The holy grail of hydrogen is green, but most hydrogen production is of other colors. Colorado is looking to change that by allocating state tax credits only to clean hydrogen projects. The recently passed legislation also instructs the Public Utilities Commission to create a process to review hydrogen projects proposed by investor-owned utilities in the state.
Climate advocacy group the National Resource Defense Council believes that the Colorado bill’s language will serve as a model for other states. In their opinion it will “encourage a robust, renewable long term hydrogen industry, that is climate aligned, and not something that’s going to be a flash in the pan….”
But is this another example of government forces attempting to slam a square peg into a round hole?
At the end of the day market forces will dictate the evolution of hydrogen, just as it has for every other technology. Subsidies and tax credits help kick-start early-stage markets. After that, the market has to figure out how to competitively produce its product.
Given the hurdles hydrogen still has to overcome, the Colorado legislation could have unintended consequences. If the value of the tax credits does not outweigh the effort required to adhere to the legislation, it could drive hydrogen development to other states. That in turn could make it more difficult for Colorado to achieve its own climate goals.
Time will tell whether this is a case of poorly designed good intentions or a true model for others to follow.