Hundreds of Billions at Stake in Developing Hydrogen To Become The Fuel of the Future

Hydrogen is more than just one of the few elements you remember from the periodic table. In recent years, it’s also become one of the most hyped clean energy techs being promoted as a fuel of the future.

Funding the future: Last Friday, Biden awarded $7B to build a network of seven hydrogen “hubs” across the US — the largest in Texas and California. The funding will help reduce reliance on global energy sources and accelerate the “deployment of low-cost, clean hydrogen.”

• Biden expects the project to bring $40B+ in private investments, creating tens of thousands of jobs.
• The administration said hydrogen “could reduce overall carbon emissions in the United States by 10 to 20 percent” (WP).

Energy-intensive industries like cement, steel and chemicals make up 60% of annual emissions — but renewable sources like solar and wind can’t power their facilities alone. That’s where hydrogen comes in.

Is it clean? While hydrogen is carbon-free when “burned,” it is still expensive to produce and consumes a large amount of energy in the process. And whether hydrogen fuel is considered green or not depends on the type of fuel used.

Producing hydrogen using carbon dioxide-emitting natural gas can be as much as 70% cheaper than using renewable energy — and in 2021, ~96% of global hydrogen was being produced with fossil fuels.

What’s at stake?

Companies are vying for billions in tax credits from the Inflation Reduction Act, and whether they have a share depends on the answer to the $100B question: who qualifies? Oil giant BP (NYSE:BP) and utility giant NextEra (NYSE:NEE) have argued to implement standards that could make it easier to access. The 45V Hydrogen Tax Credit is still being finalized, but there’s another heated debate among critics…

• Non-profit CarbonPlan’s policy director previously told WSJ, “The big risk is throwing out massive subsidies that don’t do anything.”
• Food & Water Watch’s policy director called the incentives “an industry ploy to rebrand fracked gas” and a “multi-billion dollar bet on greenwashed dirty energy.”

Forward-looking: Still, HSBC analysts are bullish on the sector and see hydrogen fuel cell developer, Plug Power (NASDAQ:PLUG), which is down nearly 40% this year, at a potential “inflection point” — expecting “Plug and the broader hydrogen economy to grow sharply” but missing Biden’s targets (Barron’s).