The Department of the Treasury and Internal Revenue Service have released proposed regulations for the Clean Hydrogen Production Credit, aiming to make the clean hydrogen industry economically competitive and to accelerate its development throughout the United States.
The proposal features four tiers of tax credits based on emissions caused in given hydrogen production processes, including a range of $0.60 per kilogram produced to $3 per kilogram produced. Credit eligibility will be decided by emissions rules outlined in the Clean Air Act, with lifecycle greenhouse gas emissions determined by the most recent GREET model from the Department of Energy. Facilities will also be required to provide third-party verification of their clean hydrogen production to be eligible.
According to the Department of the Treasury, the credit will be made available for eligible clean hydrogen facilities for 10 years, starting on the date operations commence, for all projects beginning construction before 2033.
“Today's announcement will further unprecedented investments in a new, American-led industry as we aim to lead and propel the global clean energy transition,” said Secretary of Energy Jennifer M. Granholm. “Hydrogen has the potential to clean up America's manufacturing industry, power the transportation sector, and shore up our energy security all while delivering good-paying jobs and new economic opportunity to communities in every pocket of America.”
The proposal largely supports hydrogen generation powered by renewables but also includes guidelines for other clean energy sources such as renewable natural gas.
The proposed rules also outline how hydrogen producers may qualify for a particular credit tier by using energy attribute certificates (EACs) to demonstrate a purchase of clean power.
EACs purchased by hydrogen producers have to reflect three criteria in order to claim the tax credit. Facilities have to be using energy from a new clean power source, or one that began commercial operations within three years of the hydrogen facility being placed into service.
Clean power also must be sourced from the same region as where the hydrogen is produced. Finally, clean hydrogen production must be tracked on an hourly basis starting in 2028 and tracked on an annual basis for the time being, ensuring that hydrogen-producing electrolyzers run at the same time as clean energy is generated.
While conventional hydrogen production may cause significant pollution, clean hydrogen is largely produced through the use of electrolyzers that are powered by renewable energy sources. Along with its attempt to make clean hydrogen economically competitive compared to fossil fuel-derived hydrogen, the newly proposed credit may also help support more large-scale creation of such electrolyzers, which are reportedly required to meet rising hydrogen demand while also lowering emissions.
