Hydrogen law, regulations & strategy in the US

Explore reliable legal information about hydrogen energy in the US

1. Current status for hydrogen in the US

Introduction

Hydrogen is an emerging key technology in the US and has the potential to be a multi-billion dollar industry. 1 https://www.forbes.com/sites/energyinnovation/2019/10/07/how-hydrogen-could-become-a-130-billion-us-industry-and-cut-emissions-by-2050/#280a67b12849  Hydrogen regulation in the US is dealt with at two main levels – US-wide federal regulation and individual state regulation. The US has historically experienced changeable political attitudes towards low-carbon technologies at federal level, and approaches between states differ greatly. These are discussed in more detail in the “Policy Landscape” section, below. Long-term policy thinking is required to develop and deploy nascent technologies, such as low-carbon hydrogen, on a commercial scale. The official re-signing of the Paris Agreement on behalf of the US in January 2021 demonstrates support for the decarbonisation agenda, of which hydrogen is recognised as having the potential to play an important part.

At present, about 95% of hydrogen produced within the US is polluting grey hydrogen. However, an August 2021 report by GlobalData estimates that low-carbon hydrogen production in North America is expected to almost triple by 2030 to around 1.4 million tons per annum (“mtpa”). 2 https://store.globaldata.com/report/gdge00366ei--north-america-hydrogen-market-overview-demand-policies-deals-and-key-players/  Other research suggests the potential for low-carbon hydrogen to generate revenues of between $130-$170 billion per year by 2050. 3 https://www.forbes.com/sites/energyinnovation/2019/10/07/how-hydrogen-could-become-a-130-billion-us-industry-and-cut-emissions-by-2050/#280a67b12849  To put this into context, in 2018 the total revenue of the United States’ oil and gas industry came to around $181 billion. Further, the Road Map to a US Hydrogen Economy, developed by a coalition of US energy sector players, estimates that hydrogen could account for 14% of US energy demand by 2050. 4 https://www.fchea.org/us-hydrogen-study

The US is well placed to produce blue hydrogen using steam methane reformation combined with carbon capture, usage, and storage. This is due to the US’s significant storage capacity – estimated as being 3,000 metric gigatons of greenhouse gas emissions or about 600 years’ worth of current US emissions. 5 https://www.fchea.org/us-hydrogen-study At present, however, only about 0.25 mtpa worth of completed blue hydrogen production capacity exists in the US, with a further >0.1mtpa in feasibility study stage. Deployment of green hydrogen production is even less advanced, with about 0.2mtpa of production capacity in feasibility study stage. 6 https://hydrogen-central.com/globaldata-hydrogen-production-america-triple-2030-1-4-million-tpa/

To achieve the level of hydrogen generation and deployment required to match ambitions, increased investment in research and development is crucial, as well as the introduction of a supportive regulatory framework at federal and state level. Due to variation among national and state policies, infrastructure needs, and community interest, each state and region of the US has, to a greater or lesser extent, its own specific policies and road maps for implementing hydrogen infrastructure. The need for a harmonised approach, at least in some areas, will be important in realising hydrogen’s potential. For example, the majority of hydrogen activity currently in the US is used at, or near to, where it is produced. 7 https://afdc.energy.gov/fuels/hydrogen_production.html  If hydrogen is to be transported across state borders, state cooperation will be needed to ensure that the appropriate infrastructure is in place and that regulation of hydrogen transport between states is not mismatched. An August 2021 statement by Bakken Energy and Mitsubishi Power Americas announced the intention to do just that, with the companies confirming their intention to acquire and redevelop a synthetic natural gas plant in North Dakota into a blue hydrogen production facility, with the aim of connecting the hub by pipeline to other hubs throughout the US.

At state level, California, Texas, and Louisiana are recognised by the US Department of Energy as being the major hydrogen-producing states. 8 https://afdc.energy.gov/fuels/hydrogen_production.html  California in particular has made significant progress in the development of low-carbon hydrogen as a new energy source.

The Road Map to a US Hydrogen Economy has identified that hydrogen can play a role in five major sectors of the US economy:

  1. as fuel for buildings;
  2. as transportation fuel;
  3. as feedstock for industry and long-distance transport;
  4. as industrial fuel; and
  5. for power generation and grid balancing. 9 https://static1.squarespace.com/static/53ab1feee4b0bef0179a1563/t/5e7ca9d6c8fb3629d399fe0c/1585228263363/Road+Map+to+a+US+Hydrogen+Economy+Full+Report.pdf

The majority of low-carbon hydrogen projects in the US to date relate to the transportation sector.

