The US Treasury on Friday (December 22) released its much-anticipated guidance for the Inflation Reduction Act’s (IRA’s) 45V Clean Hydrogen Production Tax Credit, laying out criteria for hydrogen producers to access tax credits of up to $3/kg.
For electrolytic hydrogen producers, the rules include the controversial “three-pillar” requirements of additionality, hourly and geographical correlation – following suit of the EU to ensure only clean electricity can be used to producer green hydrogen.
Under the original IRA text, the PTC is due to implemented in a tiered approach based on lifecycle emissions – with the lowest emissions receiving the $3/kg tax credit.
© US Department of Energy (DOE)
To gain access to the top tier $3 tax credit, US green hydrogen producers will have to source electricity from renewables in the same regional grid, that are no older than three years old at the time of hydrogen production start-up.
Going further than the EU’s delegated acts however, the 45V guidance required producers to match renewable electricity and electrolyser operation within the same calendar year until 2027 – and hourly matching from 2028.
Read more:Leaks suggest US 45V guidance will be more stringent than EU renewable hydrogen rules – reports
Jennifer Granholm, US Secretary of Energy, said the guidance will further “unprecedented investments” in US industry as the nation aims to “lead and propel the global energy transition.”
However, the announcement has been met by a range of industry voices that say the stringent guidance will limit green hydrogen’s uptake.
US coalition Hydrogen Forward described the guidance as “misguided,” saying the “restrictive and unworkable” requirements run counter to Congressional intent and the Biden administration’s climate goals.
“Hydrogen Forward is disappointed to see the early imposition of requirements for additionality, geographical- and time- matching in the guidance, as the guidance will have a chilling effect on hydrogen investment, delay technological deployment and slow progress to reduce costs and address climate challenges,” the group said.
Previously speaking to H2 View, Traci Kraus, Executive Director of Government Relations at Cummins – a Hydrogen Forward Member – warned the requirements would see investments intended for green hydrogen flow to blue hydrogen projects.
She suggested that if the top tier requirements are too hard to achieve, project developers may opt for blue hydrogen production because it is easier to gain the same, albeit lower, level of tax credit.
Read more: Strict 45V guidance would see dollars flow to blue hydrogen investments, says Kraus
The coalition suggests the guidance should ensure a broad range of low- and zero-carbon technologies and production pathways remain eligible for the incentive on a carbon intensity basis.
Furthermore, Roxana Bekemohammadi, founder and Executive Director as the US Hydrogen Alliance (USHA), said the requirements put the incentive “out of reach.”
“The Biden-Harris Administration has miscalculated an effective pathway to implementing the hydrogen production incentives, completely missing the intention of the IRA,” Bekemohammadi said.
She warned the “miscalculation” compromised the success of the recently awarded seven regional hydrogen hubs.
Read more: US DOE selects seven hydrogen hubs for $7bn funding
Despite wide ranging concerns, some have applauded the move. Hy Stor Energy’s CEO, Laura Luce, said the three-pillar approach would see the US secure a leadership position in the energy transition and catalyse global investment and demand for clean hydrogen.
Furthermore, Luce said its industry partners “fully support” the company’s embrace of the requirements.
Hy Stor’s CCO, Claire Behar, last month (November 22), in an interview with H2 View, said “The stakes are very high to ensure that we do get the 45V right and to ensure that the green hydrogen we’re producing does not generate significant carbon emissions, and to ensure that the federal investment and taxpayer dollars are used effectively to reduce carbon emissions.”
Additionally, the Biden administration had been under pressure to ensure the full climate benefits of green hydrogen production. Following the selection of the seven hubs, numerous environmental groups criticised the government for handing out taxpayer dollars to “extend the life of oil and gas companies” by funding blue hydrogen projects.
However, the Treasury has said blue hydrogen projects are eligible to receive the credits. But the pathway remains unlikely to meet criteria for the top tier.
Limiting electrolyser flexibility could cost Central West Europe $2.1bn per year, report finds
Additionality and hourly correlation rules for electrolysers could cost Central West Europe (CWE) $2.1bn per year, according to a new Hydrogen Council report.
The Hydrogen in Decarbonized Energy Systems report said mandates for electrolysers contracted only with newly built renewable assets (additionality) and matching the assets’ generation profiles to the hour or less (temporal correlation), can reduce system flexibility.
“This type of market distortion aimed at restricting electrolyser generation can reduce system flexibility by removing some of the freedom electrolysers have to respond to prices and reducing the pool of renewable assets they can contract with,” the report read…
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