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Good morning, and welcome back to Energy Source, coming to you from New York.

Nearly 200 countries struck a “historic” deal at the UN COP28 climate conference in Dubai yesterday, agreeing for the first time to transition away from fossil fuels to avert the worst effects of climate change.

The deal, dubbed the “UAE Consensus”, caps a two-week summit that laid bare the tensions between wealthy and poor nations over the costs of halting new coal, gas, and oil projects. UN climate body chief Simon Stiell said the Dubai “outcome is the beginning of the end” for the fossil fuel industry. Our climate colleagues in Dubai break down how the eleventh-hour deal was struck.

While the UAE Consensus calls for the transition away from fossil fuels to accomplish net zero by mid-century, it did not include language to “phase out” hydrocarbons, a demand supported by more than 100 countries. Some delegates and climate groups also criticised the agreement for offering “cavernous loopholes” for the fossil fuel industry and not including language that directs funding to developing countries for the transition.

The world’s largest oil producers welcomed the COP28 agreement, my colleagues Tom Wilson and Jamie Smyth report. Shares in BP, Shell, ExxonMobil and Chevron were all largely unchanged by late Wednesday afternoon in London, ticking up at the end of the trading day in New York.

Elsewhere, today’s newsletter looks at the mounting pressure facing the Joe Biden administration to execute more flexible rules for green hydrogen, as projects remain in limbo. The White House is expected to release guidance by the end of the year, which will help set a global standard for the fuel.

Thanks for reading,

— Amanda

The future of the US green hydrogen sector hangs in the balance

The fight over the future of US green hydrogen has intensified after news outlets leaked draft rules from the White House that would only subsidise projects reaching a higher green standard than what many industry players expected.

Biden’s landmark climate law, the Inflation Reduction Act, included an uncapped tax credit for green hydrogen, transforming the US into one of the top destinations for the fuel.

For months, the White House has delayed rules for the tax credit amid an intense lobbying blitz from environmentalists and industry groups over what should count as green. The lack of guidance has prevented final investment decisions on projects across the country and slowed the growth of a sector that is primed for take-off.

How the US defines green hydrogen in the tax credit will shape the sector’s role in decarbonisation as well as set a global standard for hydrogen trading. Leaked documents seen by Politico and Bloomberg earlier this month show that the White House may opt for rules similar to the European Union’s guidelines, prompting backlash from industry groups that argue the standards will choke the nascent industry.

Plug Power, a US hydrogen company, told Energy Source that the recently leaked hydrogen tax credit rules were “unworkable” and threatened to pause projects in New York and Texas if rules proved too stringent.

“All the efforts that we put in to encourage and build a hydrogen industry quite honestly would disappear if this [guidance] is as strict as they say,” said Andy Marsh, chief executive of Plug Power, adding that tax credit uncertainty contributed to its Securities and Exchange Commission warning last month that it could run out of cash within the next year.

Plug Power is a corporate partner on four of seven hydrogen hubs that will share $7bn awarded from the Biden administration in October.

Column chart of Annual production based on announced US projects  showing US green hydrogen sector set to take off this decade

Under the leaked guidelines, green hydrogen developers must use power from new renewable projects operating on their regional grid to qualify for the tax credit. Developers also must demonstrate production is powered by renewables every hour (up from annually) starting in 2028, according to Politico and Bloomberg.

The American Clean Power Association, a lobbying group that includes fossil fuel companies, criticised the leaked guidance, warning “it undermines a promising opportunity for the clean power sector”. The ACP estimates hourly requirements for hydrogen before 2032 would make projects too costly to be financially viable.

Mona Dajani, global co-chair of energy, infrastructure, and hydrogen at law firm Baker Botts, said: “There’s a lot of investors and foreign companies that changed their path to come here to the US to invest . . . If they have these rules, these guidelines, it would really be difficult for the industry to take off.”

Green hydrogen, which is produced by splitting water via electrolysis, has been hailed as the Swiss-army knife of the energy transition for its potential to decarbonise hard-to-abate sectors such as shipping and heavy industry.

Some large hydrogen developers and environmentalists cheered the leaked rules, arguing that stringent requirements are needed to foster a hydrogen industry that is truly green and incentivise other countries to follow suit. 

Bar chart of Carbon footprint of hydrogen by type of production showing Without restrictions, green hydrogen can be dirtier than other forms of hydrogen production

“The stakes are very high to get this right,” said Claire Behar, chief commercial officer of Hy Stor Energy, which is building a green hydrogen facility in Mississippi. “These are multiyear, multibillion-dollar projects that really should be going for the gold.”

Air Products, one of the world’s largest hydrogen developers, said the leaked guidance would set a “solid foundation” for the global hydrogen market.

“This high standard would appropriately match to the world-leading IRA incentive, to uphold and jump start our national clean energy transition and the deployment of clean hydrogen at scale,” Air Products said. The industrial gases company is building a $4bn green hydrogen facility in Texas with power company AES, which has said it is prepared to confront the strictest standards for green hydrogen.

BloombergNEF, an energy consultancy, estimates that unless restrictions are set on green hydrogen production, the process could result in emissions 75 per cent greater than grey hydrogen produced from natural gas. 

“The whole point of supporting [green] hydrogen should not be to maximise the usage of hydrogen but to minimise emissions,” said Martin Tengler, head of hydrogen research at BNEF. “If you allow the production of hydrogen with very high emissions, then you’re kind of defying the whole reason of why you set up a hydrogen credit in the first place.”

Job Moves

  • Oberon Fuels, a US renewable fuels producer, appointed Ann Anthony as chief financial officer and Derek Winkel as chief operating officer today. Anthony joins from OPAL Fuels and Winkel from Chevron.

  • Our Next Energy, a US battery storage manufacturer, appointed Paul Humphries as chief executive on Sunday, replacing founder Mujeeb Ijaz, who will serve as board vice-chair and chief technology officer.

  • Eskom, South Africa’s state electricity monopoly, appointed Dan Marokane as chief executive on Friday, after almost a year-long seek.

  • Key Capture Energy, a US battery storage developer, appointed Brian Hayes as chief executive on Friday. Hayes joins from EDP Renewables.

Power Points


Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and David Sheppard, with uphold from the FT’s global team of reporters. accomplish us at energy.source@ft.com and follow us on Twitter at @FTEnergy. Catch up on past editions of the newsletter here.

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