HOW PROPOSED 45V GUIDANCE CAN UNDERCUT BIDEN’S HYDROGEN HUBS: The Biden administration has poured billions into a program meant to build out hydrogen facilities across the U.S. But proposed guidance for a tax credit meant to incentivize the production of “clean” hydrogen could undercut the materialization of the hubs the Energy Department is funding, according to leaders of the projects.
The leaders of all seven hydrogen hubs wrote a joint letter calling for the tax credit guidance, known as 45V, to be less restrictive. The letter, which was sent on Monday, expressed concerns that the tax credit’s narrow eligibility criteria could have “far-reaching” negative consequences for the hydrogen industry – and even prevent the hubs from taking off. The comments were among thousands published in the Federal Register just before the comment period closed on Monday.
If you’ll recall: The bipartisan infrastructure bill established the Regional Clean Hydrogen Hubs Program (H2Hubs), which allocated $7 billion to seven projects across the country to produce clean hydrogen.
“Unfortunately, these investments and jobs will not fully materialize unless Treasury’s guidance, in its current form, is significantly revised, as many of the projects generating these investments and supporting jobs will no longer be economically viable,” the letter reads. “It is essential to strike a balance that encourages the growth of the clean hydrogen industry, protects jobs, preserves environmental gains, and fosters opportunities for disadvantaged communities.”
Why this matters: This has been a concern since the guidance dropped – and could be a stumbling block for the Biden administration if the tax credit fails to support the hubs’ production of hydrogen. The White House created the program with the goal of producing more than three million metric tons of clean hydrogen per year. According to its calculations, this would eliminate 25 million metric tons of carbon dioxide emissions from end uses each year – the equivalent of the combined annual emissions of over 5.5 million gasoline cars.
“If all seven hubs are signing onto a joint letter saying this current guidance for the 45V tax credit is a problem … that should be a giant red flag,” said Xan Fishman, the senior director energy policy and carbon management at the Bipartisan Policy Center. “We don’t have a major hydrogen economy operating in the U.S. right now … and if the 45V tax credit is structured in such a way that the hub producers aren’t going to be able to claim it, or are going to get a lower credit value than they were expecting, then that puts each hub at risk.”
Let’s take a step back: It’s not just the hydrogen hub leaders taking issue with the guidance. Many other industry players are concerned with the three pillars of the guidance that determine eligibility for the tax credit, including deliverability, temporal matching, and incrementality. The deliverability requirement would require a project to source power from the same region in which a facility is located, while temporal matching would require producers to show that their produced hydrogen is matched “hourly” with renewable energy. The third pillar, incrementality, would require “new” renewable sources of energy to be built to power the hydrogen facilities.
Take a look at the comments provided by the United Brotherhood of Carpenters and Joiners of America, which also support the argument that the guidance would undercut the hydrogen hub programs by providing no clear pathway for nuclear facilities to be eligible for the tax credit. Read that here.
We’ve also covered the confusion around how natural gas companies could qualify for the tax credit. Read that here.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment writers Breanne Deppisch (@breannue_dep) and Nancy Vu (@NancyVu99). Email bdeppisch@washingtonexaminer dot com or nancy.vu@washingtonexaminer dot com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
KERRY BLASTS INVESTORS OVER RETREAT ON GREEN FINANCE: Outgoing U.S. climate envoy John Kerry blasted asset managers for leaving the global investment coalition, Climate Action 100+, accusing the firms in an interview with the Financial Times this week of “turning away from science.”
His remarks come less than a month after JPMorgan’s asset management arm, Pimco, and State Street Global Advisors announced they would be leaving the coalition, which recently asked signatories to step up their actions to manage climate risk. (BlackRock stopped short of quitting the group but said it would be playing a smaller role.)
“Anyone who is pulling away today is turning away from the science and responding to political and ideological pressure that is not based on facts, not based on science,” Kerry told the Financial Times. “They’re not in my judgment acting on the right side of history.”
Republicans have blasted asset management firms for so-called ESG investment policies, accusing them of “boycotting” fossil fuels, and some GOP-led states have prohibited doing business with them.
“We need these [asset management] companies to be acting on the right side of history. We need them to be helping lead the charge in the way that they were,” Kerry said. Read more from the interview here.
