The Inflation Reduction Act (IRA) Section 45V (“45V”) established a new clean hydrogen production tax credit (PTC) that will pay an incentive per kilogram of clean hydrogen produced over the first 10 years of a facility’s production. The IRA establishes different incentive tiers dependent on a facility’s lifecycle greenhouse gas (GHG) emissions rate and directs the United States (U.S.) Secretary of the Treasury (“Treasury”) to issue implementing guidance for determining lifecycle GHG emissions.
Download: Assessment of Grid Connected Hydrogen Production Impacts - Executive Summary
Download: Assessment of Grid Connected Hydrogen Production Impacts - Part I Literature Review and Framework Key Insights
Download: Assessment of Grid-Connected H2 Electrolysis Impact - Part II - Implementation
Three crucial pillars for assessing the GHG emissions of electricity supply for hydrogen production and its lifecycle GHG accounting are incrementality (or additionality), temporality, and deliverability. Extensive industry discussion since the IRA’s passage has focused on these three pillars due to the wide implications for electricity required in the hydrogen production process. Some stakeholders argue for stronger requirements to prevent a higher level of emissions from hydrogen production growth under the 45V PTC and to ensure these value chains continue to be robust and grow beyond the term of the tax credits. Other stakeholders assert that strict regulations may increase costs and limit hydrogen deployment and the development of a hydrogen industry.
Part I is a literature review and summary of key conclusions from approximately 30 reports. Part I also indicates initial considerations for the implementation guidance on hydrogen lifecycle GHG accounting, which are further explored and discussed in Part II. Together, these reports find that a three-pillar framework will provide protection against emissions increases while enabling sustainable long-term industry growth. It will build confidence and public support for hydrogen deployment while setting an important precedent for future policies and market harmonization efforts.
In December 2023, Treasury released its proposed guidance for the 45V Production Tax Credit; at the time of this report’s publication Treasury has not released final guidance. Where appropriate, this report comments on the connections between the proposed guidance and the three-pillar framework.