Kyle Hayes Discusses Department of Energy Incentive Program for Hydrogen Producers

Foley & Lardner LLP partner Kyle Hayes is quoted in the Bloomberg Law article, “Hydrogen Subsidies, Contracts in Spotlight as US Weighs Demand,” offering his insight on the U.S. Department of Energy’s (DOE) efforts to scale up the adoption of hydrogen power.

Hayes led Foley’s submission of comments to the DOE on behalf of a consortium of hydrogen investors, project developers, and equipment manufacturers as feedback to the agency’s solicitation, announced in a notice of intent earlier in July, to establish demand-side support mechanisms to support reliable demand for hydrogen.

While a “contracts for differences” mechanism, which involves a project’s receipt of a fixed price for its output that is then offset against the market price of the commodity during a given interval, has been suggested by some as one step DOE could consider, Hayes highlighted the lack of organized commodity markets for hydrogen that would likely make that construct most functional.

Hayes said the DOE could instead support a take-or-pay contract structure—a common arrangement in the oil and gas sector that obligates an off-taker to take the molecules produced or, if they don’t, pay a certain amount to the seller. He explained further steps that the agency could take, including providing subsidies for equipment and upfront pipeline interconnection costs and bolstering the creditworthiness of off-takers.

Hayes explained that the department’s program “is centered around something that I don’t know that we’ve necessarily seen, which is DOE subsidizing commodities for off-takers.”