When produced from renewable energy sources, hydrogen could provide clean fuel for shipping, long-duration energy storage, and other areas that are difficult to decarbonize.

But factors such as scale, scope, and affordability have so far stalled deployment.

Green hydrogen's outlook, though, has been completely shifted by incentives in the Inflation Reduction Act. The climate law provides a green hydrogen production credit of $3 per kilogram of hydrogen produced with zero emissions.

The tax credit levels the playing field between fossil fuel-produced hydrogen and the more costly green hydrogen, which typically runs between $5-10 per kilogram. The Biden administration, meanwhile, wants to reduce the cost of green hydrogen by 80%, or $1/kg, by the end of the decade.

Today, nearly all hydrogen produced globally comes from fossil fuels.

According to the International Energy Agency, 80% of hydrogen is produced using emission-intensive natural gas reforming or coal gasification. The global capacity of electrolyzers, the key technology for green hydrogen production, stood at just 300 MW in 2020.

Beyond the cost barrier, green hydrogen has struggled to reach its potential due to the absence of a clear market for the product.

Many companies have made commitments, agreements, or announcements that have contributed to green hydrogen hype cycles in the past.

Ana Quelhas, EDP Renewables' managing director for hydrogen, told the Factor This! podcast from Renewable Energy World that companies often approach EDP about interest in green hydrogen, but those conversations seldomly result in long-term offtake agreements.

Quelhas, speaking before the Inflation Reduction Act legislation was unveiled, said inadequate market certainty and policy support was holding back green hydrogen adoption.

AES and Air Products were able to establish market certainty through a 30-year offtake agreement, and now have the policy support of the Inflation Reduction Act, though neither company mentioned the climate law in their announcement.