The US throws a lifeline to the inexperienced hydrogen trade — will or not it’s sufficient? | USAEMALL.com

Welcome to Energy Source, coming to you from New York.

Donald Trump has continued to wage his trade war against the US’s trading partners and sent letters to eight more countries on Wednesday, including threatening Brazil with a 50 per cent tariff. The latest announcements followed earlier statements in which the president said he would impose 50 per cent duties on copper — a metal that is essential for the renewable energy industry.

Some sectors of the industry have faced setbacks after Trump’s “big, beautiful bill” was signed into law last week. Many solar and wind projects will lose access to investment and production tax credits. The latest cuts to the Biden administration’s Inflation Reduction Act will cede more ground to China, which leads the energy transition.

My colleague Rachel Millard reported China is building 74 per cent of all current solar and wind projects globally, with clean energy driving a quarter of the country’s economic growth last year.

In today’s Energy Source, we look at one renewable industry — green hydrogen — that was spared by Trump’s bill after the termination of a vital tax credit was pushed to the end of 2027. But two years may not be enough time for this nascent industry — which produces crucial fuel to decarbonise heavy industries — to scale.

Thanks for reading — Alexandra

US green hydrogen wins a reprieve

US President Donald Trump celebrated the nation’s independence day by signing his landmark tax and spending bill into law. The green hydrogen industry, which was poised to lose a crucial tax credit by the end of the year, also had reason to celebrate.

The House of Representatives’ version of the “big, beautiful bill” would have terminated the 45V tax credit by the end of the year. That plan provides a $3 a kilogramme tax credit for clean hydrogen (a fuel that is produced using renewable energy) for a 10-year period. Most green hydrogen projects are not financially viable without government incentives.

But the green energy lobby aligned with the American oil industry to successfully push the deadline to January 1 2028 in the version of the bill signed into law.

“I’m thrilled that we’ve been given until the end of 2027 to begin construction,” said Andy Marsh, chief executive of Plug Power, one of the largest US hydrogen fuel and equipment manufacturers. “There was a lot of uncertainty at the beginning of 2025. Now I know the rules of the game.”

Marsh said Plug Power aims to start construction on three new green hydrogen projects by the end of 2027 — a plan that would not have been possible if the tax credits expired at the end of the year. The company, which produces 40 tonnes of hydrogen a day, expects to produce between 100 to 120 tonnes of the fuel a day by the end of the decade.

But as the industry celebrates the win, some experts worry the two-and-a-half-year runway may not be enough time for the sector to scale. Some developers will miss out on the tax credit, slowing the decarbonisation process for steel and other heavy industries that rely on green hydrogen to cut emissions.

Wood Mackenzie estimated 75 per cent of announced green hydrogen projects would be unlikely to qualify for the 45V tax credit by 2027, putting 2.3mn tonnes of announced capacity at risk.

Hector Arreola, principal analyst for hydrogen and emerging technologies at Wood Mackenzie, said: “Hydrogen is still very, very new so giving subsidies for just two years is just not enough to bring costs down to where it needs to be competitive.”

“Hydrogen is not cost competitive right now without subsidies and even with subsidies.”

BloombergNEF estimated the average levelised cost of green hydrogen ranges between $3.74 to $11.70 a kilogramme, compared with grey hydrogen — produced from natural gas — that costs between $1.11 to $2.35 a kilogramme.

Oleksiy Tatarenko, senior principal at the Rocky Mountain Institute, said the industry needs to reach a certain scale in order to bring costs down. If only 25 per cent of announced green hydrogen projects are able to start construction before the end of 2027, that will challenge the sector’s ability to lower costs. The industry will probably need government incentives after the termination date, he added.

Aaron Berman, a fellow at Resources for the Future, agreed. “If you look at the wind and solar industry it took decades for the cost to come down. The hydrogen industry has not had that time,” he said.

Wood Mackenzie’s Arreola warned the US may fail to catch up with China’s green hydrogen industry, which is leading the space. S&P Global in April reported the Asian country accounted for 50 per cent of the global total production capacity of the fuel in 2024.

The US industry has struggled with weak demand because of the high costs of the fuel, but the sector is optimistic on its future and is focused on bringing costs down quickly.

Lee Beck is senior vice-president of global policy and commercial strategy at HIF Global, an e-fuels company that is developing an e-methanol plant in Matagorda County, Texas, and aims to utilise the 45V tax credit.

She said: “Our goal is to bring down the cost of producing e-fuels [synthetic fuels derived from renewable energy] as soon as possible and build facilities in the future that will not necessarily be dependent on support from governments.”

“This is a window of opportunity to build first-of-a-kind facilities to generate further learnings and cost reductions for technologies created in the US,” she added.

Frank Wolak, president and chief executive of Fuel Cell and Hydrogen Energy Association — which led industry efforts on delaying the termination date for the 45V tax credit — said developers will need to start plans to avoid a time crunch.

“Time is of the essence,” Wolak said, adding the new timeline favours well-prepared projects. “[The industry] has two years of timeframe to get moving and show it can achieve progress and make the investments.”

Jeremy Harrell, chief executive of ClearPath — a conservative clean energy organisation that was involved in lobbying Congress over Trump’s bill — said the industry is in a “race to see what type of capacity the US can build out for the next couple of years and show that we can be a leader in the global low-carbon hydrogen market”.

Beth Deane, chief legal officer at Electric Hydrogen — a company that manufacturers electrolyser equipment that produces green hydrogen — said she expected the tighter tax credit deadline would create “urgency” that would facilitate more development in the US.

“With any nascent industry you have to show what’s possible,” Deane said. “If further support is needed that will have to be evaluated in the future.” (Alexandra White)

Job moves

• BP has appointed Simon Henry, Shell’s former chief financial officer, to its board of directors.

• Ascent Resources named David Patterson as chief executive.

• Centrica has appointed Alessandra Pasini as non-executive director.

Power Points

• Canadian investor Brookfield Asset Management is poised to become the largest private investor in the Sizewell C nuclear Plant, with the UK government set to hold a minority stake in the project.

• UK ministers are set to drop a plan to split Britain’s wholesale electricity market into different geographical zones, after warnings that zonal pricing would jeopardise investment in new wind farms.

• BP and Shell have signed agreements to assess new opportunities in Libya, as international oil companies step up their return to the North African country after its civil war.

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Kristina Shevory, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.