THE FUTURE OF U.S. INVESTMENT IN RENEWABLE HYDROGEN PROJECTS

Abstract

Renewable hydrogen is becoming an increasingly popular topic in the United States, particularly after the passage of the Inflation Reduction Act. This report seeks to identify the key factors that will allow hydrogen electrolyzer projects, powered exclusively by renewables (“renewable hydrogen”), to become profitable and to estimate the timeline for which these projects may be deployed on a commercial scale. A financial model is built to test various project factors and timelines. Many scenarios are analyzed to understand how renewable hydrogen projects can become profitable within the next five years or less. The most important factor to ensure profitability is obtaining high value offtake agreements. This allows renewable hydrogen projects to have reliable revenue, making projects more appealing to investors. The next three most important factors include securing low-priced renewable energy, using a high efficiency electrolyzer, and receiving the full value of the production tax credit from the IRA. Other factors considered include: degradation of the electrolyzer, electrolyzer lifetime and replacement costs, CAPEX cost curves, O&M price, capacity factor of electricity inputs, investment year, LCFS prices, REC prices, and ITC values.