Speaker 1: This is Dana Perkins and your listening to Switched on
Speaker 1: the BNAF podcast. Draft guidance for the US hydrogen Production
Speaker 1: tax Credit was introduced in December of twenty twenty three,
Speaker 1: with the aim of promoting decarbonization in hard to abate
Speaker 1: sectors and enhancing energy security in the country as well.
Speaker 1: The draft guidance requires electrolysis projects to meet additional criteria,
Speaker 1: including hourly matching between clean energy production and power consumption.
Speaker 1: While some applaud the draft guidance for preventing greenwashing and
Speaker 1: driving real decarbonization, others view these requirements as excessive in
Speaker 1: fear they could potentially discourage investment in green hydrogen production.
Speaker 1: On today's show, we bring you a discussion from bnaf's
Speaker 1: recent summit in New York, where Martin Tangler, who leads
Speaker 1: BNF's hydrogen research, spoke with Kathleen Baron, Executive vice president
Speaker 1: and chief Strategy Officer at Constellation, alongside Claire Bahar, chief
Speaker 1: commercial officer at High Store Energy, and Elena Scaltreaty, chief
Speaker 1: commercial officer at TOPSO and l. Lastly, Andy Vezy, President
Speaker 1: and chief executive officer at forties U North America. During
Speaker 1: their lively discussion of the forty five v tax credit.
Speaker 1: They considered whether a heavy focus on green hydrogen production
Speaker 1: overlooks hydrogen adoption, and they compared the US to Europe,
Speaker 1: where you do see demand side incentives. As they consider
Speaker 1: what it will take to build out a hydrogen industry
Speaker 1: in the United States, they got into which technologies are
Speaker 1: going to help them get there and the associated costs.
Speaker 1: Agendas and videos from previous b andF summits, including this one,
Speaker 1: can be found at BNF dot com under the events tab.
Speaker 1: As always, if you like this podcast, make sure to
Speaker 1: subscribe on Apple Podcasts, Spotify, or wherever you get your podcasts,
Speaker 1: and consider giving us a review to make us more
Speaker 1: discoverable by others. Right now, though, let's hear Martin's panel
Speaker 1: from the BNF summit in New York titled Controversial Shifts
Speaker 1: in America's green hydrogen Landscape.
Speaker 2: Let's jump straight in.
Speaker 3: So when President Biden signed the Inflation Reduction Act in
Speaker 3: August twenty twenty two, many in the hydrogen industry saw
Speaker 3: it as a turning point, as a real game changer.
Speaker 3: A three dollar per kilogram tax credit for anybody who
Speaker 3: can make hydrogen with very, very low carbon emissions, but
Speaker 3: almost two years later, no one has actually received a
Speaker 3: single dollar because we're waiting for guidance on how these
Speaker 3: credits can be claimed. In December, the Treasury and the
Speaker 3: IRS published a draft of this guidance, and this draft
Speaker 3: is quite controversial for including the so called three pillars
Speaker 3: of additionality, time matching, and deliverability. Most companies want leniency
Speaker 3: on these three pillars, but some are in favor. Billions
Speaker 3: of dollars.
Speaker 2: Are a stake in this debate, and everybody agrees on
Speaker 2: one thing.
Speaker 3: We need final rules as soon as possible, and this
Speaker 3: is where we get to our panelists. Claire, you've become
Speaker 3: quite famous recently for coming out in favor of these
Speaker 3: really strict rules. So I'm going to quote your recent
Speaker 3: testimony at a public hearing on March the twenty fifth,
Speaker 3: where you said high store energy urges the Treasury and
Speaker 3: the IRS to adopt the three pillars approach, requiring additionality
Speaker 3: from day one, strong deliverability standards, and a phase in
Speaker 3: of hourly matching by twenty twenty eight. First, can you
Speaker 3: explain to us what these three pillars are so we
Speaker 3: educate the audience, And second, what makes it possible for
Speaker 3: you to argue in favor of these three pillars when
Speaker 3: some of our other panelists and most of the industry
Speaker 3: seem to be in favor of some leniency.
Speaker 4: Perfect.
Speaker 5: Thank you Martin, and thank you Bin Yaf for the
Speaker 5: upper to need to speak today. I'll start with defining
Speaker 5: what the three pillars are. The three pillars are strict
Speaker 5: guidelines in relation to the guidelines.
Speaker 4: For grid connected electrilizers.
Speaker 5: And these guidelines are to ensure that there is robust
Speaker 5: accounting for the carbon emissions associated with grid connected electrilizers.
Speaker 5: And so, starting with additionality, it's a requirement that new
Speaker 5: new green electrons are powering the electrilizers. For regionality, this
Speaker 5: is to ensure that the clean hydrogen production is in
Speaker 5: the same location as the clean electricity that's powering them.
Speaker 5: And this is to ensure that you're not claiming green
Speaker 5: electrons in West Texas, for example. Are then correlating to
Speaker 5: your project, your hydrogen project in the new work.
Speaker 4: And then lastly is time matching.
Speaker 5: That's to ensure that the clean electricity is being produced
Speaker 5: at the same time as the green hydrogen production. So
Speaker 5: the guidelines have a transition periods similar to that of
Speaker 5: the EU that allow for an annual matching until twenty
Speaker 5: twenty eight, and then from then on it's an hourly matching.