Transport sector use

Transport accounts for around a third of US carbon emissions. 10 https://www.epa.gov/greenvehicles/fast-facts-transportation-greenhouse-gas-emissions  The US is among the leading countries in moving towards broad commercialisation of fuel cells and hydrogen energy in transport, with over 9,000 fuel cell electric vehicles (“FCEV”) currently on the road – around 25 per cent of the global FCEV stock. 11 https://www.ieafuelcell.com/fileadmin/publications/2021-Deployment_status_of_fc_in_road_transport.pdf Statistics as to the current number of refuelling stations in the US differ – partly depending on whether private refuelling stations are included in the numbers – but the majority of refuelling stations are currently located in California. 12 A 2021 report on the Deployment Status of Fuel Cells in Road Transport estimates that the US had 63 stations as at the end of 2020 (https://www.ieafuelcell.com/fileadmin/publications/2021-Deployment_status_of_fc_in_road_transport.pdf), while the Department of Energy’s website states that there are 48 refuelling stations located in the US, 47 of which are in California (https://afdc.energy.gov/stations/states) In addition, fuel cells are being deployed in industrial vehicles with roughly 23,000 fuel cell-powered operational forklifts reported in April 2021 across the US. 13 Best Hydrogen Fuel Cell Stocks In 2021 | Fuel Cells Works

The state of California is leading the way in hydrogen mobility. As of September 2021, the majority of FCEVs on the road in the US are located in the state, along with 48 hydrogen fuel cell buses. 14 https://www.autoweek.com/news/technology/g32203425/10-things-about-hydrogen-fuel-cell-vehicles-in-america/  California also ranks alongside industry-leaders Japan, South Korea, and Germany in terms of the deployment of hydrogen fuelling infrastructure. Some North-Eastern states are rolling out hydrogen fuelling stations, but California is currently most advanced and reported to have 31 strategically located commercial stations state-wide. 15 https://www.californiahydrogen.org/resources/hydrogen-faq/  Further, there are a number of prototype heavy-duty fuel cell electric trucks in operation in California and Arizona.

Feedstock for industry and long-distance transport

About 95% of the hydrogen currently consumed in the US serves as a feedstock or reactant in industrial processes, for example within refining, ammonia, and methanol plants. 16 https://cafcp.org/sites/default/files/Road%2BMap%2Bto%2Ba%2BUS%2BHydrogen%2BEconomy%2BFull%2BReport.pdf  With a switch to low-carbon “green” hydrogen, there could be a significant reduction in domestic carbon emissions in these industries. Hydrogen could also be applied in other industries, such as steel production. The Yara/BASF ammonia plant in Freeport, Texas, has developed a pilot using low-carbon hydrogen. Opened in 2018, it showcases a sustainable production process using by-product hydrogen from nearby petrochemical plants instead of natural gas from steam methane reforming. In August 2021, Mitsui and CF Industries – one of the world’s largest ammonia producers – signed a memorandum of understanding to carry out various feasibility studies in respect of ammonia produced using blue hydrogen production in the US. 17 https://www.upstreamonline.com/hydrogen/mitsui-teams-up-with-fertilizer-heavyweight-to-explore-us-blue-ammonia-developments/2-1-1051748

Industrial sector use

The industrial sector is one of the biggest consumers of energy in the US and is responsible for around 23% of overall domestic greenhouse gas emissions. 18 https://www.epa.gov/greenvehicles/fast-facts-transportation-greenhouse-gas-emissions  At present, nearly all hydrogen used in the industrial sector is “grey” hydrogen. Low-carbon hydrogen is an attractive means of decarbonising such industrial processes, which are difficult to electrify.

Power generation and grid balancing

Hydrogen could help decarbonise the power system, particularly as it can provide strategic opportunities for storing large amounts of energy over longer durations, for example, when seasonal storage of energy is needed. In doing so, it can offer long duration discharge cycles that other technologies currently lack. The University of California, Irvine (“UCI”), in collaboration with SoCalGas, is running a demonstration project through its Advanced Power and Energy Program (“APEP”) to utilise excess renewable power by converting it to hydrogen and blending it into the natural gas system. In 2016, UCI engineers successfully implemented the first power-to-gas hydrogen pipeline injection project in the US. SoCalGas is exploring ways that their existing infrastructure could be leveraged to enable other power-to-gas opportunities, including developing a “hydrogen home” demonstration project, which will convert solar power into low-carbon hydrogen which can then be stored, blended, or used to power a fuel cell within the home. Further, SoCalGas are conducting research with a view to increasing hydrogen blending on the grid up to 20%. 19 https://www.utilitydive.com/news/socalgas-announces-net-zero-emission-goal-by-2045-but-some-stakeholders-re/597232/

The APEP 2021 annual report highlights the steps that have been taken to create a ‘Hydrogen Ecosystem’ for the UCI campus. The aim is to generate green hydrogen through electrolysis which is then stored and subsequently blended with the natural gas powering the campus at times of high demand, thus displacing a proportion of the carbon emissions which would otherwise have been generated through natural gas use. 20 Advanced Power and Energy Program (APEP), UC Irvine

Hydrogen’s role in supplying micro-grid type power has also been acknowledged. In particular, supplying communities with the highest risk of shut-offs during seasonal weather-related issues, such as high temperatures or wildfire-related power interruptions.

