U.S. could surpass China as clean hydrogen leader

Washington D.C. Correspondent
Source: BloombergNEF: Hydrogen Supply Outlook 2024 • Clean hydrogen refers to production from electrolysis of water using renewable energy and from natural gas equipped with carbon capture and storage technology.

The United States could surpass China as the world’s leading clean hydrogen producer as early as next year, according to BloombergNEF’s latest projections shared exclusively with Cipher.

Governments including the U.S. are pouring large sums into making clean hydrogen, which is seen as one of the most viable replacements for carbon-intensive fossil fuels in hard-to-abate industries like steel, cement, shipping and long-distance hauling.

Producing clean hydrogen — either from electrolysis (splitting water with renewable energy) or from natural gas equipped with carbon capture and storage (CCS) — continues to attract the most investment in the U.S. among emerging clean technologies, according to Cipher’s Cleantech Tracker.

Even though the U.S. is projected to become the world’s largest producer of clean hydrogen as soon as next year, BNEF says the country still isn’t on track to meet the Biden administration’s annual goal of producing 10 million metric tons by 2030.

“In our outlook, the U.S. undershoots the goal by getting to 6 million metric tons by 2030,” Adithya Bhashyam, BNEF hydrogen analyst and one of the report’s authors, told Cipher.

With its robust project pipeline, the U.S. is responsible for 87% of the clean hydrogen supply coming out of North America in the next six years. BNEF analysis projects U.S production could surpass China’s next year even though China currently makes three times as much clean hydrogen. By the decade’s end, the U.S. could be producing twice as much as China.

However, BNEF cautions China has not yet set a target for hydrogen production in 2030, so there’s a chance the country could ultimately deploy more hydrogen than currently expected.

Moreover, Bhashyam said BNEF projections for the U.S. are dependent on final federal guidance for tax credits in the 2022 Inflation Reduction Act for clean hydrogen. The guidance was proposed in late December and is expected later this year. These guidelines will determine how the government will award credits for hydrogen made with electricity from the grid and from natural gas equipped with CCS.

Nearly 80% of forecasted U.S. supply is expected to be made from natural gas with CCS as these projects have reached the advanced planning stages, supported by generous CCS tax credits, BNEF said. This includes projects by chemical companies Air Liquide and CIF Industries.

In contrast, the announced pipeline of projects making hydrogen with renewable-powered electrolysis is significantly smaller because companies are waiting for final government guidance.

BNEF says its forecast could change if ExxonMobil finds the tax credit unfavorable and withdraws its clean hydrogen project in Texas representing 14% of the total U.S. projected supply.