Speaker 5: And the reason why these three pillars are so important,
Speaker 5: it's to ensure that we're investing in long term infrastructure
Speaker 5: that are decreasing emissions instead of in fact increasing emissions.
Speaker 5: And unfortunately, today our electric grid is still predominantly fossil
Speaker 5: fuel based sixty seventy, as high as eighty percent in
Speaker 5: some locations.
Speaker 4: And so if you are putting on a large.
Speaker 5: Load and you're not then adding more renewable electricity such
Speaker 5: as wind or solar, you are in fact increasing the
Speaker 5: demand for fossil fuels that would be backfilled by peakers
Speaker 5: that are coal and natural gas and so high store energy.
Speaker 4: You know, really applauds the Treasury.
Speaker 5: For taking this stance and ensuring that the three pillars
Speaker 5: are upheld. And from our perspective, our project prior to
Speaker 5: the guidelines is going to be three pillar compliant from
Speaker 5: day one. And our first project is the Mississipi Clean
Speaker 5: Hydrogen Hub, which couples on site, off grid dedicated renewables
Speaker 5: for our electrolysis production and salt cavern storage CO located
Speaker 5: and storage gives us the ability to store access hydrogen
Speaker 5: and then it is dispatchable on demand four times when.
Speaker 4: The wind isn't blowing and the sun isn't shining.
Speaker 5: And you know, holistically, we're in this business to decarbonize
Speaker 5: and it's not about just having another another molecule. We say,
Speaker 5: if you're going to burn natural gas, burnatural gas, don't.
Speaker 4: Go through all the loops, okay to get there.
Speaker 3: So it's a combination of those off gride renewables as
Speaker 3: opposed to on grid, which I think that's that's relatively
Speaker 3: easy to understand. You managed to save some costs by
Speaker 3: not paying some of the expensive grid fees, and then
Speaker 3: those that salt cavern storage, right, and the salt caverns
Speaker 3: is to me that that's a really really key factor
Speaker 3: of the projects that you're building.
Speaker 2: And salt caverns.
Speaker 3: Are quite quite rare, right, You don't get to build
Speaker 3: salt caverns just just anywhere. I don't think you could
Speaker 3: build a salt cabon Europe because we're not sitting on
Speaker 3: a salt deposit right now. So would you consider building
Speaker 3: projects if you didn't have salt caverns?
Speaker 5: Well, So the salt cavern storage is really key for
Speaker 5: both the scale and the duration. It's that long duration,
Speaker 5: that multi day, multi week and seasonal energy storage that
Speaker 5: we're prioritizing in the off take markets we're looking at,
Speaker 5: which are the energy intensive industries where direct electrification is
Speaker 5: not a viable option. And it's these off take markets,
Speaker 5: for example, steel, that are the first movers that are
Speaker 5: already there with their customers showing the green premium that they.
Speaker 4: Want a zero carbon solution.
Speaker 5: And from the commercial point of view, this transparency in
Speaker 5: carbon emissions is exactly what our customers are asking for to.
Speaker 4: Ensure that they can.
Speaker 5: Account for their scope one, two and three emissions and
Speaker 5: most importantly that the products they're producing today in the
Speaker 5: United States with clean hydrogen is competitive and accepted on
Speaker 5: a global scale.
Speaker 3: Okay, so customers wanted one final one before we get
Speaker 3: to Andy, who I sure, I'm sure has very different,
Speaker 3: very different view on this. So would your position be different,
Speaker 3: Claire if your project was not based on top of
Speaker 3: salt caverns, which you'd be also asking for some leniency There.
Speaker 5: No, because leniency with the market in such infancy, there
Speaker 5: is urgency, but we cannot be sacrificing urgency with investing
Speaker 5: in infrastructure that's going to continue to lock in fossil fuels.
Speaker 4: The goal is decarbonization and.
Speaker 5: To transition off of fossil fuels and hydrogen is an
Speaker 5: excellent solution because it provides that molecule that can be
Speaker 5: stored and transported over long distances, and we need to
Speaker 5: be prioritizing it in the areas of the economy where
Speaker 5: direct electrification is not a viable option, and not trying
Speaker 5: to have it spread thin, wide and thin.
Speaker 4: It needs to be concentrated.
Speaker 2: Okay, good to know.
Speaker 3: So no leniency even if you don't have if you
Speaker 3: didn't have salt caverns.
Speaker 2: Okay.
Speaker 3: I wonder what Andy has to say, because Andy, you
Speaker 3: are one of the strongest, is asking for those more
Speaker 3: lenient rules in your testimony in that same hearing where
Speaker 3: Claire was speaking in March, you said, I'm quoting forty
Speaker 3: five V in its current form is a strait jacket
Speaker 3: on the energy on the emerging industry. The only solution
Speaker 3: is to add a minimum include grandfathering first mover projects.
Speaker 2: First, can you explain what grandfathering means?
Speaker 3: And then second, why do you feel this way if
Speaker 3: Claire says that she can make her projects work even
Speaker 3: with those strict rules.
Speaker 6: Yeah.
