The momentous United States Inflation Reduction Act (IRA) of 2022, described as the most significant piece of climate legislation in history, was passed by the US House of Representatives in August 2022.
One of the most important aspects of President Joe Biden’s Inflation Reduction Act 2022 is the significant support for green hydrogen, which soon makes it globally competitive with fossil fuel alternatives.
Australia is in danger of falling behind
The former Coalition government and key business leaders, such as iron ore miner Andrew Forrest, have advocated for Australia to become a hydrogen superpower. It is hoped that hydrogen will one day replace gas, oil, and heavy industrial processes.
At the Fortescue Metals annual general meeting, Fortescue Future Industries, CEO Mark Hutchinson announced on Tuesday:
“The recent passage in the United States that the inflation Reduction Act has seen the US position itself as probably the world’s green hydrogen superpower.”
“We’ve worked hard with the US government, with the White House, with (Democrat) Senator Joe Manchin to get this bill passed and as a game changer because the hydrogen market globally will benefit from the passage of that bill.”
“America is actually very well placed to be the place of investment for the world, and they’re poised to take advantage of this. Australia and Europe must now look closely at what the Americans have done. And to make sure that they supercharged green energy and not left behind.”
FFI has ambitious plans for green hydrogen, both in Australia and abroad. It has signed a series of Memorandums of Understanding for potential gigawatt-scale renewable energy projects closer to the end market. Check out our page to learn more about Fortescue’s “World First” Green Ammonia Plant’s Hydrogen Electrolyser In Queensland.
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The US is far more generous in subsidy than Australia
Quinbrook, one of Australia’s largest and most successful investors in renewable and storage projects, much of which is in the United States, also cautions that Biden’s Inflation Reduction Act will have far-reaching consequences for Australia and the rest of the world.
Quinbrook’s co-founder and managing partner David Scaysbrook stated in a briefing on Nov 22nd:
“And that is the degree to which the hydrogen supply chain will be subsidised in the United States, which will make it very, very difficult for Australia to compete with US exports of green ammonia, for example.”
“On a global basis, at every step of the supply chain from the renewable power to the onshore manufacture of electrolysers through to the manufacturing of the actual hydrogen product and the degree to which that is subsidised – something north of $USD5 a kilo is just the end product subsidy – will be devastating from a competitive perspective.”
As the US deploys $500 billion in concessional loans to US businesses through the Inflation Reduction Act (IRA) of 2022, dubbed the Green New Deal, Mr Scaysbrook stated that the US would cut Australia’s lunch by subsidising hydrogen fuel at a rate of about $US5 per kilogramme – a far more generous subsidy than anything available in Australia.
Australia still has a distinct advantage
According to Scaysbrook, Australia still has significant prospects in supplying rare earth, key minerals, and raw materials, but fewer opportunities for green hydrogen and Australia’s aim of becoming a green hydrogen export superpower.
“The reason we say that is because the United States is now hell-bent on creating alternative supply chains, all the way through the fundamental critical minerals and raw material.”
“The Act is so widespread, and that is going to create a significant new industrial demand for rare earth critical minerals, raw materials: a lot of which we have here in Australia,” he said.
He warned that Australia must accept that critical mineral processing is a dirty business that may harm the environment.
“Onshore processing of critical minerals is fantastic from a job creation perspective. It’s fantastic from an onshore value-add economic stimulus point of view, but some of these processes have a significant environmental impact. And the question is, do we have the stomach for that?”
About US Inflation Reduction Act (IRA) 2022
The Inflation Reduction Act of 2022 (IRA), signed into law on August 16, 2022, focuses new federal expenditures towards reducing carbon emissions, lowering healthcare costs, supporting the Internal Revenue Service (IRS), and enhancing taxpayer compliance.
Over the next ten years, the new proposal for the FY2022 Budget Reconciliation bill will invest about $300 billion in Deficit Reduction programmes and $369 billion in Energy Security and Climate Change initiatives.
The Inflation Reduction Act:
• Enacts historic deficit reduction to fight inflation
• Lowers energy costs, increases cleaner production, and reduces carbon emissions by
roughly 40 percent by 2030
• Allows Medicare to negotiate drug prices and caps out-of-pocket costs to $2,000
• Lowers ACA health care premiums for millions of Americans
• Make the biggest corporations and ultra-wealthy pay their fair share
• There are no new taxes on families making $400,000 or less and no new taxes on small
businesses – we are closing tax loopholes and enforcing the tax code.
