Smith Collection/Gado/Sipa USA via AP Images
If you get D.C. tipsheet newsletters or (perish the thought) print editions of your local newspaper, you may have noticed a flood of advertising on a relatively obscure issue. Organizations are trying to influence upcoming Treasury Department guidance on tax subsidies for hydrogen production. Supporters argue that “green” hydrogen is an abundant, clean fuel that could power transportation and factories without emitting greenhouse gases; detractors say that the process of producing hydrogen is incredibly energy-intensive and could be counterproductive if the electricity that goes into it burns carbon.
The debate lines up about the way you would expect: environmentalists on one side, businesses with a stake in the hydrogen industry on the other. But there’s a wild card in the mix: Amazon.
The e-commerce giant has signed deals that will likely make it the nation’s biggest consumer of hydrogen fuel, which it sees as essential to reach its decarbonization goals. Amazon hasn’t taken a public position on the controversy, but it is a principal member of the lead lobbying group for looser Treasury rules on hydrogen tax credits. Members provide funding to the organization.
Amazon’s Climate Pledge calls for the company to be powered by 100 percent renewable-energy power by 2025, and to reach net-zero carbon emissions by 2040. It has been a financial booster of hydrogen production for a while. Back in 2020, Amazon’s Climate Pledge Fund, a $2 billion investment fund for sustainable technologies, issued Series A funding to ZeroAvia, a U.K.-based company attempting to use hydrogen to fuel airplanes. This continued in 2022 with investments in Electric Hydrogen and Sunfire, companies that develop electrolyzers, large machines that create hydrogen by splitting water molecules apart.
But Amazon is not just a funder of hydrogen companies, it’s a major consumer. Last August, Amazon made a deal with Plug Power to purchase 10,950 tons per year of green hydrogen, to be used for its forklifts, logistics trucks, and buildings, starting in 2025. It’s one of the largest contracts in the industry to date, building on a relationship between Amazon and Plug that started back in 2016. Amazon has been replacing batteries in its forklifts with fuel cells, in a partnership with Plug.
In the unique deal, which at the time was seen as “a big boost to the fledgling hydrogen economy,” Amazon received warrants for 16 million shares of Plug common stock, which vest if it spends $2.1 billion with Plug over the life of the seven-year contract. As part of its earlier 2016 deal, Amazon already retained the right to buy 23 percent of Plug. So as an investor, customer, and part-owner, Amazon has major incentives for the hydrogen industry’s success.
ELECTROLYZERS OFFER THE PROMISE of decarbonizing difficult sectors where emissions cannot easily be reduced, because hydrogen can serve as a portable, energy-dense fuel similar to gasoline or oil. Likely use cases include aviation, cargo shipping, and heavy industrial production like concrete and steel. The problem is that electrolyzers need enormous amounts of electricity to produce hydrogen, and right now, little of that power is clean. Even Amazon estimates that about 95 percent of the hydrogen produced today involves fossil fuel electricity, primarily from natural gas. If renewable sources powered the electrolyzers, the “green” hydrogen produced would present a quicker path to net-zero emissions.
The Biden administration sees the potential in hydrogen. It recently announced a $1 billion Department of Energy program to create regional hubs for a clean hydrogen network. And the Inflation Reduction Act included as much as $100 billion for the Section 45V hydrogen production tax credit, which offers $3 for every kilogram of hydrogen produced from carbon-free electricity, about half of the current cost.
But the Treasury Department has yet to finalize rules for what will count under the tax credit. It all comes down to ensuring that the electrolyzers are truly clean-powered.
Currently, most green hydrogen companies do not build renewable energy and feed it directly into their electrolyzers (though some, like Hy Stor Energy and Air Products, are planning to do so). Without a direct source, there’s no way to know if a specific electron is clean or not, given the mix on the grid.
Amazon has signed deals that will likely make it the nation’s biggest consumer of hydrogen fuel, which it sees as essential to reach its decarbonization goals.
Hydrogen producers want to solve this by using market-based solutions to prove that their energy is green. This involves the purchase of renewable energy certificates (RECs), which are sold by a clean-power source that operates on the grid, which hydrogen companies would then claim with Treasury to verify that its product is green.
Environmental groups want to tighten up that process, which they find unreliable. They have endorsed three pillars most clearly expressed in a study by Princeton University. First, they want “additionality,” meaning that the clean energy must come from new sources not currently on the grid (additional sources rather than existing sources). Second, they want those clean-energy sources to be local, so they respond directly to hydrogen producers’ demand; this is called “deliverability.” And third, they want “time-matching,” so that the electrolyzers run at the same time as the clean-energy sources; this prevents an electrolyzer from running overnight on natural gas while claiming solar energy that runs during the day.
“If IRS fails to implement the three pillars, they’ll wind up using billions of federal dollars intended to fight the climate crisis to actually increase pollution,” said Holly Burke, communications director with Evergreen Action, which has released their analysis on the situation. “This would be a huge divergence from Congressional intent for the IRA’s clean-energy tax credits and the Biden administration’s own climate goals.”
As you might expect, the companies trying to profit from hydrogen production and reel in the federal tax credits have a different point of view. They think the current system should suffice to prove clean-energy intent, and that anything else would make hydrogen production too costly and strangle a nascent industry. European rules for green hydrogen have split the difference, adopting additionality, deliverability, and time-matching but with a long phase-in that lets producers figure out how to meet the goals.