Speaker 7: Sure, And first of all, let me say that I
Speaker 7: hope everybody's sitting in this panel is wildly successful because
Speaker 7: because we need very low carbon hydrogen, right, we need
Speaker 7: it as soon as possible, but we needed to have
Speaker 7: it at the lowest possible cost, right. I think there's
Speaker 7: a lot in here to unpack. And you know, I
Speaker 7: think we've talked before. I said that you know where
Speaker 7: you stand on this issue starts with where you sit, right,
Speaker 7: And if I was sitting in a similar position, then
Speaker 7: I could basically say, Yep, I'm supportive of these things
Speaker 7: because I know why seventy five percent of the industry
Speaker 7: can't compete with me because I can't do it and
Speaker 7: it's all price. So I think that's great. But here's
Speaker 7: the deal. We're not doing projects here. We're trying to
Speaker 7: build an industry. We're trying to build an industry, and
Speaker 7: the key in building the industry is driving the cost
Speaker 7: of every molecule down. I always get challenged, well, nobody
Speaker 7: wants to buy green hydrogen. No, nobody wants to pay
Speaker 7: the price. But if I could sell that green molecule
Speaker 7: at the same price as grey. Everybody would buy green hydrogen.
Speaker 7: We'd all be happy as heck. Right, So how do
Speaker 7: you get there? Well, the Body Administration in the Inflation
Speaker 7: Reduction Act anticipated driving the cost of that molecule down
Speaker 7: by twenty thirty to a dollar a kilogram.
Speaker 6: And this was really to incent and get this started. Right,
Speaker 6: And why is it so important that we have as
Speaker 6: many projects going now?
Speaker 7: Include I mean the early ones that don't meet the
Speaker 7: three pillars or one of the three pillars, because almost
Speaker 7: all of them can meet one, which is deliverability.
Speaker 6: I can't find too many that don't. Right. Why is
Speaker 6: it so important?
Speaker 7: Because the more you do, the more projects that go,
Speaker 7: the ones that are successful, the ones that fail. You're
Speaker 7: building economies of scale, economies of manufacture to bring down
Speaker 7: your costs, and economies of novels. You get smarter about
Speaker 7: how to do it. You got to drive that engine.
Speaker 6: To be successful. And here's the deal.
Speaker 7: If we made the same requirements from this industry to
Speaker 7: have to bring its own green electrons to the party,
Speaker 7: and we made that apply to everybody who was making
Speaker 7: electric vehicles, I would not be driving my electric vehicle today.
Speaker 6: Why this one. Right. And here's the other issue. We're
Speaker 6: trying to solve too.
Speaker 7: Many problems with one piece of rulemaking. Right, there are
Speaker 7: two point six tero watts of renewable standing in queues.
Speaker 7: That's twice the installed total capacity. Now we're going to
Speaker 7: require even more pressure to push through that houses in
Speaker 7: the industry going to start. Yes, I'm very happy that
Speaker 7: high store is going to have a project.
Speaker 6: I really am. But that's not going to build an industry.
Speaker 7: You have to open and broaden that aperture, right, and
Speaker 7: then it will close over time.
Speaker 6: We're not advocating that.
Speaker 7: We people don't pay attention to the three pillars because
Speaker 7: they are critically important. Right, you said it. We have
Speaker 7: no totally green grids, right, we have done right. The
Speaker 7: other thing we don't have is we don't have enough
Speaker 7: green electrons. We have to sort that in time. But
Speaker 7: we're saying that for projects that can get into construction
Speaker 7: by twenty twenty eight, they should be grand funds so
Speaker 7: we get them going.
Speaker 6: Right.
Speaker 7: And one other issue which no one talks about outside
Speaker 7: the Three Pillars is the creep model. So every year
Speaker 7: you have to reevaluate the credits you're getting what they're worth.
Speaker 6: Who can finance a project that way. So there's a
Speaker 6: lot of work to be done.
Speaker 7: But here's the deal. Every effort, every effort is good.
Speaker 7: Let's widen the aperture, let's not restrict it right off
Speaker 7: the bat. So we have a few projects because here's
Speaker 7: what forty five in its purest form will do.
Speaker 6: It will make the plant smaller.
Speaker 7: All right, you can ask me why, but I'm not
Speaker 7: going to explain.
Speaker 6: Now.
Speaker 7: Smaller, there will be fewer of them, and they will
Speaker 7: cost more. Estimates right now is that projects will increase
Speaker 7: in cost between one hundred and forty one seventy five percent.
Speaker 6: To the end consumer.
Speaker 7: How are you going to build demand that is ensuring
Speaker 7: absolutely ensuring that high carbon intensity hydrogen.
Speaker 6: Comes into this market. So let me stop there and.
Speaker 2: I get it.
Speaker 3: So, more expensive hydrogen, fewer projects, smaller projects. So you
Speaker 3: said your position, You know you stand where you sit.
Speaker 3: Why don't you or why doesn't Fortescue sit on top
Speaker 3: of salt caverns?
Speaker 7: Well, I'll tell you where we do so. Well, first
Speaker 7: of all, look, I think you said it right. They're
Speaker 7: very few and it's not all salt, it's domo salt.
