US hydrogen credit ruling allows developers to move forward

US hydrogen credit ruling allows developers to move forward

• Final tax credit guidelines from the Biden administration reward cleaner hydrogen projects regardless of technology but President Trump’s spending review hangs over energy infrastructure buildout.

February 12 – On January 3, the administration of former President Joe Biden introduced a tiered system to distribute production tax credits (PTCs) for clean hydrogen producers, regardless of whether they use renewable energy, nuclear or natural gas with carbon capture.

“Green” hydrogen is produced using renewable energy and electrolyzers, which turn electricity into hydrogen through the process of electrolysis. Most hydrogen supplied to date has been “grey” hydrogen produced from gas-based steam methane reforming, while “blue” hydrogen is produced from gas and carbon capture technologies which lower the carbon footprint.

The cost of green hydrogen is currently far higher than the cost of grey hydrogen and the PTCs aim to accelerate wider deployment of clean hydrogen technology and drive down costs. The Biden administration aimed to reduce the cost of clean hydrogen to $1/kg by 2031, compared with estimates of around $5/kg in 2022.

The 45V rules mean green hydrogen projects using clean power from plants built within 36 months of the hydrogen facility becoming operational qualify for a full tax credit of $3.00 per kilogram (kg) of hydrogen.

The requirement to source clean power from newly constructed plants aims to ensure green hydrogen projects do not hamper efforts firmly underway to decarbonize wider electricity supply. For hydrogen projects, it could mean higher costs than sourcing power from older renewable energy facilities or the grid.

To meet this requirement, hydrogen plants could also source power from nuclear plants at risk of retirement, up to 200 MW per reactor, or from existing renewable energy generation in states that meet strict clean electricity standards and emissions caps. Only Washington and California currently meet these criteria.

The clean energy sector is digesting fresh market uncertainty following President Donald Trump’s flurry of executive orders last month, but for hydrogen developers, the 45V guidance is a crucial step forward. Many developers had paused projects until the final rules were published.

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