Now, Norway-based HydrogenPro has thrown in the towel on its plans to build an alkaline electrolyser manufacturing plant in Texas. This choice comes at a moment where there is ambiguity regarding the 45V rules. These guidelines are critical to incentivizing the production of green hydrogen in the United States. The move offers insight into the multifaceted daunting challenges that the burgeoning green hydrogen industry is confronted with. This is particularly true with the tariffs recently introduced by President Trump.
In production capacity it will reach over 8.6 million tonnes per annum (mtpa) by 2030 the U.S. hydrogen pipeline is. Over a third of this capacity will be projects in development for green hydrogen. New tariff policies now threaten to undermine this growth and poison supply chains needed to deploy emerging clean technologies. Further, these new tariffs apply not just to hydrogen, but to all industries that depend on steel and aluminum—including many clean energy sectors.
A 25% tariff on imported steel is a direct blow to manufacturers of wind turbines. That’s unacceptable. These turbines and electrolysers are absolutely necessary for the emerging green hydrogen value chain. In fact, a large majority of electrolyser supply today is from Europe. The recent imposition of a 20% reciprocal tariff on EU goods has created even more challenges for U.S. developers to navigate. As a consequence, they will inevitably face restrictions on their product diversity and reach. This will undermine their ability to make investments in green hydrogen projects.
Impact on Production Capacity
So now, developers in the U.S. green hydrogen landscape are faced with a terrifying Catch-22. They’re being hit with escalating material costs due to tariffs. This could result in them massively limiting the range of electrolyser technologies that they’ll allow for their projects. This further consolidation is expected to happen over the coming year given current policy paths.
In reality, the current market landscape is dominated by blue hydrogen. It is generated from natural gas with carbon capture and storage (CCS), and it makes up 64% of the anticipated low-carbon hydrogen capacity by 2030. Surprisingly, of this capacity, green hydrogen only accounts for 36% of it. As a side note, this raises big questions about the long-term viability and competitiveness of renewable energy pathways.
Clarice Brambilla, an expert in the field, emphasizes the severe implications of these tariff policies on the U.S. market:
“Protectionist tariffs are fracturing critical supply chains and isolating U.S. manufacturers from global innovation and scale, at a time when collaboration is essential to driving down the levelized cost of renewable energy – the result being a weaker domestic hydrogen market and lost international competitiveness.”
Uncertain Future for HydrogenPro
HydrogenPro has made the decision to suspend its plans for a Texas facility. This action further highlights the uncertain investment climate for green hydrogen in the U.S. The firm’s reluctance underscores the chilling effect of politics on business’s decision-making. Complicated tariff regulations and the unknown fate of certain tax incentives, like the 45V hydrogen production tax credit, could put a serious damper on advances in clean energy initiatives.
Brambilla further comments on the critical nature of maintaining supportive frameworks:
“Trump should prioritize maintaining supportive tax incentives like the 45V hydrogen production tax credit, as they are crucial for encouraging investment in green hydrogen projects.”
There’s already widespread bipartisan support for the 45V credit, and it’s helping states of every political stripe. Unpredictable policies are a danger, too. They can scare off investment and delay projects by years.
Additionally, American electrolyser manufacturers such as PlugPower, Electric Hydrogen, Ohmium, and Verdagy may find themselves in a unique position to capitalize on these disruptions. Yet, they too have to operate in an ever-challenging space characterized by rising costs and supply chain constraints.
Global Competitiveness Concerns
Other countries — particularly the EU and China — are doubling down on their own commitments to hydrogen alliances. At the same time, the U.S. stands to lose our competitive edge in the global market. Brambilla warns about the potential isolation resulting from current policies:
“As others double down on hydrogen partnerships, particularly the EU and China, the U.S. may find itself locked out of the very economy it helped kickstart.”
The direct cost increases from Trump’s tariffs are immediate and produce the kind of effects that starkly outweigh potential benefits. They redirect attention away from renewable solutions towards fossil fuel-derived hydrogen solutions. This move has the potential to dramatically reduce green hydrogen capacity and investment for the long term.
Brambilla articulates this concern:
“His policies will thus further tilt the playing field toward fossil fuel-derived hydrogen and away from renewables-based pathways.”