Speaker 7: And if you look at a map. There are only
Speaker 7: so many, right, it's a scarce resource. But if you'd
Speaker 7: ask me where Fordescue sits, it sits on planet Earth. Yeah,
Speaker 7: we all do, right, we all do, and therefore get
Speaker 7: to decarbonization with a molecule for people who can't use
Speaker 7: an electron should be in all our best interests. Widening
Speaker 7: the amperture, right, doesn't impact I store. Right, you call
Speaker 7: it lenient, or you called it lenient, that's a judgment already.
Speaker 6: I call it appropriate.
Speaker 7: Right, So let's build an industry here, and let's not
Speaker 7: try to solve every problem with one piece of rulemaking
Speaker 7: today when we're really building an industry for the twenty
Speaker 7: thirties and twenty forties.
Speaker 2: Right, I call it more lenient, not linient. Andy.
Speaker 3: One final for you before we move on to Elena
Speaker 3: and Kathleen. So both you and Claire, this is really interesting.
Speaker 3: Both you and Claire are members of GH two, which
Speaker 3: is one of the strictest hydrogen standards before you have
Speaker 3: to produce your hydrogen at one kilogram of CO two
Speaker 3: or less per kilogram of hydrogen that you make. Your CEO,
Speaker 3: Andrew Forest is on the board of the GH two organization.
Speaker 3: So isn't your dislike of the hourly matching pillar at
Speaker 3: odds with your membership of the GH two.
Speaker 7: No, I don't think so, because it doesn't actually specify
Speaker 7: hourly matching, monthly matching, or annually matching. What it does
Speaker 7: requires we follow the rules and laws that are in
Speaker 7: place that it does.
Speaker 6: Look.
Speaker 7: I think for FORDESCU, we have an absolute commitment that
Speaker 7: we will never leave anything worse offt than when we come,
Speaker 7: whether it's a water aquifer, the community in terms of
Speaker 7: what we're doing, or that we will directly impact in
Speaker 7: higher emissions of CO two.
Speaker 6: We have a.
Speaker 7: Project in Washington State, in Washington State, they manage that
Speaker 7: in Washington State. It's hydro power in Washington State. That
Speaker 7: project would not meet this requirement, and it's a perfectly
Speaker 7: good project.
Speaker 6: This is what we have to sort out.
Speaker 7: There's nothing There are a few pieces in conflict here,
Speaker 7: but what's non in conflict for anybody on this stage
Speaker 7: is the urgency by which we have to produce those
Speaker 7: very low carbon intensity molecules.
Speaker 6: So let's get at it.
Speaker 7: Let's make it so people can come to this game
Speaker 7: and we can learn, we can build, we can manufacture.
Speaker 6: And here's the other piece of it.
Speaker 7: If we're increasing the cost of these projects, what's a
Speaker 7: project developed going to do. You're gonna buy the cheapest
Speaker 7: electualized as you can know where they're.
Speaker 8: Made China, tie them.
Speaker 7: And the whole purpose of this bill was to build
Speaker 7: infrastructure in this country.
Speaker 3: We have a report on electronizing in China. They're not
Speaker 3: gonna have it as easy as it seems.
Speaker 7: Even let me tell you, they'll have it easier when
Speaker 7: everybody's buying them, because they have to get those costs.
Speaker 6: Down here to manage the cost of that molecule. All right.
Speaker 7: And here's the other thing. Fortescue is a large public
Speaker 7: company in Australia. We're in thirty different countries and I
Speaker 7: have to go before Andrew Farst and tell them why
Speaker 7: I think he should put a dollar of his money
Speaker 7: here versus Morocco, versus Egypt, versus Norway. Right, So, think
Speaker 7: about where capital is going to go, where the capital
Speaker 7: flows are going to go. And one other aspect of
Speaker 7: this and the Inflation Reduction Act was the creation of
Speaker 7: an industry having capital invested here. So these are the
Speaker 7: things why we're concerned about and why we might have
Speaker 7: a slightly different view on this than.
Speaker 6: High stool good.
Speaker 3: Good to know that your membership of the G two
Speaker 3: standard is not at odds with your arguments for leniency
Speaker 3: or more leniency on these rules.
Speaker 2: Moving on to Elena, So Elena.
Speaker 3: Many green hydrogen proponents say that the proposed guidance, the
Speaker 3: strict guidance, benefits blue hydrogen by being too strict on
Speaker 3: green and therefore constraining green hydrogen and making blue the
Speaker 3: default technology to go to. And your company, top so So
Speaker 3: licenses a blue hydrogen technology called sincore to firms like
Speaker 3: Exxon and Fidelis. But your client, Exxon is now threatening
Speaker 3: to ditch a blue hydrogen project that would use your
Speaker 3: technology because the rules would make it hard for them
Speaker 3: to qualify for the clean Hydrogen credit and they would
Speaker 3: have to settle for a lower credit, the forty five
Speaker 3: Q credit for carbon.
Speaker 2: Capture and storage. So what is your view?
Speaker 3: Does the current guidance on green hydrogen help blue hydrogen
Speaker 3: by constraining green or does it hurt blue hydrogen because
Speaker 3: it doesn't get those doesn't allow them to get those credits.
