Will This New U.S. Bill Kill Green Hydrogen? What H.R.1 Means for America’s Hydrogen Future

In today’s episode of The Hydrogen Podcast, we break down the biggest legislative shift in the U.S. hydrogen industry to date—the House-passed “One Big, Beautiful Bill Act” (H.R.1)—and how it could transform the economics of hydrogen production.

🧪 Key Topics Covered:

• Why steam methane reforming with CCS, natural hydrogen, and methane pyrolysis may dominate U.S. hydrogen production
• The repeal of the Section 45V Clean Hydrogen Production Tax Credit and what it means for projects like Plug Power, Air Products, and Clean Hydrogen Works
• The new focus on Section 45Q for carbon capture—and how ExxonMobil’s Baytown hydrogen hub could thrive under the new rules
• The shifting competitiveness of electrolytic hydrogen, and why its future may now rest on R&D and cost innovation

💼 Economic Takeaways:

• Hydrogen from SMR+CCS, natural hydrogen, and pyrolysis costs $1–$2/kg—half the cost of electrolysis
• Potential loss of $50B in hydrogen investments due to the short 60-day construction window for 45V eligibility
• Plug Power’s market cap could drop $500M; Air Products’ and CF Industries’ projects are now at risk
• But ExxonMobil’s Baytown plant could make $500M/year in CCS tax credits under 45Q

📈 Whether you're a policymaker, investor, or energy professional, this episode is your definitive guide to understanding the real market implications of H.R.1.

👉 Like, subscribe, and hit the bell to stay ahead of the hydrogen curve.
 📩 Email us at info@thehydrogenpodcast.com for feedback or questions!

#HydrogenPodcast #GreenHydrogen #BlueHydrogen #HydrogenEconomy #HydrogenPolicy #Section45V #Section45Q #CarbonCapture #NaturalHydrogen #MethanePyrolysis #ExxonMobilHydrogen #PlugPower #AirProducts #CleanHydrogen #HydrogenLegislation #HydrogenInvestment

Transcript

In the United States, economics drives market development, and for the hydrogen industry to flourish, we must prioritize the most cost-effective production methods. Today, that means focusing on steam methane reforming (SMR) with carbon capture and sequestration (CCS), natural hydrogen, and methane pyrolysis, which offer hydrogen at $1–$2 per kilogram, compared to $4–$6 per kilogram for hydrogen produced via electrolysis with renewable energy. While electrolytic hydrogen holds long-term promise for decarbonization, its current price point limits its competitiveness. The "One Big, Beautiful Bill Act" (H.R.1), passed by the U.S. House of Representatives on May 22, 2025, by a 215-214 vote, reinforces this economic imperative by repealing the Section 45V Clean Hydrogen Production Tax Credit, redirecting the industry toward cost-efficient solutions like SMR with CCS, with significant benefits for projects like ExxonMobil’s Baytown facility. As the bill awaits Senate review, let’s explore how an economics-first approach, catalyzed by this legislation, can build a robust U.S. hydrogen economy.

Hydrogen is critical for decarbonizing high-emission sectors—transportation, industry, and power generation—which account for over 30% of global carbon dioxide emissions, or roughly 10 billion metric tons annually. Its versatility as a fuel or feedstock makes it a cornerstone for net-zero goals by 2050, particularly in applications like ammonia production, steel manufacturing, and heavy-duty transport. However, the U.S. hydrogen industry faces economic barriers: electrolytic hydrogen costs $4–$6 per kilogram due to high electricity and capital expenses, compared to $1–$2 per kilogram for hydrocarbon-derived hydrogen via SMR, and the nation’s hydrogen refueling infrastructure is limited to fewer than 100 stations, compared to over 100,000 electric vehicle charging stations. Until recently, the Section 45V credit, part of the 2022 Inflation Reduction Act (IRA), provided up to $3 per kilogram for low-carbon hydrogen (lifecycle emissions below 4 kg CO2e per kilogram), supporting 20–30% of revenues for companies like Plug Power and CF Industries. The "One Big, Beautiful Bill Act" changes this landscape by terminating the 45V credit for facilities beginning construction after December 31, 2025, limiting eligibility to projects starting within a 60-day window and completed by 2028. It retains the Section 45Q tax credit for CCS, offering up to $85 per ton of CO2 captured, restricts credits for projects involving foreign entities of concern (notably Chinese suppliers), and repeals credit transferability after 2027.

The repeal of the 45V credit has sparked concerns, with the Fuel Cell and Hydrogen Energy Association warning of potential delays to $50 billion in planned projects, including 46 in Louisiana, such as Air Products’ $4.5 billion facility and Clean Hydrogen Works’ $7.5 billion Ascension Clean Hydrogen project, which could create over 2,500 jobs. The 60-day construction window is challenging, as projects require 12–24 months for permitting and financing, risking billions in investments. Posts on X suggest the repeal could cede U.S. leadership to the EU and China, where subsidies support 10–15% of global hydrogen capacity. However, I see this as a pivotal opportunity to align the hydrogen industry with economic realities. By eliminating the 45V subsidy, the bill forces a focus on cost-effective production methods—SMR with CCS, natural hydrogen, and methane pyrolysis—that can deliver hydrogen at $1–$2 per kilogram, building market demand and infrastructure to drive a hydrogen economy. This approach allows electrolytic hydrogen, reliant on costly PEM or alkaline electrolyzers, to develop cost reductions through scale and innovation, targeting $2–$3 per kilogram by 2030, ensuring it complements rather than competes with cheaper alternatives in the near term.

