Ramanan.
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