Speaker 9: So thank you and really pleased to be here. Let
Speaker 9: me start by saying that at TOPS we have the
Speaker 9: beauty of having a number of technologies that actually speak
Speaker 9: to all colors, and for that, we are color agnostic
Speaker 9: when it comes to hydrogen. So in fact, we tend
Speaker 9: to talk about low carbon hydrogen and renewable hydrogen.
Speaker 8: And when you look at our.
Speaker 9: Portfolio of technologies, it's true we have blue with our sinker,
Speaker 9: which is fully commercial and fully scaled technology, but we
Speaker 9: are making huge investments for our size of company in
Speaker 9: green with the electoralizer, the sec electoralizer, So we are
Speaker 9: really invested in both technologies and in many more because
Speaker 9: we are as well in renewable fuels. So as a
Speaker 9: matter of fact, we are quite agnostic. And as and said,
Speaker 9: we are all for the carbonization in whatever form and
Speaker 9: shape it takes place, as long as it takes place
Speaker 9: fast enough that we can commit and actually get to
Speaker 9: our twenty to fifty targets. So I think everybody that
Speaker 9: talks about forty five V at the moment is unhappy, whether.
Speaker 2: It's green or blue.
Speaker 9: So in any shade of color, when we think of green,
Speaker 9: and we think of our own investments and the customers
Speaker 9: we talk to, there is certainly a concern about availability
Speaker 9: of fitstocks to actually scale the technology, tests, the technology
Speaker 9: make it making sure that it comes you know, at
Speaker 9: the right cost, in the right amount of time. But
Speaker 9: also when we speak to our customers in the low
Speaker 9: carbon hydrogen and low carbon ammonia for that or blue
Speaker 9: hydrogen and ammonia, they do have concerns that actually, as
Speaker 9: it is shaped at the moment, the forty five V
Speaker 9: doesn't really favor decarbonization. Why because actually it sets a
Speaker 9: standard which is for the calculation of the carbon intensity
Speaker 9: based on the carbon intensity of the fitstocks, which are
Speaker 9: based on historical heverages, So actually not favoring projects and
Speaker 9: those and those project developers that want to be more
Speaker 9: ambitious that actually want to make investment towards decarbonizing the
Speaker 9: whole value chain methane emissions and also being more ambitious
Speaker 9: on the carbon capture on the process of hydrogen production,
Speaker 9: hence actually failing a bit the whole purpose and the
Speaker 9: philosophy of the i RA and the forty five V specifically.
Speaker 9: So if we have advice accordingly, we would actually advise
Speaker 9: changes both with regards to green hydrogen and to low
Speaker 9: carbon hydrogen, and just with the purpose of doing things
Speaker 9: quickly enough that you can scale up technology, but that
Speaker 9: you can also enable and implement technologies that are already
Speaker 9: fully scaled and commercial and can bring an enormous impact
Speaker 9: in a relatively short amount of time.
Speaker 3: Okay, So Topsail winds either way, whether it's blue or green,
Speaker 3: or low carbon or renewable.
Speaker 6: What a happy company?
Speaker 9: No, I always say, I don't know if it's by
Speaker 9: design or by luck, but we sit right in the
Speaker 9: middle of the energy transition, and our ambition is actually
Speaker 9: to make it happen. And it's just good that I
Speaker 9: think we're quite neutral towards the quarter that it is
Speaker 9: to take.
Speaker 3: Okay, do our other panels have anything to say? And
Speaker 3: de Claire, what do you guys think about the impact.
Speaker 2: Of this guidance on blue? Is it good for blue?
Speaker 2: Or is it bad for blue?
Speaker 5: I think the common I'll make is, unfortunately, so much
Speaker 5: attention has been brought to forty five V and almost
Speaker 5: pitting green hydrogen companies against each other, while no attention
Speaker 5: has been put on forty five Q with blue hydrogen.
Speaker 5: So I think, you know, as Andy said, everyone up
Speaker 5: here in favor of green, and it's it is about decarbonization.
Speaker 4: So I think I'll say.
Speaker 3: That, okay, or all in favor of decarbonization, that's good.
Speaker 2: So if not, we were in the wrong place.
Speaker 3: Moving on to another topic, and this is where we
Speaker 3: bring our last panelist to Kathleen. Kathleen, your company, Constellation
Speaker 3: has the biggest nuclear fleet in the US, twenty one reactors.
Speaker 2: If I check correctly.
Speaker 3: Now, the nuclear industry has struggled somewhat economically in the
Speaker 3: recent past, at least so my colleagues in the Power
Speaker 3: team tell me. So it's not a surprise, of course
Speaker 3: that the nuclear industry would like to get some benefits
Speaker 3: from from making making hydrogen. But the draft guidance right
Speaker 3: now excludes most nuclear because of the additionality claws. So
Speaker 3: if you're three years or older, your plants is three
Speaker 3: years older than you know, you don't qualify it with
Speaker 3: the current rules. So your CEO, Joe Dominguez, in an
Speaker 3: interview with Bloomberg called the additionality rule crazy.
Speaker 2: So how that's that's quoting quoting it.
