Editor’s Note: a guest post by Louisiana Public Service Commissioner Eric Skrmetta
The retail price of hydrogen fuel at the pump is a complex issue, and admittedly limited to a few states, largely influenced by the usual production costs, distribution logistics, station operations, and additional factors like taxes, incentives, and policy support. But in California, under Governor Gavin Newsom’s leadership, these factors are currently massively outweighed by impossible state government policies imposed on industry that converged to create a continuing unsustainable spike in consumer hydrogen prices, impacting not only transportation matters but the entire national industrial hydrogen market. This crisis, driven by California-specific policies, necessitates federal intervention to expand production of hydrogen from natural gas, as well as future production from other methods as they develop, and to protect the economy, energy production, and transportation development across the United States.
The Roots of California’s Hydrogen Price Surge
California’s hydrogen market, the nation’s only retail hub, has experienced a significant price increase due to unique California mandates that cannot be achieved. The requirement that hydrogen as a transportation fuel contain 33% renewable content (meaning hydrogen manufactured utilizing renewable energy which largely does not exist in any meaningful way at this time), coupled with the California Low Carbon Fuel Standard (LCFS) mandate of 40% green energy content for credit generation, has contributed to the massive increases in the price at the pump.
These regulations along with an absence of policy vision, layered with high capital expenditures for early market stations, unanticipated operational expenditures, and supply chain disruptions, have needlessly driven up the cost of hydrogen. Inflation, rising labor indexes, and natural gas pricing—all beyond station operators’ control—further exacerbating the situation.
A California-Caused National Problem
Hydrogen economics differ outside California, where the retail model is absent. But California’s policies have created a ripple effect, increasing costs through markets for Texas and Louisiana, the nation’s other major hydrogen producers. California’s mandate on technically unavailable renewable content, stringent regulations has disrupted national supply chains, making hydrogen unduly expensive. This price spike, compounded by a lack of transparency in the transitioning retail market, impedes the scalability of hydrogen as a viable additional fuel in the vehicle spectrum, affecting industries and consumers nationwide.
Economic and Energy Implications
The elevated hydrogen prices threaten economic stability by raising operational costs for transportation and industrial sectors. In Texas and Louisiana, where hydrogen production supports energy-intensive petroleum industries, these costs jeopardize jobs and competitiveness. California’s regulatory action, including refinery closures and oil production restrictions, reduces domestic energy supplies and hindering further national energy production. This scarcity could lead to broader energy issues, stalling economic growth in other state who do not follow or support the course of action taken by California.
Transportation and Development at Risk
Hydrogen-powered vehicles, a cornerstone of clean transportation, are becoming less feasible due to high costs driven by California’s policies. This could delay the development and investment in and of refueling infrastructure as well as hinder the addition of the hydrogen resource to the national fleet of petroleum using vehicles. Investment in energy innovation, particularly in Gulf Coast states, is deterred, potentially slowing technological advancement across the country.
Impact on Industrial Gas Pricing for Manufacturing
California’s market price manipulation, driven by its stringent renewable content mandates and regulatory burdens, significantly impacts industrial hydrogen gas pricing for the manufacturing sector. As a key input for processes like steel production, chemical synthesis, and refining, hydrogen’s inflated costs in California ripple through to national markets, forcing manufacturers in states like Texas and Louisiana to absorb higher expenses. This price distortion undermines the competitiveness of U.S. manufacturing, particularly in energy-intensive industries, and threatens job losses and reduced output, necessitating federal action to stabilize pricing and protect the industrial base.
Federal Efforts Impeded by California
The federal government has sought to address these challenges through legislation, but California’s actions are undermining these efforts. The Inflation Reduction Act (2022) introduced the Section 45V Clean Hydrogen Production Tax Credit, incentivizing clean hydrogen production, including green hydrogen from renewable energy, with safeguards like temporal matching, deliverability, and incrementality outlined in final rules released in January 2025. The Bipartisan Infrastructure Law (2021) allocated $9.5 billion for Regional Clean Hydrogen Hubs (H2Hubs), encouraging diverse low-carbon sources without mandating a fixed green hydrogen percentage. The National Clean Hydrogen Strategy and Roadmap (2023) sets a target of 10 million metric tons by 2030, prioritizing market-driven adoption. These initiatives emphasize flexibility and incentives over mandates, aiming to reduce reliance on fossil fuel-based hydrogen. However, California’s regulatory mechanism is clashing with this federal approach, stalling national progress.
The Case for Presidential and Cabinet Action
The national scope of this issue deserves the attention of Secretaries of Energy Chris Wright and Transportation Sean Duffy. California’s policies are impeding federal efforts to foster a balanced hydrogen market that would only enhance the United States energy dominance and provide potential for the nation’s transportation systems, creating regional disparities that threaten economic stability and energy innovation. Federal leadership is needed to harmonize regulations, to align state and federal goals. A federal framework could stabilize prices, support models like the Gulf Coast’s less carbon-focused approach or Canada’s $12-15/kg retail range and ensure a sustainable hydrogen future.
Conclusion
Governor Newsom’s hydrogen policies have triggered a seemingly unbreakable price increase dilemma, with severe consequences for the nation’s industrial potential. The economic strain, reduced energy production, and potential transportation setbacks in states like Texas and Louisiana, combined with the obstruction of federal initiatives, highlight the urgent need for federal intervention. An interdepartmental coordinated federal approach is essential to end California’s overreach and secure a balanced viable national hydrogen economy. President Trump’s effort promoting “drill baby drill” will be successful for oil and gas but we need to limit the negative impact of states like California whose bad policies impact derivative molecules from petrochemicals, those like hydrogen, so our nation can ensure the greatest value from our use of our resources.
Commissioner Eric Skrmetta is currently fulfilling his 17th consecutive year of service as Public Service Commissioner for the State of Louisiana, presently as Vice Chairman of the commission. He is a Member of the Board of Directors of the National Association of Regulatory Utility Commissioners (NARUC), serving as Co-Vice Chairman of the NARUC Subcommittee on Nuclear Energy, NARUC vice chairman pipeline safety subcommittee, NARUC National Gas Infrastructure Task Force Committee Member, NARUC Nuclear Energy Partnership NEP, NARUC Washington Action Committee Member, NARUC Taskforce for Emergency Preparedness Recovery and Resiliency Member. He is a Member of the New Mexico State University Center for Public Utilities Advisory Council. Commissioner Skrmetta holds a Bachelor of Science Degree, a Juris Doctorate, and LLM in Admiralty Law.
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