2. Market prospects for hydrogen

Federal Investment

On 7 July 2021 the Department of Energy announced $52.5 million of funding 21 https://www.electrive.com/2021/07/08/us-doe-awards-52-5m-to-31-hydrogen-projects/#:~:text=The%20US%20American%20Department%20of,breakthroughs%20in%20the%20hydrogen%20sector. for 31 projects to advance next-generation clean hydrogen technologies and to support the Hydrogen Energy Earthshot, the first in a series of initiatives with a stated aim of accelerating breakthroughs in more abundant, affordable, and reliable energy solutions within the decade. The Hydrogen Energy Earthshot seeks to reduce the cost of clean hydrogen by 80% to $1 per 1 kilogram in 1 decade. 22 https://www.energy.gov/eere/fuelcells/hydrogen-shot  An associated 700,000 jobs and $140 billion in revenue are estimated to be gained by 2030 if the Hydrogen Energy Earthshot goals are achieved.

The American Jobs Plan 23 https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/  also suggests pairing investment in 15 low-carbon hydrogen demonstration projects with a new tax credit for low-carbon hydrogen production facilities where construction begins before 2026. This would mirror other tax incentive schemes like 45Q, which has incentivised carbon capture and storage projects in the US since its introduction.

Further to this, the Fiscal Year 2022 Budget proposes that $197.5 million is requested for supporting efforts to enable the widespread adoption of hydrogen and fuel cell technologies. The Budget sets out that the production of clean hydrogen is a key priority for the Office of Energy Efficiency and Renewable Energy in conjunction with enabling diverse end uses, including:

  1. grid integration and stationary energy storage;
  2. transportation;
  3. chemicals;
  4. industry; and
  5. backup power.

This Budget Request is an increase of $47.5 million on the amount enacted in the 2021 fiscal year, up 31.7%, 24 doe-fy2022-budget-in-brief.pdf (energy.gov) and underlines a shift from early-stage research in fuel cells to accelerating research, development and demonstration to bring about fuel cell systems that operate at a much lower cost than those at present. This Request also highlights a move from early-stage materials research to accelerated, target-driven research, development, and demonstration in hydrogen technologies. This research focus emphasises a reduction in the cost of electrolysers, alongside increased funding to demonstrate the use of green hydrogen as feedstock or as an agent to decarbonise the production of steel and ammonia. 25 doe-fy2022-budget-in-brief.pdf (energy.gov)

California specific incentives 

State and local governments in California have worked to establish market development and incentivise consumer adoption of hydrogen. They have successfully implemented a portfolio of policies to boost the market. One such example is the California Low-Carbon Fuel Standard (“LCFS”) which created a market for tradeable credits pushing low carbon fuels.

The Volkswagen Zero Emission Vehicle (“ZEV”) Investment Plan is an example of a public-private tie-up to promote consumer adoption of hydrogen across the state of California. As a form of reparations for its violation of emission control requirements, in 2016 Volkswagen agreed to invest $800 million over 10 years into zero-emission infrastructure in California. The programme will include public education, brand-neutral marketing programmes and increased access to ZEVs for consumers. 26 https://afdc.energy.gov/fuels/laws/HY?state=CA

Another example of public-private cooperation in hydrogen deployment is the contract between Swiss manufacturer Stadler and the San Berdino County Transportation Authority for the hydrogen powered “FLIRT H2” train planned to be opened in 2024. 27 https://railway-news.com/stadler-wins-us-flirt-h2-hydrogen-contract/

On the purely private side, Chevron and other partners are investing $20 million in a start-up aimed at producing green hydrogen as part of an innovative waste disposal process. 28 https://ravensr.com/  The first facilities are planned to be built at landfill sites in California.

In 2021, Californian legislators began lobbying their assembly leaders to commit $300 million for hydrogen refuelling infrastructure; 29 https://www.forbes.com/sites/arielcohen/2021/06/17/california-legislators-push-300-million-hydrogen-plan/?sh=28488ee05cfb  a process which as of October 2021 is ongoing. This is in addition to the $115 million of funding approved by the California Energy Commission (“CEC”) in 2020, which will seek to fund an additional 134 hydrogen refuelling stations in the state. 30 https://www.energy.ca.gov/news/2020-12/energy-commission-approves-plan-invest-115-million-hydrogen-fueling

Whilst these types of policies have been successful to date, in order to achieve a self-sustaining market, California will need to move towards establishing new, market facing policy mechanisms that focus on attracting both private capital and new market players.