Speaker 3: How important is hydrogen And it seems like hygien really
Speaker 3: is very important for the nuclear industry, But how important
Speaker 3: is it for nuclear industry? Is it a matter of
Speaker 3: life and death for the nuclear industry that these credits
Speaker 3: don't work out?
Speaker 2: Then, you know, we're folding.
Speaker 10: So I have to start out by saying, not only
Speaker 10: do we have an expert moderator, but we.
Speaker 8: Have a comedian moderator. So this is the best panel
Speaker 8: I've ever been on. This is great.
Speaker 10: Hydrogen is important to nuclear nuclear is important to hydrogen.
Speaker 10: I just I need to go back to the passage
Speaker 10: of the bill. This is not like a policy conversation.
Speaker 10: I am a recovering lawyer, so I have to focus
Speaker 10: on the fact that the statute is explicit that nuclear
Speaker 10: can be used to power an electrolyizer and make hydrogen
Speaker 10: that can qualify for the credit. In fact, we are
Speaker 10: already making clean hydrogen with nuclear energy at an electrolyizer
Speaker 10: that we built in New York right next to one
Speaker 10: of our plants.
Speaker 8: The reason we built that is because we've got.
Speaker 10: A grant from the Department of Energy to build that electrilyizer.
Speaker 10: We've also gone to grant to power one of the
Speaker 10: seven hydrogen hubs, the one that is encompassing the Midwest States.
Speaker 10: Not going to happen if we can't use the nuclear
Speaker 10: energy to make the hydrogen at that For that hub,
Speaker 10: all that work, that's nine hundred million dollars of an investment.
Speaker 10: That's on pause while we wait for the guidance to
Speaker 10: come out. So we'll see what happens when we see
Speaker 10: the final rules. But you said a moment ago, no
Speaker 10: one's making hydrogen here. We're making hydrogen here, we're claiming
Speaker 10: the credit. So if we have to visit with the
Speaker 10: courts to sort out whether the final guidance is consistent
Speaker 10: with the statute or not, we've already had center mansion
Speaker 10: offered right an Amikus brief.
Speaker 8: The people who wrote this bill.
Speaker 10: Didn't write additionality into it. They knew how to specify
Speaker 10: when something needed to be built by a certain date.
Speaker 10: They didn't do that with respect to the electricity going
Speaker 10: into the electrolyzer.
Speaker 8: They just said it had to be zero carbon.
Speaker 10: We make more zero carbon magwats than anyone in the country.
Speaker 8: One out of every ten comes out of one or.
Speaker 10: Machines, and so yes, we are focusing on this as
Speaker 10: a way to ensure the long term operation of the
Speaker 10: nation's nuclear fleet. The Inflation Reduction Act was the first
Speaker 10: time the federal government provided a credit to existing resources.
Speaker 10: So the fleet is receiving your credit, But unlike the
Speaker 10: other credits in the Act, it does expire in eight years.
Speaker 10: So if a nuclear reactor were able to sell clean electricity,
Speaker 10: whether through the grid or directly behind the meter to
Speaker 10: an electoralizer, those types of contracts only need to be
Speaker 10: You could still claim the credit if you sign one
Speaker 10: of those contracts early in the twenty thirties and it's
Speaker 10: in place for ten years. So it's a long term
Speaker 10: potential revenue stream to provide the reactor a reason to
Speaker 10: stay on the grid past the expiration of the forty
Speaker 10: five year credit.
Speaker 3: Okay, so this is a long term mechanism for nuclear
Speaker 3: to live. And I'm glad you mentioned the other credit
Speaker 3: because that was going to be my next question. Nuclear
Speaker 3: industry is getting its own forty five you credit for.
Speaker 2: Nuclear power plants.
Speaker 3: So do I understand it correctly that the forty five
Speaker 3: view in your view is not giving you enough of
Speaker 3: a long long, you know, long enough supply of money,
Speaker 3: and then you would need for the longer term to
Speaker 3: be producing the hydrogen.
Speaker 6: Yeah.
Speaker 10: To be clear, forty five view is designed to ensure
Speaker 10: that a reactor can recover its cost of operations if
Speaker 10: market prices are below its cost of operation. So, unlike
Speaker 10: credits for wind and solar, the forty five U credit
Speaker 10: actually phases down as market prices go up. It has
Speaker 10: that built in consumer projection feature. But the point is
Speaker 10: it expires in eight years, So unlike the renewable credits,
Speaker 10: which will be in place till all of your children
Speaker 10: are grown and have their own kids, this this this
Speaker 10: credit will not be So it is a potential revenue source.
Speaker 10: You know, all the points we've made here about demand
Speaker 10: are accurate. We need to have a market for this commodity,
Speaker 10: and therefore we need to get going at bringing down
Speaker 10: the cost, as we've done with other types of technology,
Speaker 10: so that it can be a long term source of revenue.
Speaker 10: But you know, we're sort of stuck in the starting
Speaker 10: blocks here, and you know, this notion of additionality just
Speaker 10: we struggle with it just economically. I mean, if the
Speaker 10: logic is that wind farm or solar farm wouldn't be
Speaker 10: there but for the hydrogen credit, I just I struggle
Speaker 10: with that because I know all of you who woke
Speaker 10: up this morning and say, gee, I wish we had
Speaker 10: more wind and solar on the grid.