Economically, the 45V repeal challenges companies like Plug Power, whose 2023 annual report warned that its loss could reduce its $2 billion market capitalization to $1.5 billion, cutting revenues by $50–$75 million annually. Projects like Air Products’ facility, aiming to produce 750 million standard cubic feet of hydrogen daily for ammonia decarbonization, face higher costs without the $3 per kilogram subsidy, as electrolytic hydrogen’s $4–$6 per kilogram price is uncompetitive. Customers in ammonia, steel, and chemicals may resist price hikes, pressuring producers to scale back. However, the Section 45Q credit provides a robust alternative, offering $85 per ton of CO2 captured, or $0.50–$1 per kilogram of hydrogen for SMR-CCS projects. CF Industries expects $100–$150 million annually from its Donaldsonville CCS project, capturing 2 million tons of CO2 yearly, stabilizing operations and funding infrastructure. SMR with CCS leverages the U.S.’s 2.6 million miles of pipeline infrastructure, reducing hydrogen costs to $1.50–$2.50 per kilogram, competitive with diesel ($0.10–$0.15 per mile) for fuel cell electric vehicles (FCEVs). This cost-efficiency can drive demand, supporting $10–$15 billion in infrastructure investment by 2030 for 1,000 refueling stations, enabling FCEVs with 500-mile ranges and 10–15-minute refueling times.

Natural hydrogen, extracted from geological formations, offers another low-cost option, potentially at $0.50–$1 per kilogram. Companies like Koloma are exploring deposits in the U.S. Midwest and Gulf Coast, with pilot projects estimating 1–5 million tons of annual production by 2030. The process requires drilling and purification, similar to natural gas extraction, but faces challenges in resource mapping and infrastructure development, with capital costs of $10–$50 million per site. Methane pyrolysis, which splits methane into hydrogen and solid carbon without CO2 emissions, is emerging at $1–$2 per kilogram, with firms like Monolith Materials scaling facilities in Nebraska. It requires high-temperature reactors (800–1,200°C) and energy inputs of 20–30 kWh per kilogram, but the solid carbon byproduct can generate additional revenue, offsetting costs. These methods, supported by 45Q for CCS or market-driven for natural hydrogen and pyrolysis, align with the bill’s economic focus, building a demand-driven hydrogen economy.

The ExxonMobil Baytown facility, part of a $20 billion Gulf Coast hydrogen and CCS hub, is uniquely positioned to benefit from the bill’s emphasis on the 45Q credit. Set to produce 1 billion cubic feet of hydrogen daily by 2028, capturing over 7 million tons of CO2 annually, the facility can generate $500–$600 million yearly from 45Q credits at $85 per ton, offsetting its $3–$5 billion capital cost. Using SMR with CCS, Baytown will produce hydrogen at $1–$2 per kilogram, leveraging ExxonMobil’s hydrocarbon expertise and existing pipelines to supply refining and chemical industries, reducing emissions by 5–10 million tons annually. The project will create 1,000 direct jobs and contribute $2–$3 billion to Texas’s economy, positioning Baytown as a model for cost-competitive, lower-CI hydrogen production and reinforcing the economic viability of SMR with CCS under the bill’s framework.

Technically, SMR with CCS is mature, producing hydrogen at 70–80% efficiency but requiring advanced CO2 management. Scaling U.S. storage from 10 million tons annually to 50 million by 2030 demands leak-proof pipelines and injection systems, with projects like the Heartland Greenway ($1–$2 billion for 15 million tons) facing geological stability challenges. Natural hydrogen extraction involves drilling and gas separation, with technical hurdles in identifying viable deposits and ensuring purity, requiring $5–$10 million in exploration per site. Methane pyrolysis uses plasma or thermal reactors, with challenges in scaling energy-efficient systems and managing solid carbon storage, but its zero-CO2 output aligns with low-CI goals. Electrolytic hydrogen, consuming 50–60 kWh per kilogram at 60–70% efficiency, faces high capital costs ($50–$100 million for 100 MW plants) and electricity expenses ($50–$100 per megawatt-hour). The 45V repeal allows electrolysis to focus on R&D, targeting 40–50 kWh per kilogram and membrane durability beyond 30,000 hours, potentially halving costs to $500–$1,000 per kilowatt by 2030. Solid oxide electrolysis (SOE), using waste heat to reduce energy to 40 kWh, could further lower costs if scaled.

The bill’s restrictions on foreign entities may raise electrolyzer costs by 10–20%, but they encourage domestic manufacturing, with Nel Hydrogen’s U.S. facilities creating 500–1,000 jobs per plant. The repeal of credit transferability after 2027 complicates financing, but CCS projects like ExxonMobil’s could attract oil and gas investment, leveraging expertise to lower costs. The Senate, with a 53-47 Republican majority, may extend the 45V timeline or raise 45Q rates to $100 per ton, balancing CCS and electrolysis. By 2030, SMR with CCS, natural hydrogen, and methane pyrolysis could supply 60–70% of U.S. hydrogen demand (20 million tons annually), while electrolytic hydrogen scales to meet 5–7% of energy demand by 2050, supported by renewable energy at $20–$30 per megawatt-hour. This economics-first approach can drive $20 billion in Gulf Coast economic activity, decarbonizing 10–15 million tons of CO2 annually, and position the U.S. as a global hydrogen leader, complementing EU and Chinese efforts.

Alright, that’s it for me, everyone.  If you have a second, I would really appreciate it if you could leave a good review on whatever platform you listen to. Apple podcasts, Spotify, Google, YouTube, etc. That would be a tremendous help to the show. And as always if you ever have any feedback, you are welcome to email me directly at info@thehydrogepodcast.com. So until next time, keep your eyes up and honor one another.