Dec. 22 (UPI) — The Treasury Department Friday released proposed rules spelling out how hydrogen production tax credits will work under the Inflation Reduction Act’s Clean Hydrogen Production Credit.
The agency outlined three criteria for taxpayer use of energy attribute certificates that will be used to assess and document qualification for hydrogen production credits.
“The Inflation Reduction Act’s hydrogen tax credit will help build a clean hydrogen industry that will be critical in reducing emissions from harder-to-decarbonize sectors like heavy industry and heavy transportation,” Senior Advisor to the President John Podesta said.
First, it established that recipients must use new clean power, clarifying that clean power generators that began commercial operations within three years of a hydrogen facility placed into service are considered new clean power sources to use the EACs. Newly added capacity or “uprates” can also qualify as new clean power.
The second requirement for the EACs is deliverable clean power. That’s power that must be sourced from the same region as the hydrogen producer. The new proposed rules will seek comment on how to consider transmission of clean power between regions.
The third requirement is new clean deliverable power annually generated.
For this, Treasury said that the EACs will “generally need to be matched to production on an hourly basis-meaning that the claimed generation must occur within the same hour that the electrolyzer claiming the credit is operating.”
The new proposed rules include allowing annual matching until 2028, when hourly tracking systems are expected to be more widely available.
The goal of the credits is to incentivize clean power production and carbon reduction.
“Incentives in the Inflation Reduction Act are helping to scale production of low-carbon fuels like hydrogen and cut emissions from heavy industry, a difficult-to-transition sector of our economy,” said U.S. Treasury Secretary Janet Yellen.
The IRA’s Clean Hydrogen Production Credit for facilities meeting prevailing wage and other requirements will range from 60 cents per kilogram of hydrogen produced to $3 per kilogram.
That credit will be available for 10 years beginning when a production facility is put into service for projects that begin construction by 2033. That means these credits could be available for some hydrogen facilities well into the 2040s.