Texas specific incentives 

The size and geography of Texas has already allowed renewable energy to thrive, ranking first in the US for both installed and under construction wind capacity, and fifth for the same in solar energy. Excess renewable energy could be used to generate green hydrogen. Due to the existing scale of energy production, and status as the largest producer of hydrogen, Texas has therefore been identified as having significant potential to produce green hydrogen in the H2@Scale Initiative. 31 Between the Coasts: Texas — Fuel Cell & Hydrogen Energy Association (fchea.org)  The US Department of Energy aims to assist Texas in the designing, building, and operation of the first dedicated renewable hydrogen network in the US. This funding totals $10.8 million, with the project expected to continue for three years. 32 DOE-Backed Hydrogen Project Underway in Texas (powermag.com) As seen at state and federal level across the US, the cost of hydrogen as a fuel remains the greatest anticipated market challenge to significant production expansion. 33 How The Lone Star State Is Building A Green Hydrogen Future (forbes.com)

A further facilitating factor for hydrogen expansion in Texas is that it has approximately 1,600 miles of dedicated hydrogen pipelines; this has been posited as available for potential expansion. This is alongside the three hydrogen-specific underground storage fields in Texas which have a combined capacity of roughly 6 billion cubic feet. 34 Texas well-suited to become leading US producer of low-cost hydrogen: panelists | S&P Global Platts (spglobal.com)

For these reasons, Texas has been tipped against California in a ‘race’ to become the hydrogen capital of the US. 35 California And Texas Vie To Be America’s Hydrogen Capital (forbes.com)

Louisiana specific incentives 

Alongside Texas, Louisiana has displayed potential to help the Gulf Coast become a hydrogen production hub. This is on the basis of plentiful storage potential, in addition to already being a platform for a significant amount of hydrogen supply and infrastructure through the state’s hydrogen consumption in the refining and chemicals sectors. It has been suggested that Louisiana could become part of a pipeline network to transport carbon captured from blue hydrogen. 36 Could Louisiana be key in building a hydrogen economy? (1012industryreport.com)

Transport sector ambitions

In particular, there is potential for investment in the transportation sector. The US has a large long-haul trucking industry compared with other markets. On average, Americans drive more than 12,000 miles per year, per vehicle – nearly twice as far as people in other developed countries. 37 https://cafcp.org/sites/default/files/Road%2BMap%2Bto%2Ba%2BUS%2BHydrogen%2BEconomy%2BFull%2BReport.pdf  There is therefore a need for long distance capability, with such vehicles having a projected sale growth of 1%per year over the next decade. 38 https://static1.squarespace.com/static/53ab1feee4b0bef0179a1563/t/5e7ca9d6c8fb3629d399fe0c/1585228263363/Road+Map+to+a+US+Hydrogen+Economy+Full+Report.pdf  Such long distances and preferences for large vehicles favour FCEVs over battery powered EVs.

3. Challenges facing hydrogen projects

Cost challenges

As is the case in a number of other countries, one of the main challenges facing hydrogen in the US is cost. At present, the costs of hydrogen throughout the whole supply chain are not competitive against fossil-fuel and more carbon-intense alternatives. Costs to hydrogen buyers may be lowered if:

  • breakthroughs in technology reduce costs or improve the efficiency of electrolysis;
  • electricity prices drop;
  • an import/export market for hydrogen develops; or
  • alternative zero-carbon hydrogen production technologies are commercialised and surpass electrolysis in their cost-effectiveness.

The US is developing large-scale renewable power that forecasts for the costs of electricity production to be as low as $20 per MWh in 2030. A large network of US companies with expertise in fuel cells, electrolysers, reformers and carbon capture and storage are already working to bring equipment and production costs down.

A 2020 study carried out by researchers at Massachusetts Institute of Technology (“MIT”) has suggested that solar-powered electrolysis for hydrogen production could reach a low price of $2.50/kg by 2030 in US states with good solar resources. The research goes as far as to suggest that green hydrogen generation could become cost-competitive, with the ability to maintain stable prices, if geological hydrogen storage prevails over the next decade. The study does note, however, that natural gas without carbon capture may still be a cheaper alternative in 2030, at a price of around $1/kg. 39 https://www.pv-magazine.com/2020/08/25/solar-powered-hydrogen-under-2-kg-by-2030/

Policy landscape gaps

The future deployment of hydrogen in the US over the next decade will depend on the policy landscape at both federal and state level for encouraging the development of low-hydrogen projects. Support and policy certainty would help address challenges such as:

  • capital requirements to build foundational hydrogen infrastructure;
  • regulatory barriers and lack of appropriate codes and standards (regulation is addressed in more detail, below); and
  • funding requirements for further research and development.

