Joe Manchin’s New Tax Bill Could Help Hydrogen Electric Vehicles

Hydrogen is “the most dumb thing I could possibly imagine for energy storage,” said Tesla CEO Elon Musk to the Financial Times.

“It does not naturally occur on Earth, so you either have to split water with electrolysis or crack hydrocarbons.”

Lithium in its pure form also doesn’t occur naturally on Earth, but Musk didn’t address the discrepancy.

Still, Musk’s statement is correct: hydrogen doesn’t occur naturally on Earth. So, while hydrogen is the most abundant element on Earth, it must be split from other elements to obtain its pure form.

Moreover, producing green hydrogen (meaning hydrogen produced through electrolysis with renewable energy) is expensive, costing between $3.73/kg to $6.50kg in the United States, according to the latest figures from analyst S&P Global Platts.

In the United States, hydrogen produced from natural gas costs between $1.71/kg and $2.18/kg. Unsurprisingly, most hydrogen comes from coal or natural gas.

However, the Inflation Reduction Act, a tax and climate bill announced by Democratic Majority Leader Chuck Schumer (N.Y.) and Sen. Joe Machin (D-W.Va.), could significantly reduce the price of producing green hydrogen in the United States.

That could help spur hydrogen vehicle interest, also called Fuel Cell Electric Vehicles (FCEV), according to the International Energy Agency (IEA).

A Hyundai Motor’s Nexo hydrogen car is fuelled at a hydrogen station in Seoul, South Korea, on Aug. 13, 2019. (Kim Hong-Ji/Reuters) Green Energy Credits

The $433 billion Inflation Reduction Act of 2022 is not yet in effect. However, with support from previous hold-outs, Manchin, and Sen. Kyrsten Sinema (D-Ariz.), passage in the Senate is almost assured. Passage in the House is also likely given the Democratic majority.

If passed, the bill will give U.S. producers of “qualified clean hydrogen” tax credits of up to $3/kg for green hydrogen. That could bring the cost of producing