The US Department of Treasury has unveiled a proposal to offer billions of dollars in tax credits to hydrogen manufacturers, as reported by Reuters on December 22. The credits will be linked to the entire lifecycle emissions of the power source used in hydrogen production, ranging from USD0.60 to USD3 per kilogram. Notably, to be eligible for the highest credit of USD3 per kilogram, hydrogen producers must power their electrolyzers with clean electricity built within three years that a hydrogen plant went into service. Moreover, the proposal requires the operating period of electrolyzers to match the time clean electricity is generated on an annual basis through 2027, then on an hourly basis from 2028.

The tax credits will be provided under the Inflation Reduction Act (IRA), aiming to elevate US hydrogen production to 50 million tons per year by 2050, up from the current 10 million tons, largely produced using fossil fuels. By limiting the USD3-per-kilogram credit to projects utilizing clean energy sources constructed within the past three years, the proposed rules intend to encourage the development of new renewable projects, preventing hydrogen producers from tapping into the existing power grid to boost production, which may force coal- or gas-fired power plants to run more often. However, the American Clean Power Association cautioned that the requirement to match hydrogen production with clean electricity generation on an hourly basis by 2028 is too stringent, potentially discouraging most clean power companies from investing in green hydrogen.

Sources:

https://www.reuters.com/sustainability/climate-energy/us-unveils-clean-hydrogen-plan-nuclear-power-role-uncertain-2023-12-22/

https://www.whitehouse.gov/cleanenergy/clean-energy-updates/2023/12/22/treasury-sets-out-proposed-rules-for-transformative-clean-hydrogen-incentives/

https://www.npr.org/2023/12/22/1221280931/biden-hydrogen-tax-credit-plan

https://www.bloomberg.com/news/articles/2023-12-05/hydrogen-industry-raises-alarm-over-leaked-us-tax-credit-rules