Whilst multiple state agencies have overlapping authority to regulate hydrogen depending on its application, there is currently no comprehensive hydrogen strategy for the United States. However, the Department of Energy’s Hydrogen Program Plan 40 https://www.hydrogen.energy.gov/pdfs/hydrogen-program-plan-2020.pdf  has been published with the intention of attempting to realise the potential of hydrogen use through committing to research and development, in addition to increasing demonstrations and deployments with the private sector. The Hydrogen Program Plan is a strategic framework incorporating the research, development, and demonstration efforts of the Offices of Energy Efficiency and Renewable Energy, Fossil Energy, Nuclear Energy, Electricity, Science, and Advanced Research Projects Agency. Ultimately, this aims to advance the production, transport, storage, and use of hydrogen throughout the economy and across the US. 41 U.S. Department of Energy Hydrogen Program Plan

Storage related challenges

To ensure that green hydrogen is competitive in the US, substantial reductions in storage costs are necessary. Though the Gulf Coast offers opportunities to overcome such storage issues, for hydrogen to achieve greater uptake, inexpensive storage and pipelines must be established beyond this region. Though currently the transportation and storage of hydrogen are of low immediate concern, with 85% of hydrogen produced and consumed on-site, this is a point of increasing importance. To instigate greater use of hydrogen on an industrial scale, transportation and storage costs will increase and could become a substantial barrier to this growth. Geological features are likely to provide storage at the lowest cost and are already being utilised to an extent: for example, in 2017 in Texas, Air Liquide commissioned the world’s largest hydrogen storage facility. Salt cavern storage has also been posited beyond the Gulf Coast. 42 Decarbonized Hydrogen in the US Power and Industrial Sectors: Identifying and Incentivizing Opportunities to Lower Emissions (rff.org)

When looking at hydrogen for vehicular transportation, storage is a significant technical barrier to project development, placing a potentially significant limitation on the take-up and public acceptance of FCEVs. In response to such a challenge, it is clear that a key theme in facilitating the growth of hydrogen generally across the US, as well as specifically in California and Texas, is the development of infrastructure to support hydrogen usage. This has especially been seen in the drive for the building of refuelling stations.

Key challenges to hydrogen storage are:

  • weight and volume;
  • efficiency;
  • durability;
  • refuelling time;
  • cost;
  • codes and standards. This involves codes and standards that are applicable for hydrogen storage systems and interface technologies. Improvement in these areas will allow for greater implementation and commercialisation to ensure both safety and public acceptance, which at present has not been established. Specifically, a standardisation of the hardware and operating procedures is needed in addition to these applicable codes and standards; and
  • life-cycle and efficiency analysis, as currently there is a lack of analysis of the full life-cycle cost and efficiency for hydrogen storage systems. 43 Hydrogen Storage Challenges | Department of Energy

Infrastructure and accompanying investment needed

Currently, the US has an underdeveloped physical infrastructure in relation to hydrogen. In the ‘Roadmap to a U.S. Hydrogen Economy’ report from October 2020, it was considered that the US lags behind China, Japan, and the European Union in the infrastructure needed for hydrogen projects, and that further investment is required. This was an important point moving into 2021, influencing the President’s Fiscal Year 2022 Budget Request, with increased funding moving forwards and the ground-level investment provided for hydrogen refuelling discussed further under Sections 4 and 6.

The ‘Roadmap to a U.S. Hydrogen Economy’ report stressed the need for hydrogen production to be increased and the transport infrastructure to carry it to end users, alongside incentives to stimulate private-sector investment, codes and standards to regulate the growing supply chain, and research into techniques that are in the early stages of development. The report sets out 4 phases for hydrogen development over the next decade, adopting a phased approach that is designed to expand into new hydrogen-use based off of current infrastructure. The number of fuel cell vehicles required to reach the report goals will need to grow from a stipulated 2,500 fuel cell vehicles at the time of the report to almost 1.2 million by 2030, alongside fuelling stations increasing from around 100 to over 4,300 in the same time period. The use of blending within existing pipelines is considered necessary to achieve this. 44 Can the US Catch Up in the Green Hydrogen Economy? | Greentech Media

4. Regulation of hydrogen

Each state in the US has its own specific policies in relation to hydrogen. As mentioned previously, California and Texas are generally more advanced in their low-carbon hydrogen policies and, as such, have been selected as the key examples in this section.

