Blue hydrogen more likely to be a winner than green under US IRA

When the Biden administration announced the Inflation Reduction Act (IRA) in August 2022, many welcomed it as a step towards a green rush in the US. Commentators saw the prospect of clean energy system spreading across the states and celebrated how competitive it would make the US with the EU. Fast forward ten months, and Biden’s green push looks increasingly grey.

The financial incentives provided under the IRA looked promising. Without a spending cap in place, the most conservative prognosis for estimate a c. $400bn of investment clean energy infrastructure, delivered primarily through tax incentives (McKinsey, 2022). Some forecasts indicate a need for federal spending of up to $1.1tn for the next ten years the act will be in effect (Goldman Sachs, 2023). However, even with the most generous investments from the Department of Energy (DoE), some obstacles cannot be overcome by federal spending alone.?

Without regionally focused investments, targeting specific obstacles, a blanket solution offered by the IRA in its current form will not be sufficient to encourage nationwide green hydrogen boom. Naturally, much remains to be seen relative to what the tax incentives will look like, and whether the regional and technological discrepancies will be addressed later this year when the IRA becomes codified. At present, however, it looks likely there will be regional clustering, predominantly in the South of the US.?

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