New Fortress Energy is already building a new Green Hydrogen plant in Beaumont Texas that will take advantage of the $3/kg tax credit made. possible by the Inflation Reduction Act.

Highlights from the New Fortress Energy Q3 conference call:

• Initial focus of clean hydrogen is to be selling to the refining and petrochemicals industry. Big impact on CO2 reduction there.
• Very early days of clean hydrogen.
• First Movers in the industry are being built NOW.
• Beaumont plant to be first of 5 plants. Beaumont to be operational in 2024.
  • Using electrolyzers from Plug Power
  • Renewable power supplied by Entergy
• IRA (Inflation Reduction Act) to spur more than $4 Trillion in investment by industry.
• Inexhaustible demand for green hydrogen.
• Production of Green Hydrogen has currently been a hobby, but the IRA makes it an economically viable market.

These are the three slides on Hydrogen from the Q3 conference call.

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Hydrogen is most commonly produced by electrolysis or Steam Methane Reforming (SMR). The electrolysis process itself is a clean process, the challenge has been obtaining clean energy to power the electrolysis process. With the world now having significant power generation from Wind and Solar, it now becomes feasible to create hydrogen from these new sources of power.

Why Hydrogen?

Why would you want to create Hydrogen from renewable power instead of just using renewable power? Well, you can think of hydrogen as stored energy that can be used later on demand. The disadvantages of Wind and Solar center around matching generation with demand. By converting the storing that energy in the form of hydrogen, it solves that matching problem.

Types of Clean Hydrogen

Green Hydrogen

Green Hydrogen is defined as hydrogen produced entirely from clean energy such as Wind or Solar.

Blue Hydrogen

Blue Hydrogen is defined as hydrogen produced from fossil fuel sources such as Natural Gas, but paired with technologies such as Carbon Capture so as to effectively remove the pollution from the process. The main bottleneck to adoption of Blue Hydrogen has been economically viable solutions to integrate Carbon Capture.

Market Outlook

Due to the Inflation Reduction Act, 2022 is expected to be the start of major investment growth in the hydrogen market, up to 4 Trillion dollars invested by industry according to some estimates.

Currently, the market for hydrogen is localized to industries that require it as input – industries such as petrochemicals and refining. However, if hydrogen can be created cheaply then it can be used as a replacement for fossil fuels, which means the worldwide applications are enormous. Before that transition can take place, the full supply and demand markets must be created.

With the IRA offering a $3/kg credit for the production of clean hydrogen, companies now have a viable economic incentive to create a supply of hydrogen, thus spurring correlated investments in the demand markets. Ultimately the hope is for engineering efficiencies to be leveraged and the $3/kg credit will no longer be needed to support the investment in supply.

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One of the core focal elements of the bill is investments in clean energy. One way to do this is to offer consumers tax incentives and rebates for purchasing energy efficient goods such as electric cars and appliances. Another way is to invest in businesses that build clean energy goods and develop new technology.

Development of Clean Hydrogen – Green hydrogen and Blue hydrogen – is one of the major positive results of the Inflation Reduction Act. There is now an economic incentive for major companies to develop sources of clean hydrogen. As the supply of cheaper clean hydrogen increases, new use-cases will be found and ultimately a much larger market for clean hydrogen will develop. Once that market is created, the subsidies may be removed and the market can become self-sustaining. Hydrogen is a wonderful fuel source, but in addition to cost, creating enough hydrogen fuel in a clean way has been a major barrier.

Here are just a few of the incentives that the Inflation Reduction Act provides to consumers:

• $1,000 electric vehicle tax credits for families.
• $14,000 in direct rebates for energy efficient appliances such as heat pumps.
• 30% tax credit on solar roof installations
• $7,500 tax credit for new electric vehicles and $4,000 for used electric vehicles

Direct investment in the Clean Energy Industry, made possible by the Inflation Reduction Act, will result in:

• 950 million solar panels by 2030
• 120,000 wind turbines by 2030
• 2,300 grid-scale battery plants by 2030
• Support rural electric cooperatives that serve 42 million people

To read some of the highlights of the Inflation Reduction Act, see this publication by The White House.

To see a summary of the budgetary costs and savings of the Inflation Reduction Act (IRA), see this publication.

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