The Biden administration today proposed new tax guidelines aimed at making hydrogen cheaper to produce as a less polluting alternative to fossil fuels. The tax credit comes with strict conditions for using newly created sources of clean energy to produce hydrogen, as opposed to more polluting sources.
The guidelines drew strong reactions today from clean energy advocates and the industry, some celebrating, others outraged. Some experts said new guardrails are needed to ensure that the Biden administration’s push to develop a domestic supply chain for hydrogen does not inadvertently increase pollution. Meanwhile, clean energy trade groups argued that the tax credit is now too restrictive to allow clean hydrogen production to flourish.
Hydrogen combustion releases water vapor instead of planet-warming carbon dioxide emissions. The problem is that today, most hydrogen is made with the help of fossil fuels – mostly through a process called steam-methane reforming that produces carbon dioxide emissions. Methane is an even more potent greenhouse gas than CO2, and is routinely released along the supply chain from production to end use.
US Energy Secretary Jennifer Granholm called hydrogen a “Swiss army knife”
Fortunately, a more sustainable way of producing hydrogen exists. An electrolyzer can split water into oxygen and hydrogen molecules. Additionally, it can run on electricity generated by renewable or carbon-free nuclear energy. This strategy is significantly more expensive, which makes the tax credit important. Hydrogen made from renewable energy can cost up to $12 per kilogram to produce, while hydrogen made from methane costs less than $3 per kilogram.
The Clean Hydrogen Production Credit was established through the Inflation Reduction Act, the largest investment the US has ever made to combat climate change. The bipartisan infrastructure legislation also sets aside $8 billion to build hydrogen production ‘hubs’ across the US. Clearly, the Biden administration sees hydrogen as a vital part of America’s clean energy future. in an interview with the verge Earlier this year, U.S. Energy Secretary Jennifer Granholm called hydrogen “a Swiss Army knife” that could supplement solar and wind power that fluctuate naturally and could be used for some industrial applications. It is difficult.
That said, many grassroots groups still have major concerns about the potential impact of the growing hydrogen industry on local communities and the environment. They don’t want air pollution from facilities that use methane to make hydrogen, and don’t rely on emerging carbon capture technologies that have been touted as a way to prevent CO2 emissions (but not other pollutants) from going into the environment. have been proposed. Even when using renewable energy, hydrogen production is likely to draw on limited wind and solar resources. If the grid is forced to rely more on fossil fuel generators as backup power sources it could lead to increased greenhouse gas emissions. Furthermore, if an electrolyzer is plugged into the grid, you don’t really know whether it is running on clean or dirty energy.
The conditions set out in the new tax credit today are expected to address some of those risks. “Strict guardrails are necessary to encourage scaling up of the hydrogen tax credit Correct Hydrogen, not just any hydrogen. There is little question whether hydrogen actually works as a tool for climate progress, Julie McNamara, senior energy analyst and deputy policy director of the climate and energy program at the Union of Concerned Scientists, said in a statement.
The tax credit, known as 45V, could save companies up to $3 per kilogram of production if they can meet the proposed tough new standards. They have to buy clean electricity New Generators that start operating within three years of a hydrogen production facility coming online. The aim is to ensure that hydrogen production helps add new sources of clean energy to the power grid rather than depleting that resource. There are also rules about where and when they can buy that energy. It has to come from the same area where they are working. And by 2028, electricity will need to be generated within the same hours that it is used to power electrolyzers.
“There is no less question about whether hydrogen actually works as a tool for climate progress.”
These three requirements reflect the recommendations of a Princeton-led study published earlier this year. Some tech companies, including Microsoft and Google, have set company goals for sourcing local renewable electricity and matching their purchases on an hourly basis to encourage clean energy development.
“The draft guidance avoids wasting billions of tax dollars on subsidies for dirty hydrogen production projects that could harm climate and health,” said Jill Tauber, vice president of litigation for climate and energy at the nonprofit environmental law organization Earthjustice. Will increase pollution.” statement.
Industry groups are not so happy. They say the proposed restrictions would derail clean hydrogen production before it even has a chance to get off the ground. “Unfortunately, the Biden-Harris Administration has miscalculated an effective path to implementing hydrogen production incentives, completely missing the intent of the IRA. And with this miscalculation, we see that the success of recently awarded hydrogen hubs is also being compromised,” Roxana Bekemohammadi, founder and executive director of the United States Hydrogen Alliance, said in an email.
He said the Biden administration needs to find other ways to encourage more clean energy to come online rather than specifically targeting hydrogen production. “When the government incentivizes, let’s say, battery electric vehicles, the consumer of electricity, it doesn’t require new electricity generation to support that vehicle,” Bekemohammadi said.
The tighter guidelines could also shatter the dreams of older nuclear power plants that thought they could find new customers in the hydrogen production business. Constellation, the largest nuclear power plant operator in the US, may file a lawsuit to prevent the tighter rules from taking effect. huffpost Report. Constellation this year announced plans to build a $900 million nuclear-powered clean hydrogen production facility in Illinois with funding from the Biden administration’s Hydrogen Hub program. But it could lose hydrogen tax credits if nuclear power doesn’t come in New Newly added capacity to a power plant or an existing plant. At least it can be said that building new nuclear reactors is a huge task. America’s first newly built reactor in decades finally came online this year — seven years late and $16 billion over budget.
At least one big industry player is on board with the proposed rules, which are similar to EU guidelines. “We applaud the Administration’s strong three-pillar hydrogen tax credit proposed rule that aims to deliver real emissions reductions, create incentives for broad investment across the hydrogen value chain, and demonstrate America’s global climate leadership,” said Air Products President and CEO. It will be necessary to strengthen.” Sefi Ghassemi said in a statement. Air Products is the largest hydrogen producer in the world.
The public will have 60 days to submit comments after the new hydrogen guidelines are posted in the Federal Register, which Treasury and the department and the IRS will have to take into account before finalizing the new rules.