Hydrogenation is widely seen as a promising way to phase out fossil fuels from heavy industry and long-distance transportation. But they have been neglected for the past two years, awaiting official guidance from the US Treasury Department on capital gains taxes.
The wait with the Treasury ended today. Announcing Final Rules for Hydrogen Producers' Eligibility for Tax Credits Under Section 45V Inflation Reduction Act.
“We're grateful to have a final rule,” said Chief Legal Officer Beth Deane. Electric hydrogentold TechCrunch. “Otherwise, the business is dead on its way.”
The rules, which have been in place for more than two years, relax some parts of the draft proposal, which would give some relief to existing nuclear and fossil fuel power plants.
Because hydrogen can be made in many different forms, the resulting regulations are meant to ensure that hydrogen producers who receive the credit do not inadvertently cause more pollution.
There are two main sources of hydrogen: electrolysis, which uses electricity to split water molecules into hydrogen and oxygen, and steam and heat, which uses steam and heat to split methane molecules, producing hydrogen and carbon dioxide.
But there are many differences in both of them. Steam reforming can either release carbon dioxide pollution into the atmosphere (producing gray hydrogen in the process) or capture and store it (blue hydrogen). Electrolyzers can be powered by renewable energy (green hydrogen) or nuclear energy (pink hydrogen). If you want to dig really deep, there are many flavors of hydrogen. The hydrogen rainbow.
At its core, The 45V regulations seek to ensure that new hydrogen production does not result in additional greenhouse gas emissions on the grid. to do so The Treasury Department requires manufacturers to track emissions from each kilogram of hydrogen over its lifetime. That is, For example, Producers of blue hydrogen must account for the planet-warming effects of methane leakage from natural gas pipelines.
Hydrogen producers must purchase renewable or clean energy from the region where they live. By 2030, They must also show that they used the power to produce hydrogen within hours.
Production of hydrogen, which generally produces fewer greenhouse gases over its lifetime, is taxed at a higher rate of up to $3 per kilogram. Green hydrogen generally costs around $4.50 to $12 per kilo; according to to BloombergNEF; Therefore, the maximum credit could make the process competitive with fossil-derived hydrogen in some regions.
Nuclear and fossil fuel power plants benefit under the revised guidance. Previously, Hydrogen producers will need power sources from new nuclear plants to qualify. Current nuclear plants can now supply up to 200 megawatt hours of electricity. In addition, Fossil fuel power plants will now qualify for some of the recently installed carbon capture equipment.
The rules are welcome but not perfect. Not surprising given the number of people interested. from Electric hydrogenDeane's view; Producers would like to see more flexibility around where they can buy electricity and how much more clean or renewable power they need to acquire.
However, Dean said, Definitely something the industry wants the most. “We want to be able to adjust after a certain point,” she said. “We really urge the incoming administration to allow this rule to stand.