Last Sunday, the Inflation Reduction Act (IRA) was passed by the US Senate, including tax credits of up to 3$/kg for ten years. Such a tax credit would effectively reduce the current cost of $3.73/kg for green hydrogen down to $0.73/kg. That's cheaper than grey hydrogen. A green hydrogen price below $1/kg might immediately stimulate demand for green steel, and could do so in other industrial sectors such as cement and glass-making.
The lower price might even make hydrogen-powered road transport more financially attractive, particularly as the IRA — which is expected to be passed by the House of Representatives and signed into law by President Joe Biden within the week — contains subsidies of up to $7,500 for fuel-cell cars and up to $40,000 for fuel-cell trucks (although battery electric vehicles are also eligible for the same funding).
Aside from the US, only the UK has unveiled a national subsidy for clean hydrogen — based on contracts for difference that would make it cost competitive with grey, while the European Commission has announced plans for a similar scheme, which will require the sign-off of 27 nations and the European Parliament. Germany has also revealed a €900m ($920m) auction scheme for green hydrogen imports from outside the EU.
What shall be the consequences for the European Hydrogen Economy?