'Weak rules for US hydrogen tax credit will push up electricity bills': consumer advocates
A letter to White House and Treasury officials calls for additionality and time matching to prevent extra demand on the grid driving up power prices
Household electricity bills will rise in the US unless the government enforces the kind of strict rules on green hydrogen production being implemented in Europe, according to a coalition of 17 consumer advocacy groups.
In a letter to White House and Treasury officials, the consumer advocates warned that without rules on additionality and temporal correlation (see panel below), electrolysers connected to state power networks would “add substantial new demand on the grid and divert large amounts of existing clean electricity that is already powering our homes to hydrogen production”.
And even matching H2 production to renewable power generation on an annual basis “would allow hydrogen project operators to scoop up and cannibalize the lowest cost clean energy resources for hydrogen production, that would have otherwise gone to powering households with low cost, clean energy”, the letter continued.
In addition to the likelihood that emissions would increase as fossil-fired power generation is ramped up to cover the extra demand, “the occurrence of either of those impacts will increase electricity prices for customers and would be a completely unacceptable and deeply concerning outcome”, the groups warned.
The advocates cited research from Princeton University which found that without strict rules for additionality, time matching and sufficient transmission infrastructure for “deliverability” of renewable power, wholesale power prices could be 8% higher in Southern California and 10% higher in Wyoming and Colorado than if these regulations were in place.
This is because the production tax credit of up to $3 per kilogram of H2 would allow hydrogen producers to continue operating an electrolyser on a near-constant basis — even when higher prices would otherwise incentivise a pause in operation.
“In these cases, the total additional costs shifted to other electricity consumers by hydrogen producers operating under lax rules are $392 million per year in the Southern California region, and $158 million per year in the Wyoming & Colorado region,” the Princeton researchers warned.
The consumer advocacy groups drew a comparison to the rise of cryptocurrency mining, a highly energy-intensive process that studies have indicated had pushed business and household energy bills up by the tens of millions per year in upstate New York.
“While hydrogen could offer more societal benefit than cryptocurrency, crypto mining offers a powerful precedent that underscores the importance of tight rules for power-hungry projects,” the letter noted.
Although the US government has already announced the seven hubs due to receive $7bn in federal funding, the Treasury is only expected to release its long-awaited guidelines for how lifecycle emissions will be counted for hydrogen producers — including whether regulations around additionality, temporal matching, and geographical correlation will be introduced — by the end of this year.
However, a number of prospective producers, prominent Democratic senators, and state governments have come out against implementing these rules, arguing that they overcomplicate project development and will ultimately push up the price of producing green hydrogen.