Could California's hydrogen rules end up being even stricter than the federal government's?




A new amendment to a bill tabled in the state assembly would ban grey and blue H2 in power and transport


A draft bill currently working its way through the California State Legislature could ban all grey and blue hydrogen used in power and transport — while making controversial hourly matching requirements for green H2 set out by the federal government for tax credits a matter of legal compliance.


Currently, California requires renewable hydrogen to make up at least a third of all H2 produced for — or dispensed by — refuelling stations if they receive state subsidies.


The California Assembly Bill 1550, introduced by Democratic assembly member Steve Bennett, would increase this to 100% from 2045 with undefined interim targets.


The draft bill also mandates all hydrogen produced and used for power generation and as a transport fuel in the state to be made via electrolysis using newly-built renewable or biomass-fired power —effectively banning the production and use of blue and grey H2 made with fossil gas in those segments by 2045.


And a new amendment — yet to be tabled, but leaked to US political news site Politico — would further tighten the rules by requiring hydrogen produced from renewable or curtailed electricity to be made within the same hour the power is delivered to the grid to count as “green”.


This would make additionality and hourly matching a matter of compliance in California from 2045.


The amendment also introduces new wording on fossil-based hydrogen, replacing an "and" with an "or" in a key section of the text, raising the possibility that production could be banned in the state outright.


“This bill would require, on and after January 1, 2045, that all hydrogen produced or used in California for the generation of electricity or fuelling of vehicles be green hydrogen, as defined, or renewable hydrogen, as defined, in furtherance of the state’s policy to achieve net zero greenhouse gas emissions as soon as possible, but no later than 2045,” the amended text reads.


Hydrogen Insight has contacted Bennett’s office for clarification, which has not responded at the time of publication.


The Biden administration had introduced in its draft guidance for the 45V clean hydrogen production tax credit requirements for electricity to be sourced from assets brought online or uprated within 36 months of the H2 facility, as well as hourly matching from 2028.


However, this would only apply to producers looking to access this subsidy of $3/kg over a ten-year period.


The 45V also has a cut-off date for projects to have started construction by 1 January 2033, although it could be extended in future.


Meanwhile, the amendment to the draft bill also limits the sources of biomass for the upstream power, requiring forest biomass to be sourced as by-products of sustainable forestry and excluding dairy-sourced biomethane or purpose-grown crops.


The draft bill has gone to a third reading within the California State Assembly — the state government’s lower house — for which it would require a majority vote to pass to the State Senate.


However, even after it has passed through the upper house, the bill would still need to go before Governor Gavin Newsom, who has 12 days to approve or veto the law.


While Newsom announced last August that the state would develop a market development strategy for green hydrogen, representatives from his office had also signed a reply to the US Treasury’s consultation on the 45V tax credit guidance which called for annual rather than hourly matching.


The consultation reply had also argued against additionality requirements, noting that the state already planned to build out 148GW of new clean energy capacity to supply 100% of the grid by 2045 — and linking up even more power to the grid for H2 facilities could massively congest the process of interconnection.



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