Federal Policy

Energy Policy Act 2005 (the “EPA”): The EPA addresses energy production in the US at federal level, including renewable energy. Title VIII of the EPA (also known as the Spark M. Matsunaga Hydrogen Act of 2005) is, amongst other things, to:

  1. enable and promote comprehensive development, demonstration, and commercialisation of hydrogen and fuel cell technology in partnership with industry;
  2. make critical public investments in building strong links to private industry, institutions of higher education, National Laboratories, and research institutions to expand innovation and industrial growth;
  3. build a mature hydrogen economy that creates fuel diversity across the massive transportation sector in the US;
  4. sharply decrease the dependency of the US on imported oil, eliminate most emissions from the transportation sector, and greatly enhance US energy security; and
  5. create, strengthen, and protect a sustainable national energy economy.

Energy Independence and Security Act 2007 (the “EISA”): While not specifically an Act that regulates the production of hydrogen, the EISA aims to further the EPA by encouraging, amongst other things:

  1. increased production of clean renewable fuels;
  2. the promotion of research on, and deployment of, greenhouse gas capture and storage options; and
  3. improved energy performance of the Federal Government.

The EISA sets out the need for the Secretary of Energy to report on the use of geothermal energy to produce hydrogen and also provides amendments to the EPA, allowing for the Secretary of Energy to competitively award bi-annual “prizes” for the advancements in technologies, components or systems related to hydrogen production, storage, distribution and utilisation.

45Q Tax Credit: The American Jobs Plan, a $2 trillion infrastructure proposal announced on 31 March 2020, includes a revised and expanded section 45Q Tax Credit. This offers a tax credit per tonne of carbon dioxide captured and stored – relevant to the production of blue hydrogen. Currently, the section 45Q Tax Credit is limited to a term of 12 years from the placed-in-service date of the facility. Certain proposals within the American Jobs Plan would extend such a term to 20 years, or perhaps longer, and others would expand or increase the number of credits and the breadth of taxpayers who could utilise this. A proposal of particular interest for hydrogen is the idea of turning clean energy tax credits into ‘direct pay’ credits that are treated as payment of tax. This would result in a cash pay-out to the taxpayer to the extent that these credits exceed the tax liability.

State Policy level regulation

California

The Renewable Portfolio Standard (“RPS”) for power generation is a market-based policy requiring utilities to deliver 50% of their retail electricity from clean, renewable sources by 2030. Since 2002, when the RPS programme was created, nearly 200 renewable energy generation projects have been built in California. 45 https://www.ucsusa.org/resources/californias-renewables-portfolio-standard-program#:~:text=California%27s%20Renewables%20Portfolio%20Standard%20(RPS)%20Program&text=The%20California%20state%20legislature%20passed,%2C%20and%20biopower%2C%20by%202030.

The California Energy Commission is the state’s primary energy policy and planning agency, established by the Warren‐Alquist Act in 1975. Through their Clean Transportation Program, they are supporting the adoption of zero-emission hydrogen fuel cell electric cars by expanding California’s network of hydrogen refuelling stations. They are investing in an initial network of 100 public hydrogen stations.

The Low Carbon Fuel Standard evaluates transportation fuels, including hydrogen. It is designed to decrease the carbon intensity of California's transportation fuel pool and provide an increasing range of low-carbon and renewable alternatives, which reduce petroleum dependency and achieve air quality benefits.

California has joined 9 other states – Connecticut, Maine, Maryland, Massachusetts, New York, New Jersey, Oregon, Rhode Island and Vermont – in the Zero Emission Vehicle Deployment Support memorandum of understanding. This supports the deployment of ZEVs through involvement in the ZEV Programme Implementation Task Force. Annually, each state reports on the number of hydrogen fuelling stations, as well as broader ZEV infrastructure and registered ZEVs, to ensure that there are 3.3 million ZEVs and an adequate fuelling infrastructure by 2025 within the signatory states.

There are a wide number of “zero-emission” laws, incentives and regulations surrounding transport in California. These can be found within broader zero-emission laws, incentives, and regulations, as well as also being hydrogen-specific. This has occurred at both state and County level. A few key Californian examples of those which specifically include hydrogen:

  • the Hydrogen Fuelling Station Evaluation involves the CEC being required to annually report on progress towards establishing a hydrogen fuelling station network that can meet the needs of vehicles being used in California. The review determines the remaining time and cost required to set up a network of 100 publicly available hydrogen fuelling stations and whether funding from the Clean Transportation Program is required to assist in achieving this goal. The CEC allocates up to $20 million per year to fund the number of stations deemed necessary based on the California Air Resources Board report which examines the specifics of current and future projections of fuelling station availability;
  • as highlighted above, the Clean Transportation Program is administered by the CEC. This program provides financial incentives for businesses, vehicle and technology manufacturers, workforce training partners, fleet owners, consumers, and academic institutions which have the goal of developing and deploying alternative and renewable fuels and advanced transportation technologies. One of the funding areas is hydrogen vehicles and the corresponding refuelling infrastructure;
  • the ZEV Promotion Plan ensures that all California state agencies must support and facilitate the rapid commercialisation of ZEVs in California. This includes the supporting infrastructure, whereby by 2025 there will be 200 hydrogen fuelling stations in California, as well as State agencies working with their stakeholders to ensure that hydrogen fuelling is affordable and accessible to all drivers;
  • an example of County incentives is the Alternative Fuel Infrastructure Grant of Santa Barbara County which provides grants for the installation of the alternative fuel infrastructure within the County which can cover 80% of the project cost up to $150,000. Hydrogen fuelling stations come within the eligible projects for this; and
  • a further County example is the Alternative Fuel and Advanced Vehicle Rebate in San Joaquin Valley. The ‘Drive Clean! Rebate Program’ provides rebates of up to $3,000 for the purchase or lease of eligible new vehicles, which includes hydrogen fuel cell vehicles.