As Heatmap’s Emily Pontecorvo has explained, the issue gets to the crucial question of managing decarbonization with technologies that use a lot of energy, something that goes back to ethanol production from corn, which studies have found counterproductive but which has become such a political football that it’s renewed year after year. The core question is this: Will subsidies be enough to ensure that polluting industries go green, or will regulations have to be imposed in tandem to make the carbon benefit real?
THIS FIGHT OVER THE TREASURY RULES has spurred all the recent advertising, in an unusually public manner. The Fuel Cell & Hydrogen Energy Association (FCHEA), a leading industry trade group, has taken out full-page New York Times ads and sponsored D.C. tipsheet Punchbowl News this week, with language that’s impenetrable to normal readers. One ad reads: “If U.S. regulators require additionality for the hydrogen production tax credit, our clean hydrogen future could be stopped before it’s even started.” The ads intimate that China would be the beneficiary of a stringent regulatory framework, and that 3.4 million jobs are at risk. NextEra Energy, the largest electric utility holding company, has also run ads favoring a looser regulatory approach.
One of the FCHEA’s 46 principal members is Amazon, a relatively unique addition because the rest of the membership is primarily energy companies or auto manufacturers that have embraced hydrogen fuel cells. As a leading customer that would probably pay more for green hydrogen if tighter rules were in place, Amazon clearly has an interest in the outcome.
Plug Power is also a principal member, along with ZeroAvia and Electric Hydrogen. Amazon has either invested in those companies, purchased hydrogen from them, or both.
FCHEA president and CEO Frank Wolak said in response to questions that members “self-select” their membership level between principal and supporting members; Amazon chose the higher level. Wolak would not disclose Amazon’s involvement in the organization or any of its working groups. “We do not share information as to the level of involvement of individual member companies,” he said.
An ad placed by the Fuel Cell & Hydrogen Energy Association
In May, the FCHEA wrote to Treasury, laying out its goals for implementation, and endorsing the use of RECs or power purchase agreements to prove clean electricity for hydrogen production. Plug Power and ZeroAvia signed the letter, though Amazon was not a signatory. Lobbying disclosures also reveal the trade group spending approximately $780,000 to lobby Congress over the past decade.
The most recent tax filing from the FCHEA, from 2021, shows $2.894 million in revenue, split between member dues and assessments, and “contracts and other fees,” which refers to managing events or developing market reports. Energy groups have not explained how much they are spending on their green hydrogen ad campaign.
“America needs clean hydrogen to reach our economic and climate goals,” Wolak said. “Clean hydrogen has tremendous potential to decarbonize a wide range of hard-to-abate sectors and flexible guidance in line with the legislative intent of the Inflation Reduction Act will allow the industry to scale up to achieve that potential.”
Environmental groups have also waged their own ad campaigns in the media. Burke, from Evergreen, pointed out that Amazon has not made any public statements about the hydrogen tax credit. But the organization to which it pays dues has come out pretty strongly for lighter rules.
“Once we fund a polluting industry, we are creating a monster that will fight us on efforts to reduce pollution at every turn,” Burke said. “Amazon’s status as a member of FCHEA’s and the lobby group’s ongoing effort to weaken hydrogen guidance only makes that risk all the more dangerous.”
The Natural Resources Defense Council didn’t want to speculate on Amazon’s unclear position, but Rachel Fakhry, policy director for their Climate & Clean Energy Program, noted that “companies like Google and Nucor steel—both on the hydrogen purchasing side—have been out in support of rigorous rules and a hydrogen molecule with rock solid environmental integrity.”
Amazon did not respond to a request for their position on green hydrogen and whether they support the FCHEA’s campaign.
THERE’S CERTAINLY PLENTY OF MUSCLE on the side of green hydrogen without Amazon. The Hydrogen Council, formed at Davos in 2017, has 145 high-powered members from the banking and industrial spheres, including oil and gas companies like Chevron, BP, and ExxonMobil. (Plug Power is also a member.) These special interests have delivered hundreds of comments to the IRS on the clean hydrogen guidelines; environmental groups issued their own comments as well. Initially, the rules were supposed to be out in April; Treasury hasn’t set a timetable yet for finalizing them, though Heatmap reported Thursday that they would not be finalized until October.
It’s one thing to face a lobbying blitz from oil and gas companies and a new sector promising jobs. It’s another when that’s paired with one of the biggest companies in the world, which has shown considerable influence with lawmakers and regulators. Amazon spent $21.3 million on lobbying in 2022, and $9.9 million already this year. Some of that lobbying expense in 2023 went toward “environment” and “clean air and water” issues.
Some industry players actually favor stricter clean-energy standards, arguing that hourly matching and other guardrails will lead to near-zero carbon fuels, and that the government shouldn’t be paying to increase emissions. One of them is Electric Hydrogen, which has received funding from Amazon.
“It seems like this is an obvious opportunity for [Amazon] to put their money where their mouth is and publicly disavow FCHEA’s position, exert their influence as a powerful member of the lobby group to get them to back down, or if it comes to it, leave the FCHEA,” said Burke. “We’ve seen other corporations part ways with trade groups that don’t match their values, why not Amazon?”
