Dive Brief:
Proposed rules for the implementation of the 45V hydrogen production tax credit remain unpopular with the majority of prospective hydrogen producers, according to a Wednesday panel at the BloombergNEF Summit in New York City.
Claire Behar, chief commercial officer for Hy Stor Energy, spoke in favor of the draft rules. Her company’s planned clean hydrogen project in Mississippi will meet the IRS criteria, she said. But three other hydrogen company leaders panned the rules.
Kathleen Barrón, executive vice president and chief strategy officer for Constellation, said her company has begun producing hydrogen using electricity from one of its nuclear power plants and intends to file for the 45V production tax credit in spite of the fact that the project does not meet the draft criteria. The company is prepared to “visit with the courts to sort out whether the final guidance is consistent with the statute,” if need be, Barrón said.
Dive Insight:
The creation of a production tax credit for clean hydrogen under the 2022 Inflation Reduction Act was supposed to be a game changer for the hydrogen industry, Martin Tengler, head of hydrogen research for BloombergNEF, said during Wednesday’s summit. “But almost two years later,” he said, “no one has received a single dollar because we are waiting for guidance on how these credits can be claimed.”
The draft guidance, released by the U.S. Department of the Treasury in late December, has proven unpopular with the majority of the hydrogen industry. The rules proposed by the U.S. Treasury would require hydrogen manufacturers to prove that the renewable energy they use is produced at the same time and in the same region as the hydrogen.
The rules also require hydrogen companies to prove the feedstock they use — from renewable energy to fossil fuel alternatives such as biogas — is a new resource. This requirement, called additionality, is intended to ensure that hydrogen production does not create additional demand for fossil fuels by laying claim to existing renewable resources.
“I think everybody who talks about 45V at the moment is unhappy,” said Elena Scaltritti, chief commercial officer at Topsoe. This displeasure is shared by companies looking to produce green hydrogen using renewable energy, and those that hope to make blue hydrogen from fossil fuels with carbon capture, she said.
While many hydrogen producers have paused projects tied to the 45V credit pending a final decision from the U.S. Treasury, Barrón said Constellation was moving ahead with its plans to create hydrogen using nuclear energy — and would file for the 45V credit on hydrogen they produce.
Although this project would not meet the additionality requirement proposed by the Treasury, Barrón said the original IRA statute intended to make sure the tax credit would apply to projects using nuclear energy. “The people who wrote this bill didn’t write additionality into it,” she said. And with the Supreme Court poised to overturn the Chevron doctrine, she said she did not believe the proposed additionality requirement would fare well in court.
Nuclear could play a key role in the production of carbon-free hydrogen because nuclear power plants generate carbon-free energy around the clock, Barrón said, and running electrolyzers 24/7 is the most efficient means of producing clean hydrogen. “You don’t want to take the cheapest option off the table right off the bat,” she said, “and that’s essentially what we have done.”
But Behar said it should be entirely possible for companies to produce carbon-free hydrogen under the proposed IRS criteria. Hy Stor Energy is building a hydrogen project in Mississippi that will be powered by dedicated off-grid renewable energy resources and should qualify under the proposed rules, she said.
Behar said she favored the Treasury’s proposal because it will ensure that U.S.-made hydrogen will meet international standards. Potential customers such as steel manufacturers want assurances that the hydrogen they buy is truly low-carbon, she said.
And without further policy action to support domestic demand for clean hydrogen, much of the hydrogen produced in the U.S. may be exported to Europe and North Asia, Scaltritti said.
