Use It or Lose It: U.S. Hydrogen Industry Must Act To Maintain Momentum
Key takeaway: Following the passage of the “One Big Beautiful Bill Act”, time is of the essence for hydrogen producers to demonstrate the value of the 45V credit program for the U.S. economy and to enhance U.S. global competitiveness. With potential domestic and export opportunities for hydrogen, the industry should showcase measurable success in the near term and leverage the wins to advocate for the extension of the credit beyond 2027.
The passage of the “One Big Beautiful Bill Act”1 (OBBBA) represents the conclusion to a tumultuous chapter for the U.S. hydrogen industry. From the passages of the “Infrastructure Investment and Jobs Act”2 (IIJA) and “Inflation Reduction Act”3 (IRA) to today, stakeholders across the hydrogen value chain have experienced a rollercoaster of highs and lows over the past four years, which has created immense uncertainty for project developers and investors.
Cornerstone programs like the Regional Clean Hydrogen Hubs Program4 (H2Hubs) and the Section 45V Credit for the Production of Clean Hydrogen5 (45V) spurred great optimism that the U.S. would develop a national hydrogen infrastructure network and compete for this emerging global market. However, the Biden administration’s prolonged implementation of these programs has put the United States’ first-mover advantage at risk.
Industry’s ability to drive investment toward hydrogen production projects was undermined in the immediate aftermath of the IRA passage in August 2022. After passage, it took the Department of Treasury and Internal Revenue Service (IRS) until January 3, 2025 to release the final rules that determine access to the 45V tax credit.6
Treasury’s lethargic 29-month, two-step rulemaking process was influenced by numerous pro- and anti-hydrogen interests with incompatible views on how exactly a hydrogen producer would determine its carbon-intensity thresholds and qualify for the incentive. Ultimately, the Biden administration’s final rule attempted to strike a balance between firm environmental requirements and operational considerations for numerous types of hydrogen production facilities.
However, the results of the 2024 elections further contributed to the uncertainty, with Republicans winning majorities in Congress and the return of President Trump to the White House. With a new mandate from voters to tackle inflation and affordability, Republicans have viewed their victory as a rebuke of President Biden’s agenda, which set the stage to pare back the IRA energy tax credits, including a proposal to terminate 45V at the end of 2025. The hydrogen industry avoided a worst-case scenario, with 45V being maintained for projects that commence construction by December 31, 2027.
The Consequences of Uncertainty
The federal government’s prolonged intervention with the 45V credit has had significant impacts on developers’ ability to advance projects to final investment decision. These impacts will be compounded by the short timeline to commence construction to access the credit.
According to data tracked by the International Energy Agency, there are about 120 viable hydrogen production projects in the U.S. development pipelines, which leverage natural gas-derived, biomass, or electrolytic production pathways.7
FTI Consulting identified 30 natural gas-derived hydrogen projects in the production pipeline, with six (representing 15% of the pipeline capacity) listed as reaching final investment decision (FID) or under construction.8 Those six projects have a high likelihood of qualifying for 45V, given that the Department of Energy altered the 45VH2-GREETmodel to allow developers to input project-specific upstream emissions data.9
For the 90 projects leveraging electrolysis or biomass with Carbon Capture and Storage (CCS) production, 14 projects are listed under the FID or under construction stage, representing less than 2% of capacity.10 For the projects that have not reached FID or under construction, developers will need to accelerate their planning pace in order to access the credit. Lacking a permitting reform package from Congress, that timeline may be difficult for developers to achieve.
In addition to the project delays within the U.S., federal policy uncertainty has seen nations, most notably China, advance to secure their share of the emerging global hydrogen market. In 2022, China released its first “Hydrogen Industry Medium- and Long-Term Development Plan,” which covers the period between 2021 to 2035. Since this plan was announced, China has expanded its hydrogen production capabilities at a rapid rate. In 2020, China accounted for less than 10% of global electrolyzer capacity;11 by 2024, that capacity had grown to 65% of global capacity.12
The Path Ahead
With just two years to begin construction, hydrogen producers have a short window of opportunity to demonstrate the value 45V can deliver to the U.S. economy and enhance its global competitiveness.
To start, industry should prioritize locking in offtake agreements with existing domestic use cases, including oil refining, ammonia and chemicals production – notably, 65% percent of the blue hydrogen capacity identified within the IEA data will be used for ammonia production.13 Projects sponsored under the H2Hubs program, especially those in the Gulf Coast and Appalachia regions with legacy infrastructure and energy workforce advantages, will be particularly well-placed to meet the 2027 commence construction deadline and plug into those use cases.
As production capacity expands, hydrogen producers can shift focus to serve new and emerging use cases, including power generation, heavy-duty transport, and steel and cement production. Hydrogen industry stakeholders will find fertile domestic markets in blue states, particularly California and the Pacific Northwest, as well as export opportunities to the E.U. and Asia – all of which continue to advance net zero goals.
The potential export market for U.S. producers offers a significant economic opportunity and an area of alignment with the Trump administration’s goals.
