The Biden administration today proposed new tax guidelines aimed at making hydrogen production cheaper as a cleaner alternative to fossil fuels. The tax credit comes with strict stipulations on using newly built clean energy sources to produce hydrogen, rather than more polluting sources.
He guidelines It sparked strong reactions from clean energy advocates and the industry today, some celebrating, others outraged. Some experts said new barriers are needed to ensure that the Biden administration's push to develop a domestic hydrogen supply chain 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.
Combustion of hydrogen releases water vapor, instead of planet-warming carbon dioxide emissions. The problem is that today, most hydrogen is produced with the help of fossil fuels, mainly through a process called steam-methane reforming that produces carbon dioxide emissions. Methane is a greenhouse gas even more powerful than CO2 and usually escape throughout the supply chain from production to end use.
US Secretary of Energy Jennifer Granholm called hydrogen “a Swiss Army knife”
Fortunately, there is a more sustainable way to produce hydrogen. An electrolyzer can split water into oxygen and hydrogen molecules. Additionally, it can run on electricity generated by renewable energy or carbon-free nuclear energy. This tactic turns out to be significantly more expensive, which is what makes tax credits crucial. Hydrogen produced from renewable energy can cost up to $12 per kilogram, compared to hydrogen made from methane which costs less than $3 per kilogram.
The Clean Hydrogen Production Credit was established by the Inflation Reduction Act, the largest investment the United States has made yet to address climate change. He Bipartisan Infrastructure Act It also set aside $8 billion to create hydrogen production “hubs” across the United States. Clearly, the Biden administration sees hydrogen as a key piece of America's clean energy future. In an interview with The edge Earlier this year, U.S. Energy Secretary Jennifer Granholm called hydrogen “a Swiss Army knife” that could replace naturally fluctuating solar and wind power that are more difficult to use for some industrial applications.
That being said, many Grassroots groups still have major concerns. on the potential impact of a growing hydrogen industry on local communities and the environment. They do not want facilities that use methane to produce hydrogen to pollute the air and do not trust emerging economies. carbon capture technologies that have been proposed as a way to prevent CO2 emissions (but not other pollutants) from escaping into the environment. Even when renewable energy is used, there is the potential for hydrogen production to take up limited wind and solar resources. That could lead to higher greenhouse gas emissions if grids are forced to rely more on fossil fuel generators as backup power sources. Additionally, if an electrolyzer is connected to the grid, you don't really know if it is running on clean or dirty energy.
The provisions established today in the new tax credit are supposed to avoid some of those risks. “Rigorous safeguards are necessary to ensure that the hydrogen tax credit incentivizes the expansion of the good hydrogen, not just any hydrogen. “What is at stake is nothing less than whether or not hydrogen truly serves as a tool for climate progress,” Julie McNamara, senior energy analyst and deputy policy director at the Union of Scientists Climate and Energy Programme, said in a statement. Worried.
The tax credit, called 45V, can save companies up to $3 per kilogram of production if they can meet the proposed strict new standards. They will have to buy clean electricity new generators that only began operating within three years of the hydrogen production facility coming into operation. This aims to ensure that hydrogen production helps add new sources of clean energy to power grids rather than depleting that resource. There are also rules about where and when they can buy that energy. It will have to come from the same region in which they operate. And by 2028, electricity must be generated at the same time it is used to power the electrolyzer.
“At stake is nothing less than whether or not hydrogen truly serves as a tool for climate progress.”
The three requirements reflect recommendations from a Princeton-led study. study published earlier this year. Some technology companies, including Microsoft and Google have set their own business goals to source local renewable electricity and match their purchases hourly in a similar attempt to encourage the growth of clean energy.
“The draft guidance avoids wasting billions of tax dollars on subsidies for dirty hydrogen production projects that would increase pollution that harms the climate and health,” said Jill Tauber, vice president of climate and energy litigation. from the environmental law nonprofit Earthjustice, in a statement.
Industry groups are not so happy. They say the proposed restrictions could slow clean hydrogen production before it has a chance to take off. “Unfortunately, the Biden-Harris Administration has miscalculated an effective path to implementing hydrogen production incentives, completely ignoring the IRA's intent. And with this miscalculation, we see that the success of the newly awarded hydrogen centers is also compromised,” Roxana Bekemohammadi, founder and CEO of the US Hydrogen Alliance, said in an email.
The Biden administration needs to find other ways to encourage more clean energy to come in rather than focusing on hydrogen production in particular, he adds. “When the government incentivizes, say, battery electric vehicles, to an electricity consumer, it doesn't require new power generation to be created to support that vehicle,” Bekemohammadi said.
The strict guidelines could also ruin the dreams of former nuclear power plants that thought they might have new customers in the hydrogen production business. The largest U.S. nuclear plant operator, Constellation, is likely to sue to stop the strict rules from taking effect. HuffPost reports. Announced constellation plans this year 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 the hydrogen tax credit if nuclear power doesn't come from a new newly added power plant or capacity at an existing plant. Building new nuclear reactors is an extremely heavy task, to say the least. The United States' First newly built reactor in decades. It finally came online this year, seven years late and more than $16 billion over budget.
At least one major industry player agrees with the proposed rules, which are similar to European Union guidelines. “We applaud the Administration's strong proposed three-pillar hydrogen tax credit rule, which will be essential to achieving real emissions reductions, creating the stimulus for broader investments across the hydrogen value chain, and solidifying global climate leadership. of the United States,” said the president and CEO of Air Products. Seifi Ghasemi said in a statement. Air Products is the world's largest producer of hydrogen.
The public will have 60 days to submit comments once the new hydrogen guidelines are posted on the website. Federal registerthat the Treasury, the Department and the IRS will need to take into account before finalizing new rules.
