Clean hydrogen industry got huge boost from Inflation Reduction Act

A tax credit tucked into Inflation Reduction Act could turbocharge the nascent clean hydrogen industry and turn it into a multi-trillion dollar business in the coming decades.

The tax credit will spur hydrogen producers to develop cleaner ways to synthesize hydrogen, which is used to make fertilizer and in other industrial processes. But it could also catalyze a whole new category of companies looking to use clean hydrogen as a replacement for fossil fuels in areas such as shipping, aviation, heavy industry, and as a way to store and transport energy.

Currently, 98 percent of hydrogen is made in a way that uses fossil fuels, according to the Center on Global Energy Policy at Columbia University. But “all the current hydrogen producers are looking to produce clean hydrogen,” explained Elina Teplinsky, a lawyer who serves as the spokesperson for the Nuclear Hydrogen Initiative, a new group working to advance the development of the nuclear hydrogen industry.

The law will make it more economically feasible to use carbon capture and storage technology to reduce the carbon emissions from hydrogen creation. It will also open the door to a whole range of companies looking for cleaner ways to make hydrogen, and to use hydrogen as a replacement for fossil fuels in certain areas.

By 2050, between 60 and 80 percent of hydrogen production will be powered by renewables, according to a November report on the industry published by the Hydrogen Council, an industry group, in collaboration with McKinsey & Company. (This prediction was published before the tax credit was passed.)

This kind of industry transition will require a lot of investment — as much as $7 to 8 trillion through 2050. But it could make a lot of money, too. By 2050, the hydrogen economy will generate about $3 trillion in annual revenue, according to the Hydrogen Council and McKinsey.

Currently, roughly half of the hydrogen produced is used to make fertilizer and ammonia, and the other half is used in petrochemical refineries or production, according to the Center on Global Energy Policy at Columbia University. The push for clean hydrogen is motivated by a need to decarbonize current processes, and because the use cases for hydrogen are expanding, too.

Industrial applications, which makes up nearly all the demand for hydrogen today, will represent only 15% of total hydrogen demand by 2050, according to the report from the Hydrogen Council and McKinsey.

Hydrogen has the highest energy per mass of any fuel and does not release any carbon emissions when it is burned or turned to electricity in a fuel cell. Entrepreneurs and advocates believe…