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US publishes draft rules for clean hydrogen tax credit

The Biden administration has released the eagerly anticipated regulations for the clean hydrogen production tax credit, introduced through the Inflation Reduction Act (IRA), defining eligibility criteria for the tax credit of up to USD 3 per kilogram.

To qualify for the tax credit under the proposed guidelines, hydrogen producers would need to use electricity from new clean sources that began commercial operations within three years of the hydrogen facility being placed into service.

The second criterion requires that the clean power used in the electrolysis process must be sourced from the same region as the hydrogen producer.

The proposed guidance envisages also a strict time-matching criterion. After a transitional period allowing annual matching until 2028, an hourly matching requirement will be established meaning that the hydrogen has to be produced during the same hours that the clean power generation takes place.

The Department of the Treasury says that proposed regulations aim to help make clean hydrogen production more economically competitive and accelerate the development of the US clean hydrogen industry while preventing subsidising hydrogen production with higher greenhouse gas emissions.

The guidelines will be subject to public comment before the Department of the Treasury and the Internal Revenue Service (IRS) issue the final rules.

Commenting on the guidance, Secretary of Energy Jennifer M. Granholm said: “Today's announcement will further unprecedented investments in a new, American-led industry as we aim to lead and propel the global clean energy transition.”

However, the American Council on Renewable Energy (ACORE) was less enthusiastic. Its president and CEO Ray Long said: "While we’ve been eagerly awaiting the Administration’s proposal on 45V guidance for the clean hydrogen Production Tax Credit (PTC), we are concerned with the lack of flexibility in the proposed rule and the impact it may have in jump-starting a hydrogen industry at scale [...]."


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