Speaker 8: You don't think, well.
Speaker 10: Geez, if only we had more hydrogen, you know, subsidies.
Speaker 10: It's we don't have an interconnection queue that works. We
Speaker 10: need wind, and we need zoning and permitting to improve.
Speaker 10: We need a better supply chain, We need the skilled workforce.
Speaker 10: We have demand for new renewables.
Speaker 8: They are not coming on the grid because of hydrogen.
Speaker 10: So if you're using renewables to make hydrogen, you are
Speaker 10: accountable the grid when you use new resource the same
Speaker 10: way as the argument goes, you do so if you're
Speaker 10: using an existing resource. So we need to build more
Speaker 10: clean We need to get to a clean grid. We're
Speaker 10: trying to do too much with this credit. You know,
Speaker 10: the courts don't usually love it when agencies that aren't
Speaker 10: you know, experts in something to try to manage it.
Speaker 10: So I fear that's where this is going if if
Speaker 10: we don't have some more rationality in the final rule.
Speaker 3: Okay, so we learn about the importance of the hydrogen
Speaker 3: credit to the nuclear industry. Now what I'm interested in
Speaker 3: is the other way around. What's the importance of the
Speaker 3: nuclear industry to the hydrogen industry? And clear I think
Speaker 3: you're in particular actually said in that March testimony that
Speaker 3: you would actually favor exceptions from additionality for nuclear power plants.
Speaker 2: Could you explain the reasoning behind that.
Speaker 5: Yeah, And I think you brought up the point, which is,
Speaker 5: if it is making it so that an asset is
Speaker 5: not going into retirement, then this is a firm based load,
Speaker 5: zero carbon source. And whereas if you are not adding
Speaker 5: new renewables to a grid, from our view, that is cannibalizing.
Speaker 5: We're adding massive demand by plugging an electrolyizer into a grid,
Speaker 5: and we are not adding more zero carbon assets to
Speaker 5: that grid. What's going to happen, in turn, is that
Speaker 5: it's going to fuel more fossil fuel generation to then
Speaker 5: feed that load.
Speaker 4: So we can't. We need to be creating.
Speaker 5: A more a decarbonized grid, but also a more resilient grid.
Speaker 3: And nuclear additionality exceptions help that. Sorry, and exceptions for
Speaker 3: nuclear from from additionality help help if it.
Speaker 5: Keeps yes, then if it keeps that asset from going
Speaker 5: into retirement.
Speaker 2: Okay, Kathleen say you are going to say something.
Speaker 10: Yeah, I think that's right, and I think the Treasury
Speaker 10: suggested as much in the proposed role. So we'll see
Speaker 10: what that translates into into in terms of flexibility in
Speaker 10: the final world. What we've said is, you know, if
Speaker 10: you're causing a station to seek a second license renewal,
Speaker 10: in other words, approval from the government to run for
Speaker 10: another twenty years, and that is sort of in the
Speaker 10: same time vicinity as the contract with the hydrogen customer
Speaker 10: that should qualify. There's also a suggestion that there'd be
Speaker 10: some you know, potential phase in or you know, if
Speaker 10: you look at what the EIA says, not what we say,
Speaker 10: but the EIA says about what will happen when this
Speaker 10: forty five ye credit expires, we will see nuclear retirements.
Speaker 10: They estimate that's twenty percent of the fleet, so you
Speaker 10: get up a twenty percent exemption something like that. Ten percent,
Speaker 10: those are all in the mix. But your question was
Speaker 10: is nuclear important to hydrogen? And I think that is
Speaker 10: true because and it's why it was explicit in the
Speaker 10: statute that nuclear existing nuclear can make hydrogen is because
Speaker 10: it is operating twenty four to seven and that is
Speaker 10: the way to get the most efficiency out of your electoralizer,
Speaker 10: to have a constant sorts of power at the power
Speaker 10: quality that you need that runs ninety five percent of
Speaker 10: the time. So it's you know, you don't want to
Speaker 10: take the cheap stoption off the table right out of
Speaker 10: the bat and that's essentially what we've done with this guidance.
Speaker 7: So we also publicly common and put into our testament
Speaker 7: testimony exemptions for nuclear We may never use nuclear electrons.
Speaker 6: We may, but right now we don't.
Speaker 7: We don't mean intention to, but we think it's important
Speaker 7: because it goes back to my initial argument. I hope
Speaker 7: they have electoralizers, really big ones that every nuclear plant
Speaker 7: they have. Why, because then someone has to produce more electoralizers.
Speaker 7: The more you produce economy as a manufacturer, the price
Speaker 7: goes down.
Speaker 6: They tect. Somebody invests in advanced membrane technology.
Speaker 7: Everything that pulls and creates demand for all the bits
Speaker 7: and pieces that make it is good for the entire industry.
Speaker 6: Right, and I finished. I have one more point.
