Hydrogen stands as a cornerstone of American energy innovation, offering a versatile and powerful solution to enable American energy dominance. Republicans have long supported hydrogen technologies, recognizing their capacity to harness resources like natural gas, nuclear power, biogas and renewables to produce a resource with a broad range of applications. Hydrogen can unlock our ability to efficiently power and decarbonize industry, fuel heavy-duty and commercial vehicles, and sustainably store and deliver energy, while also supporting industries such as fertilizer production and refining.
As nations race to dominate advanced hydrogen production, the U.S. is positioned to become a global leader in the sector, benefitting from abundant natural gas, biomass and other electricity generation resources. Additionally, the U.S. has suitable geological formations for large-scale storage and an adaptable natural gas infrastructure, further reinforcing its competitive advantage in the emerging hydrogen economy.
HYDROGEN AS A GEOPOLITICAL ENERGY TOOL
The U.S. produces about 14 percent of the world’s hydrogen, second only to China’s 30 percent. Currently, 95 percent of U.S. production relies on steam methane reforming (SMR) from natural gas, whereas about two-thirds of China’s hydrogen is derived from coal.
Today, advanced methods such as SMR with carbon capture, methane pyrolysis, electrolysis and geologic hydrogen extraction offer new opportunities for hydrogen production. Targeted federal incentives will be an essential tool to leverage America’s technological edge and abundant feedstocks, and ensure a timely scaling of a competitive domestic hydrogen economy.
FEDERAL INCENTIVES TO KICKSTART A HYDROGEN ECONOMY
The bipartisan Infrastructure Investment and Jobs Act (IIJA) established the Regional Clean Hydrogen Hubs (H2Hub) program to accelerate the development of large-scale hydrogen production, storage and utilization networks. In 2023, the Department of Energy (DOE) announced hub awardees in seven regions across the country: Appalachia, the Gulf Coast, the Mid-Atlantic, the Heartlands, the Midwest, Pacific Northwest and California.
The Section 45V Clean Hydrogen Production Tax Credit is a production tax credit (PTC) for hydrogen. The value is tiered, based on the lifecycle emissions of the hydrogen production process utilized (see table):
The 45V tax credit is designed to work in tandem with the H2Hubs and support projects within them. By reducing financial risk exposure, these incentives create certainty for investment in innovative hydrogen technologies, making them more attractive to private capital and allowing for accelerated and scaled operations.
A HISTORY OF BIPARTISAN SUPPORT
Lawmakers on both sides of the aisle have expressed the value they see in the hydrogen production tax incentive and DOE’s H2Hubs. Additionally, Republicans have led or supported various bipartisan legislative initiatives aimed at building a robust hydrogen economy, including:
- The Hydrogen Utilization and Sustainability Act, introduced in 2020 by Sen. Todd Young (R-Ind.) to extend existing clean electricity production tax credits to hydrogen.
- The Hydrogen Infrastructure Initiative, re-introduced in 2023 by Sens. John Cornyn (R-Texas) and Chris Coons (D-Del.), to support the adoption of hydrogen in energy-intensive sectors. Reps. Brian Fitzpatrick (R-Pa.) and Scott Peters (D-Calif.) led the House companion, the Hydrogen Infrastructure and Innovation Act (HIFIA).
- The Hydrogen for Industry Act of 2024, cosponsored by Reps. Don Bacon (R-Neb.) and Molinaro (R-N.Y.) to support the use of hydrogen in heavy industry.
GROWING THE ECONOMY AND ENHANCING U.S. ENERGY SECURITY
A robust domestic hydrogen market can play an important role in achieving American energy dominance and expanded utilization of American energy resources. By supporting domestic hydrogen production and infrastructure development, policies like the 45V tax credit create a multiplier effect that touches multiple aspects of national competitiveness.
Robust hydrogen deployment can benefit four key areas of opportunity:
National Security: Enhance U.S. energy security by leveraging a diverse set of existing U.S. assets, resources, infrastructure and industrial expertise to provide a low-carbon feedstock for refineries, fertilizer production, chemical manufacturing, energy storage and biofuels. Hydrogen can also serve as an alternative fuel source for heavy-duty vehicles, steel and cement production, and electricity generation.
Economic Growth: Promote economic growth by providing a new avenue for investment in American energy and energy infrastructure. Since September 2022, announced investments in U.S. clean hydrogen projects have reached $38 billion. According to the Fuel Cell and Hydrogen Energy Association, a healthy U.S. hydrogen economy could create 700,000 jobs and generate up to $140 billion in annual revenue by 2030.
Energy Leadership: Bolster U.S. global energy leadership by developing a resource for which there is growing global demand. At least 60 countries currently have articulated national hydrogen strategies—double the amount from 2022. The U.S. faces competition from economies such as China and the European Union.
Manufacturing Investment: Strengthen American manufacturing by boosting investment in U.S. industrial basins and manufacturing corridors, given hydrogen’s broad array of feedstocks, carriers and products. H2Hubs are also opportunities to reinvigorate industrial growth in regions like Appalachia, the Gulf Coast and the Midwest.