On July 7, 2025, the European Commission released the finalized Delegated Act on -carbon fuels and hydrogen,14 which sought to level the playing field between renewable and low-carbon hydrogen production methods to ensure both can contribute to decarbonization, as well as enhance investor confidence. For companies leveraging natural gas-derived production, hydrogen could act as a demand driver to boost U.S. domestic gas production, which complements the President Trump’s “Energy Dominance” agenda.15 Of the roughly 9.8 million tons per year of announced blue H2 capacity in the U.S. that FTI Consulting identified, 1,479 billion cubic feet per year, or about 3.9% of total U.S. natural gas production in 2023, would be required.16
The industry will need to measure its successes over the immediate term, and those successes should be leveraged to make the case to extend the credit beyond 2027.
As observed in the past election cycle, political circumstances can shift rapidly in a short period of time. This makes it imperative for hydrogen industry stakeholders to maintain bipartisan support, build momentum behind projects, and demonstrate the benefits of government investments toward hydrogen – both economic and environmental.
Ultimately, the short period that 45V is available could spur the momentum that was promised after the IRA passage. The message is now clear – use it or lose it.
Related Expertise
References
[1] United States Congress, “H.R.1 – One Big Beautiful Bill Act,” Office of the Law Revision Counsel for the U.S. Code (July 4, 2025), https://www.congress.gov/bill/119th-congress/house-bill/1
[2] United State Congress, “H.R.3684 – Infrastructure Investment and Jobs Act,” Office of the Law Revision Counsel for the U.S. Code (November 15, 2021), https://www.congress.gov/bill/117th-congress/house-bill/3684
[3] United States Congress, “H.R.5376 – Inflation Reduction Act of 2022,” Office of the Law Revision Counsel for the U.S. Code (August 16, 2022), https://www.congress.gov/bill/117th-congress/house-bill/5376/text
[4] United States Department of Energy, “Regional Clean Hydrogen Hubs,” Office of Clean Energy Demonstrations, https://www.energy.gov/oced/regional-clean-hydrogen-hubs-0
[5] Department of the Treasury and Internal Revenue Service, “Credit for Production of Clean Hydrogen and Energy Credit,” Federal Register (January 10, 2025), https://www.federalregister.gov/documents/2025/01/10/2024-31513/credit-for-production-of-clean-hydrogen-and-energy-credit. (govinfo.gov)
[6] Department of the Treasury, “Treasury and IRS Announce New Clean Energy Finance Initiatives,” U.S. Department of the Treasury Press Release (July 23, 2025), https://home.treasury.gov/news/press-releases/jy2768.
[7] International Energy Agency, “Hydrogen Production Projects Database,” International Energy Agency (Accessed July 23, 2025), https://www.iea.org/data-and-statistics/data-product/hydrogen-production-and-infrastructure-projects-database.
[8] FTI supplemented IEA data by researching each and every project to see if it was a) still in development, i.e. “viable” and b) what it planned to produce (hydrogen or ammonia) and how much.
[9] U.S. Department of Energy, “45V H2 Model Change Log: June 2025,” U.S. Department of Energy (June 2025), https://www.energy.gov/sites/default/files/2025-06/45vh2-model-change-log_june-2025.pdf
[10] See supra note 7.
[11] Jane Nakano, “China Unveils its First Long-Term Hydrogen Plan,” Center for Strategic and International Studies (March 28, 2022), https://www.csis.org/analysis/china-unveils-its-first-long-term-hydrogen-plan
[12] Hydrogen Council, “Hydrogen Insights 2024,” Hydrogen Council (September 2024), https://hydrogencouncil.com/wp-content/uploads/2024/09/Hydrogen-Insights-2024.pdf
[13] IEA’s Hydrogen Production Project dataset includes project capacity in terms of either ammonia or hydrogen. FTI supplemented this data using desktop research to confirm or identify plant capacity and product.
[14] European Commission, “EU Hydrogen Strategy: A Key Step Towards a Green Future,” European Commission Press Release (December 8, 2025), https://ec.europa.eu/commission/presscorner/detail/en/ip_25_1743.
[15] The White House, “Unleashing American Energy,” The White House (January 2025), https://www.whitehouse.gov/presidential-actions/2025/01/unleashing-american-energy/.
[16] U.S. Department of Energy, “Comparison of Commercial State-of-the-Art Fossil-Based Hydrogen Production Technologies,” National Energy Technology Laboratory (April 12, 2022), https://netl.doe.gov/projects/files/ComparisonofCommercialStateofArtFossilBasedHydrogenProductionTechnologies_041222.pdf; U.S. Energy Information Administration, “Natural Gas Production Summary,” U.S. Energy Information Administration (Accessed July 23, 2025), https://www.eia.gov/dnav/ng/ng_prod_sum_a_EPG0_FPD_mmcf_a.htm; FTI calculated natural gas demand for 9.8 million tons per year of blue H2 production based on daily feedstock requirements for a typical ATR plant with CCS and compared the total amount of natural gas demanded to total U.S. dry production in 2023.
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