There are a number of “zero-emission” incentives and regulations surrounding transport in California. One such example is the Zero Emission Transit Bus Requirement. This requirement established that, by 2040, all public transit agencies must transition to 100% zero-emission bus fleets.

The California Hydrogen Business Council (“CHBC”) is the leading advocate for the hydrogen and fuel cell industry in Sacramento, California. The CHBC’s policy mission is to advocate for public policies that recognise hydrogen and fuel cell technologies as a clean, zero emissions energy source that can be utilised across sectors for a wide array of applications.

Texas

As in California, Texas has a broad range of zero-emission laws, incentives, and regulations, in addition to those that target hydrogen uptake specifically.

The Texas Commission on Environmental Quality (“TCEQ”) will establish the Authorization of Governmental Alternative Fuel Fleet Grant Program, which provides grants for the purchase or lease of a new alternative fuel vehicle as well as for the purchase, lease, or installation of alternative fuelling equipment; this includes hydrogen within the definition of alternative fuel.

The Texas Department of Transportation, through the Provision for Establishment of Hydrogen Program, is permitted to seek funding from private and public sources to acquire and operate hydrogen vehicles and to establish and operate publicly accessible fuelling stations.

The TCEQ administers the Texas Clean Fleet Program (“TCFP”) as part of the Texas Emissions Reduction Plan. The TCFP offers grants to fleets to replace existing fleet vehicles with alternative fuel vehicles or hybrid electric vehicles for entities that operate at least 75 vehicles and commit to placing 20 or more qualifying vehicles in service for use in the Clean Transportation Zone. These alternative fuel vehicles must reduce emissions of nitrogen oxides or other pollutants by at least 25% as compared to baseline levels, as well as replace vehicles that meet operational and fuel usage requirements. 46 Alternative Fuels Data Center: Hydrogen Laws and Incentives in Texas (energy.gov)

5. Regulatory bodies

As a result of the structure of the US legal system, the regulation of hydrogen and the relevant regulatory bodies differ state by state. On a federal level however, there are some relevant regulatory bodies, with those most significantly and extensively in a position to influence the development of the hydrogen industry and infrastructure being:

  • The Department of Energy is a cabinet-level department of the US Government led by the US Secretary of Energy which focuses on policies regarding energy and safety in handling nuclear material.
  • The Federal Energy Regulatory Commission (“FERC”) is the US federal agency that regulates the transmission and wholesale trading of electricity and natural gas, and also regulates the transportation of oil by pipeline. Pursuant to the Natural Gas Act, FERC regulates the siting, construction, and operation of interstate natural gas pipelines and storage, as well as the rates and terms of service that these pipelines offer. The FERC has not used this jurisdiction to regulate exclusively hydrogen pipelines, and may not have the ability to do so under existing statute, but could potentially regulate the transportation of hydrogen if transported in a blended stream with natural gas. With the legislation at present, an Act of Congress will be required to ensure that hydrogen is within the scope of the FERC. Further, such an Act could accordingly separate infrastructure development responsibilities between the FERC and the Department of Transport through the Pipeline and Hazardous Materials Safety Administration. 47 Laying the regulatory groundwork for hydrogen in the United States | Utility Dive
  • The Occupational Safety and Health Administration (“OSHA”) creates the Occupational Health and Safety Standards, including for compressed gases and hydrogen. Title 29 of the C.F.R. Subpart H, as created by OSHA, covers the installation of hydrogen systems. Consequently, this regulates a wide variety of aspects of hydrogen, including location, containers and piping characteristics, safety relief devices, equipment assembly, marking, and testing. 48 Federal Hydrogen Regulation In The United States: Where We Are And Where We Might Be Going | Vinson & Elkins LLP - JDSupra
  • The United States Environmental Protection Agency (“EPA”) regulates substances that could impact human health and the environment, which includes hydrogen. Importantly, it is interesting to note that in the EPA’s regulation of hydrogen, hydrogen itself was not necessarily the focal point of the regulatory process. As such, it has been suggested that with the growth of hydrogen the EPA will likely need to revisit this regulatory approach. 49 Federal Hydrogen Regulation In The United States: Where We Are And Where We Might Be Going | Vinson & Elkins LLP - JDSupra
  • The Pipeline and Hazardous Materials Safety Administration (“PHMSA”) is centred around creating national policy, conducting research, and setting and enforcing industry standards, taken together with the intention of protecting human health and the environment through promoting the safe transportation of energy and other hazardous materials. As of December 2020, it regulated approximately 700 miles of hydrogen pipelines. As with the EPA, it can be considered that, given the primary focus of the regulations is not specifically hydrogen, certain aspects of hydrogen itself are not fully contemplated in some parts of the existing regulations’ design requirements. 50 Federal Hydrogen Regulation In The United States: Where We Are And Where We Might Be Going | Vinson & Elkins LLP - JDSupra

