The US Treasury’s much-awaited response on the implementation of 45 hydrogen tax credits sees greater timeline flexibility and provisions for nuclear operators.
Under the initial proposal, released in December 2023, producers would have had to match their clean hydrogen plant’s operations with renewable electricity production within the same hour from 2028. However, the hourly matching requirement has now been pushed back until 2030.
A new pathway has been added to allow for existing nuclear reactors, up to 200MW, as a viable electricity source for hydrogen producers, reflecting that certain nuclear reactors are at greater risk of retirement based on certain economic factors, and if nuclear retirement is averted then the additional demand from hydrogen production will not have induced emissions.
The rules cover hydrogen produced using both electricity and methane, providing investment certainty while ensuring that clean hydrogen production meets the law’s lifecycle emissions standards.
They define electricity generation as incremental if the generator begins commercial operations within 36 months of the hydrogen facility being placed in service, or to the extent a plant increases its capacity within that period.
Electricity from a generator that has added CCS within a 36-month window before the hydrogen facility is placed in service will be considered incremental.
To qualify as clean hydrogen under the statute, the lifecycle GHG emissions of the hydrogen production process must be no greater than 4 kilogrammes of carbon dioxide equivalents (CO2e) per kilogramme of hydrogen produced.
Qualifying clean hydrogen falls into four credit tiers, with hydrogen produced with the lowest GHG emissions receiving the largest credit. To qualify for the full credit, projects must also meet prevailing wage and apprenticeship standards.
US Deputy Energy Secretary David M. Turk said the final rules will allow accelerated deployment of clean hydrogen, including the Hydrogen Hubs, leading to new economic opportunities.
Patrick Serfass, Executive Director of the American Biogas Council, said the rules will incentivise production of more renewable hydrogen and recognise the value of renewable natural gas (RNG) as a renewable feedstock for making clean hydrogen.
“The final rules address key issues within the Department’s prior proposal, including removing the first productive use penalty, which effectively treated existing sources of RNG like conventional natural gas. Today’s action more closely aligns with industry standards,” he said.
“Other adjustments made by Treasury ensure barriers to hydrogen production are limited, while preserving integrity of carbon intensity scoring, tracking and certification.”
By harnessing energy from organic material that would otherwise be wasted, biogas and RNG producers simultaneously reduce methane emissions while creating renewable energy, he added.
“There are currently about 2,400 biogas projects in operation in America today, compared to a potential 24,000. These new rules will support increased production of RNG and biogas to make clean hydrogen which will allow our industry to expand their work to recycle waste in this way. We look forward to working with the new Congress and the Trump administration on preserving these valuable tax incentives.”
PA Consulting energy markets expert Salem Esber said broadly, the final guidance is a compromise that includes benefits for both the clean hydrogen industry and climate proponents, as well as existing nuclear owners, carbon capture and storage developers, renewables developers, and RNG producers.
“There is and will continue to be considerable uncertainty for several months, as the incoming administration could still review the guidance under the Congressional Review Act and overturn it,” he said.
“Data center developers are aggressively providing clean energy and will likely be higher priority offtakers for nuclear, gas plants with carbon capture and storage, and renewable generators for the foreseeable future.”
“However, if the guidance is left intact, it will provide the clarity needed for clean hydrogen development for existing hydrogen applications, for some emerging industries and foreign offtakers, and eventually at larger scale for harder-to-decarbonise industries.”
Kim Hedegaard, Topsoe’s Power-to-X CEO, said the final guidance for the 45V tax credit for clean hydrogen production is a critical milestone in growing the clean hydrogen economy in the US.
“With this added clarity, many projects that have been delayed may move forward, which can help unlock billions of dollars in investments across the country. These projects will help boost job creation, spur local economic development, and promote energy security,” he said.
“Supportive policies like 45V are an important tool for industry to drive innovation to build breakthrough projects and position the US as a leader in new energy technologies.”