GLOBAL LNG DEMAND EXPECTED TO GROW IN 2024: The global demand for LNG is expected to increase further in 2024, an official from the French energy major, TotalEnergies, said today—news that comes as Russia and the U.S. have both increased exports, with U.S. shipments abroad on track to nearly double by the end of the decade.
“LNG has continued to grow, with China being back in the market but not yet at the level of 2021,” the head of TotalEnergies’ Asia Pacific Exploration, Thomas Maurisse, said at an industry conference.
“With Europe … it’s a new and big market, this demand will still continue to grow. At the same time, new capabilities will not be on stream in this very short term, so will continue to put bit of pressure on prices and volatility.”
Much will also depend on demand from China, which began importing more spot LNG due to recent lower prices. But that could change quickly if LNG output falls, Petronas executive Shamsairi M Ibrahim told Reuters at the same conference.
“If anything happens to production, you will see a [price] spike,” Ibrahim said.
CAR PRICES EASE FOR FIRST TIME IN YEARS, WITH MORE RELIEF ON THE HORIZON: U.S. car prices have fallen year-over-year for the first time in nearly three years, according to data from Cox Automotive—giving potential car buyers more incentive to purchase a vehicle in what some dealers and analysts have projected will be the most affordable year for car sales since 2018.
New U.S. car prices averaged $47,338 in January—a 1.2% drop in prices, year-on-year, and a 2.4% drop from the peak-high month of December 2022, when prices averaged $48,516.
The price relief is due primarily to over-supplied car dealers, the Associated Press reports. After years of supply chain delays and parts shortages that sent prices soaring, the abundance of inventory is likely to skew in consumers’ favor.
And while inventories remain lower than pre-pandemic levels, analysts said they expect the availability and pace of current production to continue to lower prices for new- and used-car buyers for the rest of the year. Read more on that here.
CLIMATE CHIEF: CARBON CAPTURE IS ‘LIKE TRYING TO PUSH WATER UPHILL’: The head of the U.N.’s Intergovernmental Panel on Climate Change warned yesterday of the hurdles ahead for scaling up carbon capture and storage technologies, comparing the process, which is prominent in the net-zero plans for many oil and gas producers, to “trying to push water uphill.”
“One of the challenges is, if you take things like solar energy, it is modular and small scale, and you can roll it through the system more quickly. Once you get past the threshold, it happens by itself,” Jim Skea said at the International Energy Week conference in London.
There is still some “engineering problem-solving” to be done, Skea added. His remarks echoed the IEA, which has also called for fossil fuel interests to let go of the “illusion” that carbon capture is a solution to climate change. Read more from CNBC here.
TEXAS RACES TO FIGHT WILDFIRES AMID WARNINGS CONDITIONS COULD WORSEN: State and local firefighters in Texas raced to fight raging wildfires today as they continued to tear through the Texas panhandle, amid warnings that the situation could worsen quickly in the coming days.
The fires appeared to worsen significantly overnight. According to data from the Texas A&M Forest Service, the ongoing Smokehouse Creek Fire appeared to double in size since Tuesday evening and is currently marked as “zero percent” contained.
Gov. Greg Abbott issued a disaster declaration for 60 counties across the state, noting that “hot and dry conditions caused by high temperatures and windy conditions are expected to continue in the region in the coming days,” and could cause wildfires to grow larger and more dangerous. Read the latest on that here.
…MEANWHILE, HOUSE PANEL TO VOTE ON WILDFIRE INSURANCE BILL: The House Financial Services Committee is expected to vote tomorrow on a new bill that would task the GAO with studying wildfire risk assessment and insurance coverage.
Movement on the “Wildfire Insurance Coverage Study Act of 2023,” introduced by the panel’s ranking Democrat, Rep. Maxine Waters of California, comes as a spate of home insurance firms have either exited or reduced their footprint in wildfire-prone states.
California in particular has seen an exodus in home insurance providers, who have cited construction costs, “rapidly growing” catastrophe risks, and reinsurance market challenges as the main reasons for their exits.
RUNDOWN
Reuters Exxon’s curveball move in Guyana alters Chevron-Hess deal prospects
Financial Times Apple parks its electric car project in sign of EV industry’s struggles
