The Hydrogen and CCUS Industries: 2021 A Year in Review
In 2021, the low-carbon hydrogen and carbon capture, use and storage (“CCUS”) industries continued to gain momentum as project sponsors advanced existing projects and announced many new projects. At the same time, policy makers took steps to provide greater incentives to develop the low-carbon hydrogen and CCUS industries.
Significant Project Developments
Hydrogen and CCUS project development accelerated in 2021. Several large projects under development at the turn of the year continued to progress, including Air Products’ green hydrogen production facility in Neom, Saudi Arabia. In addition, developers announced many new projects. For example, Air Products announced plans to invest $4.5 billion, its largest-ever U.S. investment, to build a clean energy complex in Louisiana that would produce over 750 million standard cubic feet per day of blue hydrogen and a $1.3 billion (CAD) net-zero hydrogen production and liquefaction facility in Alberta, Canada. Aqua Aerem announced a $7.63 billion, 10 GW green hydrogen production facility in Australia. Other large-scale green hydrogen projects announced in 2021 include the 1 GW H2Teesside project by BP, the 10 GW H2 Magallanes project by Total Eren, a 1 GW green hydrogen project by H2 Green Steel and Iberdrola, the 50 GW Western Australia green hydrogen production facility by InterContinental Energy, and a facility for the production of green hydrogen in France by ENGIE and Total.
In 2021, the number of announced CCUS projects also increased. Summit Carbon Solutions announced its plan to develop the Midwest Carbon Express, the world’s largest carbon dioxide pipeline that would transport carbon emissions from the Midwest to North Dakota for permanent underground storage. Navigator CO2 Ventures announced plans to develop a multi-billion dollar carbon capture pipeline to transport and inject carbon underground in Illinois. In Europe, the Northern Lights project, announced in 2020 by its partners Equinor, Shell and TotalEnergies, continued to develop the world’s first open-source CO2 transport and storage infrastructure.
Besides the announced projects set forth above, many developers pursued opportunities and conducted diligence on projects in preliminary stages. As those projects mature, the number of hydrogen and CCUS projects will likely continue to grow.
Legislative and Regulatory Developments
In 2021, policy makers encouraged the development of hydrogen and CCUS projects around the world as part of a broader effort to reduce greenhouse gas emissions (“GHG”).
Clean hydrogen received legislative and policy support in the United States and abroad. In the United States, the $1 trillion Infrastructure Investment and Jobs Act (“IIJA”), which President Biden signed into law in November 2021, supports the commercialization of clean energy technologies through significant appropriations, including $8 billion for clean hydrogen technologies. The IIJA establishes four regional clean hydrogen hubs that will utilize distinct hydrogen technologies and uses. The proposed $1.75 trillion Build Back Better Act (“BBBA”), which passed the House of Representatives in November 2021, but stalled in the Senate, was even more ambitious. It included $29 billion for state and local deployment of clean energy technologies, $15 billion for U.S. Department of Energy (“DOE”) innovation loan programs and $4 billion to reduce industrial emissions. The BBBA also includes tax credits to incentivize low-carbon hydrogen projects such as the production tax credit and the investment tax credit among numerous other hydrogen-related tax credits. Efforts will continue to pass at least some elements of the BBBA in 2022.
In Europe, the European Commission (“EC”) published the Hydrogen and Decarbonized Gas Package, which is intended to stimulate the integration of hydrogen into existing gas infrastructure and remove significant barriers to entry in the hydrogen industry. The EC intends for the Hydrogen and Decarbonized Gas Package to provide regulatory certainty for the hydrogen industry in the European Union.
Governments in the Pacific-Asia region also implemented strategies to promote the development of clean hydrogen technologies. In early 2021, Singapore and Chile signed a memorandum of understanding to research and develop low-carbon hydrogen technologies. Japan implemented policies to increase investment in the research and development of clean hydrogen technologies as a low-carbon alternative to hydrocarbon fuels. In China, state-backed companies invested heavily in clean hydrogen technologies, and China is expected to account for most hydrogen electrolyzer installations by the end of 2022.
In 2021, the U.S. government took substantial steps to encourage the development of CCUS infrastructure. In January 2021, the Department of the Treasury issued final regulations under section 45Q of the Internal Revenue Code to clarify the availability of tax credits for carbon dioxide that is captured, sequestered or used for certain approved purposes. The IIJA includes $12 billion in funding for the development of CCUS infrastructure and research and development programs, including $3.5 billion for carbon capture, $4.7 billion for carbon transportation and storage, and $3.8 billion for carbon utilization and removal. The BBBA proposed an increase in the carbon capture tax credit from $50 per ton of carbon dioxide captured and stored to $85 per ton. The BBBA included a revision to the section 45Q tax credit to reduce the minimum annual capture threshold required to be considered a “qualified facility,” which enables more project sponsors to take advantage of the tax incentive. As stated above, efforts persist to pass this legislation in 2022.
Governments in Europe also supported CCUS in 2021. The United Kingdom established a GBP £1 billion CCUS Infrastructure Fund with a target of building four CCUS hubs by 2030. The European Union announced its award of €1.1 billion into seven large-scale projects, four of which are CCUS projects, under the Innovation Fund. Germany instituted a funding program to help companies develop CCUS technologies.
CCUS projects in the Asia-Pacific region also received government support. Australia announced several CCUS initiatives in 2021, including $250 million in funding for carbon capture and storage hubs. Japan announced the launch of the Asia CCUS Network, which is a platform that connects industry leaders, academics and governmental officials to promote CCUS technologies and applications throughout Asia. Additionally, Japan established $10 billion in government funding for renewable and low-carbon projects, including the development of CCUS projects.
The Work Continues
The market, legislative and regulatory developments in the clean hydrogen and CCUS industries demonstrate the growing importance of these industries in the energy transition. As technologies advance, and more legislative and regulatory initiatives are passed, increased investment in the hydrogen and CCUS sectors seems likely.
Visit 2021 – Traditional Energy Rebounds and Increased Energy Transition, for the complete list of individual, detailed articles associated with this publication.
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