Speaker 7: I don't buy into blue why because I don't think
Speaker 7: the future to a decarbonized world is the pathway has
Speaker 7: methane underneath it. But at this point I'm not arguing
Speaker 7: incident because again I want everybody to be successful. At
Speaker 7: the end of the day, the market's going to decide
Speaker 7: what they want to buy. Right, And that's another piece
Speaker 7: to the incrementality thing. The idea that we should have
Speaker 7: tax policy allocating a scarce resource to me, is nuts, right,
Speaker 7: because I go back to my argument, why is this
Speaker 7: the only industry that has to bring their own Everybody
Speaker 7: who wants to buy it should be as to do
Speaker 7: the same thing. And then what you do You have
Speaker 7: a market because we'll compete. My view is, if I
Speaker 7: can buy a green electron and I can pay the
Speaker 7: price for it, that must be the highest value for it,
Speaker 7: and otherwise somebody would ask to pay more. Let markets decide.
Speaker 7: But the bottom line here, we're getting overly focused on
Speaker 7: these little bits and pieces of policy of tax policy
Speaker 7: and rulemaking.
Speaker 6: When we're trying to build an industry.
Speaker 7: Remember the administration's goal one dollar kilogram by twenty thirty.
Speaker 7: There is nothing in this rule making proposed rule making
Speaker 7: that will get us there.
Speaker 3: Yeah, So that actually leads us to the final part
Speaker 3: of this discussion. I think it's fitting that we have
Speaker 3: only nine out of forty minutes left and we're talking
Speaker 3: about the most important topic because that's how it seems
Speaker 3: to work throughout the whole discussion around hydrogen, which is
Speaker 3: demand for hydrogen. So my team believes that BNF that
Speaker 3: the world and the US needs demand side incentives. So
Speaker 3: for somebody to actually want to buy the hydrogen that
Speaker 3: you guys produce. But the tax credits, which we just
Speaker 3: spent thirty minutes talking about, they are worth one hundred
Speaker 3: billion dollars and they're all for the producers. And the
Speaker 3: US does have a demand side incentive being developed right now,
Speaker 3: but that's a one billion dollar incentive, So we're talking
Speaker 3: one to one hundred ratio possibly for the demand side,
Speaker 3: which is very different from Europe La right. Europe has
Speaker 3: the subsidies, it has the carbon prices, it has the
Speaker 3: quotas and the mandates, so lots of demand side incentives
Speaker 3: going on over there. So, as someone who just came
Speaker 3: to US from Europe, should the US be doing more
Speaker 3: on supporting the demand side or incentivizing the demand side
Speaker 3: in order to get the industry going, creating an industry
Speaker 3: like Andy's saying, So.
Speaker 9: First of all, coming from the European perspective, everybody in
Speaker 9: Europe has been talking about the IRA as a game
Speaker 9: changer and as actually you know, an initiative that has
Speaker 9: drawn a lot of you know, investments towards the US,
Speaker 9: and I think it's a great initiative and it's really
Speaker 9: trying to move the needle now I come from Europe
Speaker 9: and based in Copenhagen, and Europe is I think the
Speaker 9: best in class for mandates.
Speaker 8: So for the famous stick, we are very good at that.
Speaker 9: Now and we also have subsidies. But you know, it's
Speaker 9: much more complex to get subsidies in Europe than to
Speaker 9: get text credit through the IRA. And we do as
Speaker 9: well have some experience because we are looking at a
Speaker 9: US site for our electoralizer production as we speak, and
Speaker 9: we realize that, you know, the tremendous difference in complexity
Speaker 9: in going through this discussion. But back to you to
Speaker 9: your question. I mean when we talk to our customers
Speaker 9: in the in the US and we have a very
Speaker 9: broad pipeline of projects here in the region driven by
Speaker 9: the IRA, and they really blossomed as soon as the
Speaker 9: IRA was was published.
Speaker 8: It's two things.
Speaker 9: It's certainty for the incentives, clarity and long term sustainability
Speaker 9: of the incentives. And the other side, because it's text
Speaker 9: credit and it's when you produce, is that you have
Speaker 9: a demand and the demand at the moment is not
Speaker 9: clear at all, and actually there's no driver in the
Speaker 9: US in North America that would you know, really incentivize them.
Speaker 9: And then as you say, the one billion from the
Speaker 9: taken from the hydrogen hub.
Speaker 8: It's a good idea, but it's a very timey thing.
Speaker 9: So actually US and the future US producers would be
Speaker 9: looking at Europe or at Northeast Asia, Japan and Korea
Speaker 9: to actually export. And I think, you know, if we
Speaker 9: want to make this successful. It's great that Europe is
Speaker 9: doing this, and you know it will drive demand, it
Speaker 9: will impose.
Speaker 8: A competitive issue on.
Speaker 9: The European producers, but US should also think about how
Speaker 9: to really deploy demand to make this a success.
Speaker 2: Thank you to our panelists.
Speaker 3: I think it's clear that the forty five V credit
Speaker 3: is a very very hot debate. I think no matter
Speaker 3: how it's going to pan out, the US is going
Speaker 3: to become a leader on low carbon hydrogen. And it's
Speaker 3: clear that our panelist companies are going to be at
Speaker 3: the forefront of it all.
Speaker 2: So thank you very much.
Speaker 11: Thank you to our panelists and Native the Day everyone.
Speaker 1: Today's episode of Switched On was produced by Cam Gray
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