6. Upcoming developments

California focused key upcoming projects

Key projects that are recently kicking off or likely to start implementation:

  • Bloom Energy: California-based Bloom unveiled on 14 July 2021 that they will begin offering electrolysers alongside hydrogen-powered fuel cells to tap the green hydrogen market. Bloom’s core product is its Energy Server, which converts natural gas into electricity through an electrochemical process without combustion, reducing carbon emissions. In 2019, Bloom stated that its Energy Servers could be upgraded to run on hydrogen, or a blend of hydrogen and natural gas. Having announced in June 2020 the intention to begin offering electrolysers to make renewable hydrogen, 13 months later it unveiled an electrolyser to “supercharge the path to low-cost, net-zero hydrogen”. This is expected to produce the lowest cost clean hydrogen through electrolysis and intends to assist hard-to-decarbonise heavy industries in achieving net-zero emissions through the Bloom Electrolyser’s use of solid oxide technology delivering better efficiency by operating at high temperatures. This is a flexible concept that could entail unique advantages for deployment across a broad variety of hydrogen applications through the use of multiple energy sources, including intermittent renewable energy and excess heat. Orders are currently being accepted, with commercial shipment expected in Autumn 2022. 51 Bloom Energy Unveils Electrolyzer to Supercharge the Path to Low-Cost, Net-Zero Hydrogen - Bloom Energy
  • SGH2 Energy Global: part of the Solena Group, it was announced on 4 June 2021 that they have agreed to sell 3,850 tonnes a year of carbon-negative green hydrogen to refuelling stations across southern California; these stations are run by two of the state’s largest station owners and operators. It is claimed by SGH2 that this is the first and only long-term green hydrogen off-take agreement in the world to date. This carbon-negative hydrogen is expected to be produced from biogenic waste and biomass. Moving forwards, a plasma-enhanced gasification plant is scheduled to open in the summer of 2023, owned jointly by SGH2 and the City of Lancaster. This will produce up to 11,000kg daily at full operation for a baseload of 350 days per year. Critically, SGH2 has announced that its green hydrogen would be cost-competitive with grey hydrogen, therefore making it the cheapest source of green hydrogen. SGH2 is said to be in negotiations with major global energy companies to launch similar projects in Northern California, as well as across parts of Europe, Australasia, and South Africa. 52 World's largest 'green hydrogen' offtake deal signed in California by waste-to-H2 start-up | Recharge (rechargenews.com)
  • Shell: In December 2020, the CEC awarded $7.3 million to Shell Hydrogen (as part of the wider Equilon Enterprises LLC) to deliver 8 of the 51 Shell hydrogen refuelling stations that have been proposed, expanding the hydrogen refuelling infrastructure. This has occurred alongside continued strong support from Toyota and Honda for fuel cell electric vehicle sales in California, and the development of the hydrogen refuelling network to facilitate the adoption of lower carbon transportation options, as noted throughout this Chapter. 53 Shell to Expand California Hydrogen Refuelling Infrastructure | Shell United States
  • Intermountain Power Project: The Utah coal-fired power plant is converting to turbines that will use natural gas blended with 30% hydrogen, a proportion that will rise to 100 per cent hydrogen over the coming decades. This generation capacity of 840MW could become a source of increasingly low-carbon energy as it is fuelled by hydrogen which is stored in very large underground caverns. This is provided that the systems to use renewable energy to convert water to hydrogen via electrolysis and store it for later use can combine in a cost-effective way. To meet the goals at Intermountain, Siemens Energy has announced a US Energy Department grant-funded project to study how its electrolysers could be combined with hydrogen compression, storage, and power plant controls technology. 54
    https://www.greentechmedia.com/articles/read/how-siemens-energy-is-targeting-the-u.s-green-hydrogen-opportunity
Portrait ofDalia Majumder-Russell
Dalia Majumder-Russell
Partner
London
Charlotte Rihoy