We view the hydrogen tax credit discussed in today's daily report as potentially very harmful, as it could give life to projects that will further increase demand on a renewable energy industry that has finite limits to its rate of growth. The credit could encourage inherently uneconomic projects – even with a longer-term “abundant power” view. If the incentives are used to back clean rather than green projects it would make more sense as blue hydrogen could be produced in very large quantities without breaking the bank and would allow constrained renewable power investments to focus on other harder to decarbonize power needs. If the hydrogen subsidy could be added to the 45Q sequestration credit we would likely see a wave of blue hydrogen investments in the US – primarily aimed at decarbonizing industrial applications and refining.
Source: Neste 4Q21 Earnings Release Presentation, February 2022
The leadership position that Neste has carved out in renewable diesel and other fuels over the last decade (outlook shown above) has set the company apart from other energy companies, even by European standards, and it will interesting to see how different LyondellBasell will look in 2 years under the leadership of a new CEO (Peter Vanacker), fresh from his success at Neste. Despite its leadership in polymer recycling, we see LyondellBasell as a bit of a laggard in ESG overall and while the company has a 2030 emissions goal there has been no detail provided. We would expect Mr. Vanacker to accelerate any existing ESG/emissions programs at LyondellBasell and add more.
