Trump's ‘Beautiful' Bill Casts a Cloud Over Hydrogen's Future
A week ago, the U.S. House of Representatives passed Trump's 'Big, Beautiful Bill' designed to deploy large tax cuts, extra spending on defense and immigration enforcement by primarily leveraging deep cuts to the Inflation Reduction Act (IRA) of 2022.
With the contentious bill now headed for the Senate, some energy experts are warning of dire consequences for some renewable energy industries if it becomes law. To wit, the sweeping policy bill seeks to phase out billions in tax credits for the budding green hydrogen and EV battery industries. Created under the Inflation Reduction Act during the Biden administration, the Section 45V tax credit has been a major boon for low-carbon hydrogen and ammonia projects across the country.
This could be profound: a total of 46 hydrogen and ammonia-related projects were qualified to receive 45V tax benefits in Louisiana alone, including massive builds from Air Products & Chemicals (NYSE:APD), Clean Hydrogen Works and Bia Energy.
Over the past couple of years, Louisiana has emerged as the country's leading hydrogen hub, focused on industry growth and sustainability. The state is home to some of the largest hydrogen projects in the country, including Clean Hydrogen Works' $7.5 billion ammonia and blue hydrogen project slated to create 1,472 jobs; Air Products' $4.5 billion blue hydrogen plant; Bia Energy Operating Company's $550 million blue hydrogen project and Monarch Energy's $426 million green hydrogen project.
Losing 45V tax credits may seriously erode the economic viability of these companies: according to company filings, Air Products received $19.7 million in federal tax credits in 2024, with the company's federal tax credit claims jumping nearly 40% between 2020 and 2024. That's perhaps not a coincidence when you consider that the 45V program kicked off in 2021 after former President Joe Biden passed the IRA.With over 10 million tons of gross annual output, Illinois-based CF Industries (NYSE:CF) is one of the largest ammonia producers in the world, with Louisiana accounting for half of the company's output. CF has already secured renewable energy certificates that qualify its pilot electrolyzer project for 45V tax credits when operational. When asked about the impact of the termination of 45V credits, Ryan Stiles, who manages the company's ammonia production, said that some customers are likely to be less tolerant of paying more for low-carbon ammonia without the 45V subsidies.
The hydrogen sector heavyweight, Plug Power (NASDAQ:PLUG), only began operations in Louisiana a month ago; however, the company has previously flagged the importance of the 45V credit, stating that any limitation 'could be materially adverse to the Company and its near-term hydrogen generation projects.'
Yet another provision in Trump's big bill would spell doom for Section 48 Investment Tax Credit for certain clean energy technologies, ending eligibility for the credits in 2032--three years earlier than the IRA intended.
On a brighter note, the bill still provides tax credits for carbon capture and sequestration under Section 45Q.
'We expect our investment into the Donaldsonville CCS project will increase our free cash flow in the range of $100 million per year due to the United States' 45Q tax credit for permanently sequestering CO2,' CF Industries said in its annual report.
CF Industries is not the only energy company that will be counting its lucky stars for Trump's big bill leaving CCS credits intact. Big Oil has invested considerable capital into carbon capture projects, including Exxon Mobil's (NYSE:XOM) latest CCS project targeting power-hungry U.S. data centers. The Oil & Gas giant has unveiled a groundbreaking plan wherein the company will provide low-carbon power to the U.S. data centers powering the AI boom. Exxon's proposal outlines a first-of-its-kind facility that will use natural gas to produce electricity while capturing more than 90% of the CO2 emissions. The captured emissions will then be stored deep underground. ExxonMobil's current CCS technology supports industries involved in steel, hydrogen and ammonia production, with the company having secured agreements to store up to 6.7 million tons of CO2 annually for these sectors.
Meanwhile, last month, Shell (NYSE:SHEL), Equinor (NYSE:EQNR), and TotalEnergies (NYSE:TTE) expanded their Northern Lights CCS project with $714 million in total investments. The decision comes after a deal with Swedish energy company, Stockholm Exergi, which has pledged to send up to 900,000 tonnes of CO? each year over a 5-year span. With the additional investment, Northern Lights is now capable of storing at least 5 million tonnes of CO? per year, more than triple the original target of 1.5 million tonnes.
By Alex Kimani for Oilprice.com
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