Hydrogen startups are seen by many as a promising way to phase out fossil fuels from heavy industry and long-distance transportation. But they have been stuck in limbo for the past few years, waiting for official guidance from the US Treasury on the lucrative tax credits. The wait is over today, with the Treasury announcing final rules for hydrogen producers to qualify for tax credits under section 45V of the Inflation Reduction Act. “We are grateful to have the final rule,” Beth Deane, chief legal officer at Electric Hydrogen, told TechCrunch. “Without that, the industry just stops dead in its tracks.” The rule, which has been more than two years in the making, relaxes some parts of the draft proposal, giving existing nuclear and fossil fuel power plants a chance. Because hydrogen can be made in a variety of ways, the resulting rules are complex rules designed to ensure that hydrogen producers who receive credits do not inadvertently cause more pollution. There are two main sources of hydrogen: those produced by electrolysis, which uses electricity to split water molecules into hydrogen and oxygen, and those produced by steam reforming, which uses steam and heat to break down methane molecules, producing hydrogen and carbon. dioxide. But both have different variations. Steam reforming can throw carbon dioxide pollution into the atmosphere (producing so-called gray hydrogen in the process) or it can capture and store it (blue hydrogen). Electrolyzers can be powered by renewable energy (green hydrogen) or nuclear power (pink hydrogen). If you really want to dig deep, there are many flavors of hydrogen that are often referred to collectively as the hydrogen rainbow. In essence, the 45V rule seeks to ensure that new hydrogen production does not result in additional greenhouse gas emissions on the grid. To do this, the Department of Finance requires producers to track the emissions produced per kilogram of hydrogen throughout its life cycle. That means, for example, that blue hydrogen producers must report the planet-warming effects of methane leaks from natural gas pipelines. Hydrogen producers must purchase renewable or clean energy from the region where it is located. By 2030, they will also need to demonstrate that power is used to make hydrogen within an hour. Generally, hydrogen production that produces fewer greenhouse gases over its life cycle gets a larger tax credit, up to $3 per kilogram. Green hydrogen generally costs about $4.50 to $12 per kilogram, according to BloombergNEF, so the maximum credit could make the process competitive with fossil-derived hydrogen in some areas. Nuclear and fossil power plants also benefit under the revised guidance. Previously, hydrogen producers had to source power from new nuclear plants to qualify. Currently, existing nuclear plants can supply up to 200 megawatt-hours of electricity. Also, certain fossil fuel power plants that have recently installed carbon capture equipment will now qualify. The rules, although welcome, are still not perfect. Given the number of interested parties, it is not surprising. From Electric Hydrogen’s perspective, Deane wants to see more flexibility in where producers are allowed to buy electricity and how much additional clean or renewable power is needed. But, Deane said, what the industry wants most is certainty. “We want something to stay there and maybe change it,” he said. “We strongly encourage the incoming administration to keep this rule in place.”
