By Matt Welch
As the global demand for hydrogen increases, foreign competitors are continuing to invest in their hydrogen production facilities. Texas is uniquely positioned to continue to invest in hydrogen and bolster America’s global energy dominance.
Tax incentives, such as the 45V Clean Hydrogen Production Tax Credit, are critical for ensuring that the U.S. stays competitive in the marketplace. But this competitive advantage, which the U.S. and Texas enjoy, is at risk. The U.S. House of Representatives recently passed its massive spending bill, which accelerates the phase-out of certain energy tax credits like 45V.
Demand for American electricity is expected to grow 50% by 2050. Data centers and transportation are drivers of this demand. Hydrogen can potentially serve as another source of energy but failing to invest in this technology in its incipient stages or phasing out the credit for projects commencing next year, is not taking advantage of an “all-of-the-above” energy strategy that President Trump has been touting.
Without 45V, the U.S. risks losing a foothold as a market leader to international competitors such as China, which has aggressively advanced its hydrogen industries. As China ramps up blue hydrogen and integrates it into its fertilizer industry, U.S. producers face being edged out in international markets. This threatens U.S. export revenues in fertilizer and ammonia, particularly to markets such as Japan. China’s investment in blue hydrogen extends beyond domestic decarbonization, it is a geopolitical tool that can impact the fertilizer and ammonia markets. China will continue to dominate the blue hydrogen and energy marketplace if Congress does not preserve tax credits like 45V.
There exists a looming national security threat from China. China cannot be allowed to undercut U.S. fertilizer producers, forcing American farmers to become dependent on importing their product. China is creating strategic dependencies for industrial companies that rely on hydrogen and fertilizer. Failing to promote American hydrogen or extending the life cycle of 45V is a China First strategy.
Texas has remained at the forefront of American energy for years and will continue to be an important domain for the future of blue hydrogen and the overall economy, but only if the Senate puts 45V back in the budget reconciliation bill. Data from a new report conducted by Citizens for Responsible Energy Solutions (CRES) Forum suggests that investing in blue hydrogen output can result in major economic returns.
In Texas alone, blue hydrogen can be responsible for creating over 9,000 jobs during the construction phase and nearly 19,000 permanent jobs if blue hydrogen were to be fully scaled. Blue hydrogen can also, according to CRES Forum’s report, “support more than $22 billion in economic output” and “contribute $12 billion to GDP.” If 9.8 million metric tons per annum of blue hydrogen is scalable to what the IEA believes, the resulting economic activity could generate billions in federal, state, and local tax revenues, providing meaningful contributions to the US GDP.
Hydrogen projects, such as the one in Baytown, are great examples of Texas decarbonizing manufacturing and heavy transport plants by utilizing steam methane reforming and carbon capture storage. Furthermore, the Gulf Coast Hydrogen Hub is set to become a cornerstone of blue hydrogen production in the US. It will leverage the region’s abundant natural gas supply to reduce the cost of hydrogen. Major projects similar to these, which make Texas an important player in the American energy landscape, may miss out on the 45V tax credit.
Members of Congress, particularly those in the Senate, need to recognize the significant advantages of 45V in fostering American energy exceptionalism. By supporting tax incentives for hydrogen-producing companies, the U.S. government can stimulate economic growth. Congress has done a great deal of work to prioritize and encourage blue hydrogen production, and the Senate should maintain this momentum by retaining 45V It will help create jobs, incentivize investment in future hydrogen technologies, and bolster the U.S. economy.
Matt Welch is state director for Conservative Texans for Energy Innovation, a group promoting energy innovation and clean energy policies grounded in the conservative principle of common sense and market-based solutions.
